Nintendo Wii: A 'Revolution' in Gaming?
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Case Code: BSTR247 Case Length: 21 Pages Period: 2004-2006 Pub Date: 2007 Teaching Note: Available |
Price: Rs.400 Organization: Nintendo Industry: Media, Entertainment, and Gaming Countries: Worldwide Themes: Differentiation, New Product Development |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Nintendo's Slide in the 2000s
Nintendo's hand-held game devices were hugely popular and were a major source of revenue for the company. However, the company's stationary consoles were not as successful. In fact, Nintendo's console sales declined with the release of every new generation of consoles. In the 1980s, when Nintendo launched the NES, its only major competitor was Sega Corp. (Sega), which launched the Sega Master System, a not-too-successful game console. However, in 1991, when Nintendo launched the SNES in the US, Sega's Mega Drive/Genesis was the most popular game console in the market. The SNES was not able to dislodge Genesis from its pre-eminent position, partly because the Genesis, unlike the SNES, offered backward compatibility.
The SNES was also incompatible with several US-made TVs, resulting in image distortion. This too proved to be a dampener on sales. However, sales of the NES and the hand-held devices were still strong, which meant that Nintendo was still the biggest player in the gaming (hardware) industry...
Making the New Console
Nintendo, however, soldiered on. Immediately after launching the GameCube, the company started work on its next console. Initially, Nintendo aimed to make its new console "faster and flashier" so that it displayed great graphics at high speeds. However, one year into the development of the new console, the company started to rethink its approach.
Faced with rising game console development costs, Nintendo was forced to reconsider whether it wanted to continue in the race to build consoles which had greater processing speeds or which supported improved graphics. "Give them (gamers) one, they ask for two. Give them two, and next time they will ask for five instead of three. Then they want ten, thirty, a hundred; their desire growing exponentially. Giving in to this will lead us nowhere in the end. I started to feel unsure about following that path about a year into development," said Genyo Takeda (Takeda), General Manager, Integrated Research and Development Division, Nintendo. In the game console industry, it had become an accepted practice for the console manufacturers to lose money on the hardware and to recover the loss by charging high licensing fees to game publishers and developers...
The Wii
In May 2006, Nintendo unveiled the new console and the much talked about wireless controller at the E3 conference in Los Angeles. At the conference, Nintendo announced that its new console would be called 'Wii'. It also gave a 150-word explanation as to why it had chosen the name. Nintendo said that the name was in accordance with its philosophy of creating a gaming world without boundaries, attracting new gamers, and making a fun product for everyone. Nintendo's press release explained, "Wii sounds like "we," which emphasizes this console is for everyone. Wii can easily be remembered by people around the world, no matter what language they speak. No confusion. No need to abbreviate. Just Wii." The unique spelling was also expected to be easy to search on the Internet as well as to serve as a trademark...
Challenges
Even though the Wii had a lot going for it, concerns about its eventual success remained. With the PS3 launch, gamers would now be able to experience true high-definition images and sound on their games, in comparison to which the Wii games would look primitive. Some analysts felt that even casual gamers would find the graphics power of the Wii disappointing in comparison to the other consoles. The unique gameplay of the Wii also had the potential to cause its downfall. Some analysts felt that playing games with the Wii Remote could become repetitive and tiring over time...
Outlook
With more and more households willing to buy more than one game console, the Nintendo Wii stood a fair chance of being included in Christmas and other holiday shopping lists, because of its low price (compared to the PS3 and Xbox 360) and unique interface. Analysts felt that customers would choose between the Xbox 360 and the PS3, but were highly unlikely to buy both, mainly because of their high price and similar features. Not surprisingly, Microsoft officials believed that customers would prefer the Xbox 360. "People are going to buy two (machines.) They're going to buy an Xbox and they're going to buy a Wii ... for the price of one PS3...
Exhibits
Exhibit I: Cumulative Sales of Nintendo Products
Exhibit II: History of Video Game Consoles
Exhibit III: Nintendo - Five Year Financial Summary
Exhibit IV: A Screenshot - The Wii Sports (Tennis) Game
Exhibit V: Some Wii Games
Exhibit VI: Some Statistics on the US Games Industry
Exhibit VII: Comparison of the Wii, the PS3, and the Xbox 360
Exhibit VIII: Nintendo Wii with the Wii Remote, the Ps3, and the Xbox 360
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