The console gaming scene has been a 3-horse race for years now. The last decade has been ruled by Sony, Nintendo, and Microsoft. If all goes according to plan, the next decade will feature the same players. The gaming industry seems to strike a certain passion for many that is not often seen in other hobbies. Some people will pick one company or console and stick with them to the end. This often means gamers will rally behind sales figures and root for their favorite console to “win” in total sales. Some will even root for the failure of the competition. But the question is: why?
This gen, the Wii was a runaway success that not even Nintendo could see coming. Until recently, the Wii was outselling the competition by huge margins. The system would sell out in stores long after the initial launch in 2006. In the end, however, the Wii was not a huge success with core gamers. Compared to the competition, the Wii’s game library lacked a certain punch. 3rd party ports were often done by B-teams and given little promotion and many major titles never made their way to the console at all. There were exclusives from Nintendo and others that were as good as ever, but the situation has been far from ideal for Nintendo.
The lack of major 3rd party support meant a bittersweet story for Nintendo. They were selling a lot of hardware, sure, but that’s just the first step to succeeding in the console space. Selling games (both 1st and 3rd party) is where a large portion of a console-makers profits derive. On the Wii, a lot games just weren’t selling. It’s sort of like owning a huge theme park that nobody visits.
Over on the other side of the fence, the competition has been duking it out for the #2 spot. The Wii has long-past reached a sales point that would be extremely difficult for Microsoft or Sony to ever surpass. That hasn’t stopped them from chasing more customers though. For the most part, losing has played to the benefit of gamers.
Take Sony for example…
In 2005 the company was riding high on the success of the PS2, the highest selling home console to date. The company was preparing to launch their new Blu-ray disc format and the PS2’s successor. Sony had invested a lot of money into these technologies and was banking on the success of their branding to carry them along into the future.
As most of us know, the “low-end” PS3 launched at $500, a higher price than most console gamers had ever known (if you owned a 3DO, you may officially consider yourself the 1% of the gaming world). The “Playstation” name did make way for the PS3 to thrive. If anything, it’s the main reason the console survived its first year.
To summarize: Arrogance brought Sony to their knees.
In fact, arrogance often seems to overcome the wide-leader. Nintendo launched the DS in 2004 for $150. The system went on to become one of the best selling pieces of gaming hardware ever released. Couple that with huge Wii sales and you could say that Nintendo was feeling pretty confident in themselves.
The DS was popular with gamers, so when Nintendo revealed the 3DS for the first time at E3 2010, they were met with an enthusiastic crowd. Nintendo went on to set the 3DS price at $250, a full $100 more than the original DS. The 3DS was strong out of the gate, setting record entry-sales numbers. But those sales quickly tapered off. The 3DS was in a slump.
Nintendo president, Satoru Iwata, later admitted in an analyst meeting that the E3 reaction was a contributing factor to the the 3DS’ price tag. In other words, it would have been better for consumers if journalists kept their excitement to themselves that week.
The company gave the 3DS a humbling $80 price drop less than 6 months into the system’s life to reduce the risk of failure early on.
Like Sony, Nintendo got a kick in the rear, reminding them that they don’t walk on water. After all, before the DS launched, Nintendo was not in an enviable position. The Gamecube lost much of its 3rd party support midway through its life. Sales were down and Nintendo found themselves in fighting with Microsoft for the #2 position, a battle Microsoft would eventually win.
It was at this time, however, that Nintendo really fought to get back into the minds of gamers. The company developed and published dozens of high quality exclusives during the Gamecube years. If you had a Gamecube, their was a lot of great exclusives to choose from.
Still, Nintendo was not looking its best. So the company took a gamble on the Wii and it paid off. The Wii was a huge success. Nintendo turned their fates around more quickly than any could have anticipated. The result? The humility went out the window. Nintendo was king again. Arrogance set in. This is how $250 3DS’ are born.
Microsoft launched the Xbox 360 in 2005, effectively kickstarting the “next generation” of console cycles. The company was eager to take the lessons learned from the original Xbox and move on. Microsoft lost an estimated $4 billion on the original Xbox, it was time for change. So Microsoft opted to end the Xbox before the 5-year benchmark and convince the world that the 360 was worth buying.
Sony was actually one of the primary reasons the 360 was launched just 4 years after the original Xbox. Microsoft knew Sony had mindshare. “Playstation” was a more popular word than “Xbox.” Microsoft had to themselves a full year as the only “next-gen” console. They were effectively in first place in game they were playing alone.
When the PS3 finally did launch, it was at a price point much higher than Microsoft had probably anticipated. So even after having a year to themselves, Microsoft continued their reign in the HD space in 2006.
So what did consumers get out of Microsoft’s success? Well, guaranteed 3rd party support for starters. If a game isn’t exclusive, there’s a good chance it’s hitting the 360.
But what else happens when your favorite company is on top? With Microsoft we got:
- The Red Ring of Death. Being a 360 owner has been hell for a lot of gamers. The 360 was very clearly rushed to launch. What was supposed to be a turnaround in profits for Microsoft ended up costing the company billions in extended warranties and repairs. Microsoft removed the Red Ring from the 360 slim.
- Bad precedent- Microsoft created a walled garden with Xbox live. As the community grew, so did user attachment. It’s harder to leave a service all your friends are on, even if you’re paying for it. So when it was revealed that Microsoft was forcing developers to charge money for DLC they wanted to give away for free, there was little backlash. Sony and several 3rd parties have joined this trend to varying degrees.
- High fees- In addition to the introduction of mainstream nickel-and-diming, the 360 ushered in higher prices all around. The “low-end” 360 SKU came with no hard drive and still cost $300. The higher-end 360 cost $400, adding less resistance to higher prices from competitors. Games also went from $50 to $60 when the 360 launched. The price of Xbox live increased the same amount in 2010 as well.
When Sony was on top gamers could expect:
- Broken hardware- While not on the same level of awful as the 360, the PS2 was not known for being reliable. Many of us have owned more than one PS2 and not just because we thought it was awesome.
- Lack of foresight- The PS2 launched with 2 controller ports 4 years after the Nintendo 64. There’s really no excuse for that. Except for the fact that Sony offered an add-on that would allow for more controllers. This was both greedy and crippling to the amount of 4-player games released for the system.
- Indifference- Like anyone with a huge lead, Sony just wasn’t hungry. They didn’t have (or necessarily need) the drive of the competition. It’s not a particularly damning fault but it did grow to the arrogance that humbled the company.
Finally, with Nintendo ruling the charts we saw:
- NEW: High prices! The DS was Nintendo first handheld to launch at such a high price (although it would be considered pretty cheap for a new handheld today… again, precedent). Likewise, before the Wii launched for $250, Nintendo had never released a home console for more than $200.
- Less games- Characters featuring Miis sold great and there’s nothing wrong with that… but what else you got, Nintendo? 2007 and 2010 were decent years for Wii exclusives. Outside of that, Nintendo largely disappointed this gen. Never more so than 2012’s Wii releases (or lack thereof).
- Misguided priorities- Casuals helped make the Wii huge. They were not big on buying lots of games though. Nintendo was able to create several successful games for casual gamers but failed to provide a system with enough games to satisfy those who make gaming their number one hobby. The company also failed to recognize the importance of a strong online system during most of the Wii’s lifetime. The Wii U aims to fix this.
On the other side of the coin, all three of these companies have worked harder to impress when they had their face to the coals. This generation the PS3 has been home to a slew of great exclusives. The 3DS was moved to a much more acceptable price range and great games have been released more consistently. Likewise, the Xbox also received a large price cut early into it’s lifetime in order to stay competitive.
Overall, history shows us that it’s a good thing when everyone succeeds… to a certain extent. When they are down, a console-maker will fight tooth and nail to impress consumers. They are humble and they want to make things right with their base. And they will lower prices to impress newcomers.
And when they are up… they are imparted the memory of a goldfish. Their humility disappears and the feeling that they can do whatever they want sets in. It happens everytime there is a large lead. It will happen again.
So enjoy the sales wars. But remember that a healthy industry is good for everyone. Competition breeds innovation and better values for the consumer. And in case you’re a major shareholder, you’ve got nothing to gain from the competition’s pain (sorry).