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."
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.
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.