Age of Disruption
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It’s common to be so involved in the present as to not appreciate our era until it is long past. As living contradictions, we are so caught to living in the future that we forget the present and, as a result, live in neither the present nor future. This should be no surprise. As kids, we rush to grow up. As adults, we long to be children again. We trade our time for money only to spend it to regain time. In all this mischief, the future becomes a thing of the past.
As such, we never know when we are in the midst of a Golden Age or Revolution until it is long over. In the early eighties, no one knew that they lived in the Golden Age of Arcades. They thought that time would always be as no one could predict of a looming crash. From 1985 to the early nineties, the consoles entered a Golden Age with the NES where most of our modern franchises emerged while PCs entered an era of disruption as the platform moved to windows. In the early 1990s, that disruption paid off resulting in a PC Golden Age with the rise of the FPS and RTS genres, the birth of such franchises like Civilization, the last of the great adventure games (the Monkey Islands), and the rise of network and online multiplayer. While debatable, some believe consoles entered another Golden Age with the Playstation, N64 and Saturn with the new classics such as Zelda: Ocarina of Time to Castlevania: Symphony of the Night.
Most people don’t think how the present will ripen with history. Did you know that we are currently in the Golden Age of the Handheld? With the last days of the GBA and its excellent library, the golden goose of the DS and its beaten rival PSP will be remembered as the high mark of handheld gaming. This begs the question, “Gee then, Mr. Malstrom. Does this mean we will have a Golden Age of console gaming?”
No.
The seventh generation of consoles will be remembered as an Age of Disruption. The entire way how we look at consoles and the standards we apply to them are all set to be thrashed within the next few years. You say: “It is because of brilliant gameplay innovation from Nintendo!” Nope.
Contrary to what you’ve heard, Nintendo is competing with Sony and Microsoft. When Nintendo says they are not competing, they mean in the current sustainable business model. The console market will see a great deal of upheaval in the next couple of years due to Nintendo aiming a disruption arrow.
The console market has been moving in a predictable fashion. Each generation, the consoles have had more powerful hardware and prettier graphics. Over time, as games became more complex and more gorgeous, the hardware costs and ease of use by players have increased as well to the point of totally overshooting the market. “The seventh generation of consoles will be the High Definition Era,” said Microsoft as it launched the Xbox 360. Sony talked about the promises of 1080p screens and Blu-Ray playing for HD. While analysts bickered about whether Microsoft or Sony would win the next console war, they wrote Nintendo out of the conflict.
Why shouldn’t they? Nintendo cannot compete with Sony and Microsoft. Sony is a vertical monopoly. Unlike Sega or Atari, Sony can leverage the entire movie, music, and television industries to its console. Sony’s Playstation 3 has a backwards compatibility with all previous Playstation games meaning it will have the largest game library before the first PS3 game is released. Sony also owns its own factories so it can control its costs much more effectively than any other console manufacturer before. Meanwhile, Microsoft is the software king of the world. Microsoft can leverage its software and networking assets to its console as well. Also, Microsoft is one of the wealthiest companies in the world. No other company can throw away four billion dollars on a console and come back to do it over again. The analysts were right. Nintendo could not compete against such leverage. Gamers asked, “When are they going to go third party?”
While Nintendo has successfully camouflaged itself from its competitors (and the gaming press) as thinking Nintendo was aiming only for niche markets, the company has been readying a disruptive business strategy. Out of the three console war participants, Nintendo is, by far, the nastiest. Why? It is because Nintendo is dropping a disruption bomb to alter the console landscape forever. A final solution.
What? You don’t believe me? You actually believe Nintendo is this happy go-lucky company that isn’t interested in ‘fighting’? Listen to what Iwata says:
”Once upon a time, way back in the 1980’s, a company became number one because its products meant ‘fun’ to young people. Then, in the 1990’s, a bigger company with a bigger brand name and bigger budgets took away the number one spot. Fortunately, that first company also had another line of products that let it remain popular and profitable. This company used that threat to reconsider its strategy, and think how it could regain overall leadership. And this is what it decided. It would redefine its own business, and expand its market beyond current core users. Could this strategy work? Well, we already know the answer. The answer is yes. Because that first company, Pepsi, has returned to number one in its industry displacing Coke. Pepsi stopped asking, ‘How can we sell more cola?’ Instead, it started asking, ‘What else do people want to drink?’
“Today, Pepsi is number one in bottled water. It is number one in sports drinks. It is number one in health drinks. And, of course, it remains number one in the snacks business that it used to maintain profitability while they executed their disruptive strategy.
“But, I begin with a story about Pepsi because it demonstrates how thinking differently, and holding strongly to your strategy, can disrupt an entire industry…“
Iwata: Disrupting Development Speech: GDC 2006
The President of Nintendo clearly is saying Nintendo is aiming to be number one by disrupting the industry. The Achilles heel of a vertical monopoly is innovation or, in another words, disruption. Far from being that happy go-lucky humble persona the gaming press presents, Nintendo is deadly serious about the upcoming console war but has decided to fight it unintentionally.
Yamauchi keeps repeating his belief that the videogame industry is moving in the wrong direction. However, now it has reached a climax.
"I have been saying this for some time, but customers are not interested in grand games with higher-quality graphics and sound and epic stories. Cutting-edge technologies and multiple functions do not necessarily lead to more fun. The excessively hardware-oriented way of thinking is totally wrong, but manufacturers are just throwing money at developing higher-performance hardware."
To oppose the idea of “bigger is better" mentality, Yamauchi revealed he thought up the idea of the DS. "Only people who do not know the videogame business would advocate the release of next-generation machines when people are not interested in cutting-edge technologies. “Nintendo has no plans to release a so-called 'next-generation' videogame console at the next year's E3 [2005] in Las Vegas. We will rather make a new proposal that uses the GameCube at its core."
The Gaming Press was stunned at Nintendo’s direction. How could Nintendo compete with Microsoft and Sony for the next generation? A reporter asked the vice president of Nintendo of America and received this answer: “You define the debate as one of graphical attributes. We don't. We don't believe graphic realism will be the deciding factor of success for the new consoles. It's like saying Van Gogh's paintings are 'graphically inferior' because they're not photorealistic depictions.”
George Harrison
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