Slashdot Mirror
On Nintendo And Marketing Myopia
Thanks to Nintendojo for their editorial discussing why Nintendo may be heading for a fall by branding itself a 'video game company', as opposed to Sony and Microsoft's wider goals as part of the "entertainment or technology industries". The writer points out: "Theodore Levitt introduced an idea called Marketing Myopia. To summarize the basic idea of his concept: in an industry where future growth seems guaranteed, a leading company will mislabel itself and ultimately lead to its own downfall." Apparently, the best historical example of this is the railroad industry, who "...labeled themselves as being in the railroad business and not the transportation business, limiting themselves and causing their own downfall." The writer concludes: "The industry has changed. Nintendo is no longer the biggest player in a relatively large niche market. They are in last place in a huge segment of the home entertainment sector, and they need to remember this fact, because no one needs another Amtrak."
Because, as we all know, video games may not be around in a few years.
so they said they were a "video game company"
that's not a console only company. that's not a hardware company, it's not a software company.
the video game brand isn't exactly that restrictive. they can do software, hardware, etc.
if i want video games, i want video games. i don't want something that records tv, plays dvd's, answers the phone, does spreadsheets and whatever else.
i want a gaming machien to play games one. unless they are that 1 in 100 company that manages to get a product right that does 5 different things, they just cripple themselves with either inadequite hardware or tacked on afterthought "features".
total waste of my money to toss shit on there i don't want.
Sony saw huge profit drops this year as well and only EA made more money than Nintendo selling games. Nintendo is still fine and any doubters just base their "research" on American sales.
Should Pepsi or Dr. Pepper give in because they aren't #1 or diverse?
Videogame Journalism is going great guns when one of, if not the most profitable gaming companies can be identified as 'dying'.
There are 3 main markets (PC, Console, Handhelds) for videogames, and Nintendo is the only company who currently dominates any one of them.
File this one in the ever-growing anti-Nintendo wing of gaming journalism.
While the information presented is good, I don't think the hypothesis is sound. Nintendo isn't just a Video Game company, it is merely their base. MS & Sony are first a software company and a media hardware company, respectively, but both delve into each others' realms, and into video gaming.
Nintendo's had its hands deep in the media industry for years - movies, television, toys, etc etc etc - are all extensions of Nintendo's little media empire. Think about all the various Pokemon TV Shows, Movies, Toys, heck I think they even have a cereal now. The same is true for other Nintendo properties - like Mario Bros., although some may argue that the plumber brothers may be past their prime in the marketing dept...
So it's not that Nintendo doesn't have its hands in the other industries, it focuses more on pure entertainment mediathough, instead of other media hardware.
The part about Nintendo having always made the highest quality games made me laugh, and discredit the article as little more than Nintendo fanboy pleading...
-Julius X
remove "-whatkindofspamdoyoutakemefor-" from email to send
Every article about Nintendo is about how they are failing and how they are going to die and blah blah blah. THey are , as the parent said, making more money than MS and Sony, they are selling more units than MS, they produce the best games, and all have all the crossovers like the other stations. So how the hell is Nintendo dying or sure to die or whatever it is? they aren't. They will be around a long time. And they are sticking to what they know, and do well, games. Unlike MS and Sony which are trying to make mass media centers.
"They are in last place in a huge segment of the home entertainment sector, and they need to remember this fact, because no one needs another Amtrak."
Psst, the video game market isn't Russian Roulette, you really can have 1st, 2nd, and 3rd place trophies. Nintendo may not be the largest, but they are raking in oodles of cash, and they have distinctive titles that you simply aren't going to get with Sony or Microsoft. Sony could easily be unseated by the next newcomer with whizbang flashy graphics, Nintendo is a lot harder to replace.
I'm getting a little tired of the "one company to rule them all" mentality that flies around here.
"Derp de derp."
Usually quarterly losses don't mean shit come end of financial year. Funnny you don't mention Sony and particullary Microsoft's massive, consistent losses.
Nintendo once upon a time claimed to be a "cartridge company." They would live and die making cartridges. After the market reality of the N64, they changed their tune. If Nintendo had stayed a "cartridge company," then they would be in the position that the author of this article describes... they would be the locomotive industry not realizing their impending obsolescence.
But Amtrak it is not. 1st of all, Amtrak was created in the 1970's by mandate of congress long after the battle with cars was a forgone conclusion. 2nd of all, Nintendo has broadened its perspective to see what it industry it is in. It is a videogame company. It does not make movies, it does not release multimedia CD's. It sells videogames, and players that play videogames. Sony can rightfully claim to be an entertainment company, because it owns movie studios, theme parks, musicians, etc. Microsoft can rightfully claim to be in the technology industry, as it does, well, techie stuff. But Nintendo's primary market is in gaming, and their competition in the gaming arena is with other video games (some would say they're competing with homework). They are right to be focused upon being the best gaming company they can be.
The article mentions several things the XBox does which the 'Cube does not, and rightfully so. The hard drive was a great addition to a console, as was the ethernet port. Some would say they are as revolutionary as the N64's addition of the analog stick. However, These were great in service of the videogame playing part. Nintendo was one of the first companies to test market a modem adapter (for the NES), and the rewritable bulky drive was a predecessor to the hard drive in the Xbox. Both were ahead of their time, and both failed. Now apparently the market is about ready for them, and hopefully Nintendo will notice on their next generation of hardware.
On the other hand, the author exposes a deeply flawed perspective of the situation claiming that Nintendo's lack of DVD playback capabilities are due to being videogame-only. DVD playback is a great feature in modern consoles. It's also the only feature mentioned that has nothing to do with videogames. Why is DVD playback not included in the GameCube? The reason Nintendo cited at the time was that they expected people who wanted to play DVDs would buy a proper DVD player, much like how the PS1 was capable of playing CD's but people kept buying real players. Furthermore, by not including DVD playback capabilities, Nintendo saved themselves an estimated (at the time) 50 dollars per console. That allowed Nintendo to ship at the magic $200 mark, and stay the low-price leader throughout the console wars. Stand-alone DVD players are now available for less than 80 dollars, with PC DVD drives hovering around 40.
Nintendo is attempting to avoid falling into the trap of so many systems before them. The historical landscapes are littered with systems that tried to do more than play videogames. The Saturn, for example, had a modem adaptor and a copy of Netscape available shortly after launch. How did it do? It died in the market. 3DO wanted to play games, read children's storybooks, play movies, surf the web... After about a year of beating around the bush, they refocused upon purely gaming, but by then the damage had been done. CDI? A console whose most compelling piece of software is an encyclopedia? The game.com organizer, game player, trivia master? The N-Gage? Admittedly, many systems that didn't try to be more than game playing machines have also died over the years. Dreamcast for one. Virtua-Boy for another. But no system that tried to market itself as a set-top box managed to survive.
Perhaps someday the set-top box analogy will be correct, but perhaps not. To function as a set-top box, the machine requires a fast connection to the web. That kind of connection will only exist if the person already has a computer. Why does this matter? Well, if downloadable content is your goal, the computer you already have can do
This Sig is a mnemonic device designed to allow you to recognize this author in the future.
"The Nintendo Difference, we've all heard the term."
Yeah, it refers to the high quality of their software. When you were 10, it was what made you pay attention. Now that you are 20, you may no longer care about it, although you probably may have lost sight of the fact that it still exists and is still what appeals to those who are 10 right now. Regardless, it still matters to me and the other 11 million people who own GameCubes worldwide.
"150 years ago, the big railroad companies controlled transportation in the United States.....They labeled themselves as being in the railroad business and not the transportation business, limiting themselves and causing their own downfall."
Well, too bad for the railroad companies. They didn't market themselves to the people who NEEDED them. But the video game industry is not the railroad industry. Nobody NEEDS video games, they are a luxury. (Fanboys, shut up.) People needed cheap, flexible transportation, and non-railroad transportation methods served that requirement. Regardless, the railroad industry is still quite large, since it serves its original purposes very well to this day.
With games, nothing about movie DVD playback makes the software gameplay better. Nothing, other than free MPEG support (which is easy to do otherwise) and the optical disc technology itself (which the GaemCube also uses). So, if Nintendo can deliver a system that is not encumbered by DVD licensing fees and misdirected movie-playing features, while delivering a low-cost yet very powerful system which is easy to develop for and which features A-quality software, who is to say that the decision is a wrong one?
Then there's online gaming. Sigh. I have very little interest in it, but let's spell out the facts:
- Online gaming takes significant R&D ($$$) to do right.
- Due to system inconsistencies, cross-platform online gaming is non-existent in the current generation.
- Because of the above two facts, it makes sense for 3rd parties to support online play only for (A) the market leader, Sony, or (B) the alternative who is willing to foot most of the bill and technical development, Microsoft.
- Nintendo understands that they are neither the market leader nor are willing to develop an expensive online infrastructure while there are no guaranteed revenue streams in the online gaming sector. So, they release their online adapters as a token gesture, then tell developers, "Online gaming will be what you make of it. Go crazy."
- 3rd parties shrug their shoulders, since by forging ahead with online GameCube games, they would be going after a smaller market than the PS2, and there is no pre-existing network architecture as with Microsoft's offering.
Hmm, let me summarize another way: Cube online gaming doesn't exist, because it makes no direct money for Nintendo. However, by not investing in a network, Nintendo isolates developers who would want a network in order to develop games on Nintendo's platforms, which themselves would make money for Nintendo. Problem is, since Nintendo isn't THE market leader, there's no guarantee that developers would develop for Nintendo's network even if such a thing existed. So, given the risk, Nintendo played the safe hand and watched as two differing approaches battled against each other.
The market leader did the same thing that Nintendo did, release a token adapter and let 3rd parties largely figure it out for themselves, but they also released 1st party online games with much success. The alternative threw dumptrucks of money at the issue and developed a lovely online system for gamers and developers alike, but at extremely high losses for the company. If Nintendo is smart, they now have one example of how to do online gaming adequately well, and one example of how to do it extremely well while going bankrupt in the process: the smart way, and the Microsoft way, respectively.
"Let's face it. Most 13 year olds wouldn't be capable of dropping six hundred dollars to inve
Looks like somebody at Nintendojo's taken marketing 101, then... Levitt was insightful in the context of his time, and "Marketing Myopia" remains a classic text in the context of understanding professional marketing's roots. But marketing theory has moved on a hell of a lot since the 1960's. The point of the text is more sophisticated that the idea that companies need to do "more things" in order to compete. Quite the contrary - the point is that to be competitive a company has to understand not what it does ("we're a train company"), but what its (current and potential) customers need. So rail companies' customers don't want trains as such; they want to be transported from A to B. Nintendo's customers want to be entertained interactively. But that's as far as it goes. Whether "what customers want" is some kind of ill-defined "entertainment device" (second-rate DVDs attached to a console?) rather than high quality separates is debatable, to say the least. It's also a hugely unoriginal idea - people have been saying that games consoles will somehow mutate into "entertainment devices" for years (everyone in marketing is familiar with Levitt - you can be sure that Nintendo's marketing department is too!) In fact, there's already am enormously popular device for non-specific electronic entertainment, including games, media, networking, messaging etc - and the majoriry of us reading this are sitting using it right now. There's not one "marketing strategy" which all companies should blindly follow; expanding your market is often a good thing, but not always (AOL Time Warner?) In my opinion, Nintendo would be exceptionally unwise to take on Sony directly - Sony are already in the "electronic equipment" game and could frankly squash Nintendo if they tried. Not, of course, that I would ever admit to being in marketing on Slashdot...
Huh?
We play games cause they're fun - something no amount of marketing or hardware no matter how good can impart.
The railroad industry and transportation sector isn't such a good example of marketing myopia either. Rail and air are such different beasts, its tantamount to abandoning one business for another. A better example would be to make use of the existing track infrastructure by laying fiber optics across it (I forget which company now) and diversifying to the telecommunications sector.
The main reason Nintendo posted a loss was the massive loss they took due to their overseas holdings since dollar has been loosing ground on the yen.
The dollar has fallen about 7% compaired to the yen over the last 3 months. Now take into account Nintendo's $5 billion US in cash which is held mostly outside Japan and we can see they took up to 7%*$550 billion yen = 38.5 billion yen in losses just from the devaluation of the dollar. (Thats about $350 million US)
Nintendo isn't suddenly floundering on thier games sales. Its just the US recession pulling down the dollar. Once the dollar strengthens they will have record profits.
On a side note even posting MS size losses Nintendo would still have the cash to finance at least another consol generation or two.
As far as I'm concerned, Nintendo didn't make the GCN able to play DVD's because 1) it would have required the addition of a SPDIF (optical digital audio) - which the other two have. And 2) the ability to read normal 120mm discs. Don't forget quite a few Nintendo-branded games still MSRP for more than $30 - despite how their gameplay is oh so similar to some of the Mario 64 titles.
You're making the same mistake here--Nintendo is not a Sony that also makes games, instead Nintendo is a Capcom that also sells consoles. Sony and Microsoft are way the heck larger than Nintendo, and it's ridiculous to expect Nintendo to out-Sony Sony. Sony's model is to encourage other people to develop PS2 games so they can sell PS2s. Nintendo's model is to make gamecubes so they can develop Gamecube games.
Perhaps the future of Nintendo hardware is in question. But that's not a big problem, Nintendo can simply abandon its hardware side if it no longer makes any sense to keep selling hardware. In other words, take the Sega route.
Anyone who believes that the railroad industry has died should spend a night in my apartment, which has railroad tracks about 15 feet from my bedroom window.
Your lack of sleep will prove you wrong.
The railroad companies were very wise to declare that they're in the railroad business. It turns out that the railroad business was and still is a very useful business - huge amounts of US product are shipped via rail.
It turns out that although trains make crappy methods of transportation nowadays, (Planes do the transport to a limited number of points faster, and cars can go anywhere), they're still the best thing if you want to, say, move several tons of coal, lumber, etc. I mean, trucking is nice for some things, but, really, there are some things that railroads can do that no one else can do.
I think Nintendo offers a kind of game that no one else offers. When I pick up Zelda, or Metroid, or even one of their B-titles like Mario Sunshine, the game has a particular feel that other game companies don't match. I'm not sure what it is - I've hypothesized several times, but I'm never happy with the answer.
If I want to play a Nintendo-type game, though, the fact of the matter is that I need a Nintendo-made game. So, more than simply being in the video game business, I think Nintendo is in the Nintendo business. And I think that they're "who are you?" marketing, as odd as it is, is a conscious move in that direction.
Philip Sandifer's academic website
Nintendo has repeatedly said that the company is in the Video Game business. Not the entertainment or technology industries, like Microsoft or Sony, but the Video Game business. Sure, the difference is small on paper, but it represents a huge gap in what Nintendo is willing to do in comparison to what their competitors will do.
What the author of the article doesn't seem to get is that Nintendo is in the business of MAKING MONEY, and they are kicking everyone's butt in that aspect.
Since we're consumers, we'd love Nintendo to put the gloves on and play Microsoft and Sony in their own turf, we'll benefit, but when that happens, that's when Nintendo will succumb. [The other two guys have too much money].
Remember... survival of the firm is first.
Nintendo will choose to fight at a leveled field (or at the level that they're best -making games-), worse comes to worse, Nintendo will become a 3rd party, but on their own terms.
"Apparently, the best historical example of this is the railroad industry, who "...labeled themselves as being in the railroad business and not the transportation business, limiting themselves and causing their own downfall.""
Yeah, because we've all seen now how incredibly popular locomotives that also functioned as a tractor-trailer and a jumbo jet have been. I mean, who wouldn't want a train with wings?
"The industry has changed. Nintendo is no longer the biggest player in a relatively large niche market."
Whether it has changed for the better remains to be seen. The gaming industry is still far too young to make long-term predictions.
"They are in last place in a huge segment of the home entertainment sector"
Apparently he hasn't looked at the numbers since the $99 price drop.
But actually that's besides the point. Sony and Microsoft are jumping up and down about the 18-25 male market while Nintendo has never targeted so exclusively. Their main target market is still there and still churning out lots of cash for Nintendo.
Apart from the relatively small variety of games Nintendo has compared to Sony or MS, the article only points out the gamecube is unable to play movies as a example of one of the reasons for the future fall of Nintendo. Seems to me the ability to play dvd movies on your videogame system is more a marketing thing than actually a real advantage. I think almost everybody owning a PS2 or GC has some other kind of platform (dvdplayer/computer) to watch movies on DVD. Yes, the PS2 can play movies but... is it really the main reason for its success? I guess not. People don't buy a console only to play movies, but they do only to play games, or games and movies. Consoles are still all about games, and Nintendo knows it.
---------
Thinking never hurt anybody --MacGyver
WHY, WHY, WHY do I always see articles about the demise of Nintendo, when they're in EXCELLENT condition? Here are some examples:
1. Nintendo has NO DEBT.
2. Nintendo went FORTY ONE YEARS without posting a half-year net loss, and are on pace to go for forty TWO years without a full year net loss.
3. Nintendo has over eight billion dollars cash, and probably a couple more billion dollars in assets, making it an 11 figure company, with each cent of its money spendable for itself.
4. Nintendo will ALWAYS have dedicated fans who will buy their products, who will raise kids that will become dedicated fans, ensuring that Nintendo's products will ALWAYS sell.
5. The highest selling publisher of console games and handheld games, worldwide, is Nintendo.
6. GBA and GC are the only systems to see INCREASED sales in 2003.
7. Sony posted a net loss of over 1 billion dollars last fiscal year. MS lost money, as well. Nintendo posted a profit. Who's in bad condition, here?
8. Nintendo has maintained firm control of the handheld market for two decades, and it's stronger than ever.
9. Sure, Sony and MS are valued at over 50 billion dollars. However, they have to spread that money over several different markets: PC hardware, PC software, CD players, TVs, movies, video games, etc. Nintendo can focus all of its resources, all 10 billion + dollars on one market: Video games.
It's funny. I never hear complaints about MS losing billions on the X-box, nor about how they're in 3rd place in worldwide console sales. In spite of the skeptics, the crticism, and the reminders of every little thing that goes wrong, Nintendo is in a comfortable 2nd place in the console market, on top of the software charts, as always, and on pace to continue to profit yearly. Nintendo is doing much more than merely surviving: They're expanding, and it doesn't look like they'll be slowing down any time soon.
The classic story of the railroad tycoons who didn't realize that they were actually transportation tycoons is all well and good but Nintendo does not have the same problem.
According to the COmpany History, Nintendo is over 100 years old. They started out making playing cards. Read the history on that link. It shows them going through a few different changes. The important common factor? Nintendo has always made games.
That's right. Nintendo is not a console company and it's not a video game company and it's not an entertainment company. It's a game company. They make games. They have been making games for over 100 years. I think that we can all agree that "making games" is a pretty broad understanding of what the company does.
Myopia, indeed.
I have a lot of opinions about Cyborgs and Architects
Except that it isn't the number one priority, really. And I play online on my Xbox and PS2 all the time. But I'm not fooled into thinking online is the big thing in console gaming right now.
Look at the facts.
Sony only sold 780k online adapters before launching the new online bundle for the PS2. Out of, what, 60+ million units? That's less than 1.5% of the total PS2 userbase that bought the online adapter. Sony isn't making any money off of their online abilities.
Microsoft has touted 500k Xbox Live subscribers as the number since before E3. 500k is around 5.5% of the total Xbox userbase. It hasn't gone up signifigantly since then, or beleive me MS would definitely toot their own horn. Now they're giving away 2 free months of XBL with every single Xbox sold, in order to try and get people to subscribe. Notice that in order to get new subscribers they're resorting to giving away two months of something they want you to subscribe to. Yeah, seems like XBL sales have more than flatlined over the months.
Sorry, friend, but online is not the big thing. Not right now, anyway.
Microsoft is losing millions of dollars per quarter on Xbox Live; and for what, a measly $25 million per year in subscription revenue? They lose more than four times that on the Xbox every single quarter, so $25 million a year in subscriptions isn't doing jack shit for them.
Sony is losing money on the hardware they bundle with the PS2, and they don't get a whole lot in return.
Nintendo can easily see this. And Nintendo is all about profits.
Microsoft is willing to throw money at the Xbox to make it suceed; but they have Office and Windows to fall back on (at least for now, who knows what the shareholders might say after seeing the quarterly loss of the Xbox this Xmas season... it's going to be a huge sum of money lost).
Nintendo doesn't have the luxury of having a product that brings in twice its operational costs in profit each quarter *cough*Windows*cough*ripoff*cough* like Microsoft does. Nintendo can't afford to try and do what MS is doing with Xbox Live, and then not make any money from it; or at least not lose too much money from it. They don't have overpriced operating systems and office suites to make up for every other money losing division within their company, like Microsoft does.
And Nintendo knows this. Nintendo needs to show a profit each year to keep going. Trying to make a huge deal of online gaming, when the numbers clearly show it is a niche market in the console world, is not conductive to profits.
Microsoft could never turn a profit on the Xbox and never care; because their Windows and Office divisions will subsidise every single money losing venture they delve into. And trust me, XBL isn't making any money any time soon.
Thursdae