For an understanding of the background material, read
this Wired article.
The summary (since I know many of you won't): 20th century mainstream media is a business model based on producing as many "hits" as possible. That business model, in short, is collapsing as the internet permits companies like Amazon.com, NetFlix, and Apple (iTunes) to serve niche markets that the "hits" strategy misses. Does this sound familiar? Nintendo continues to pursue a business strategy centered on "hits" whilst Microsoft and especially Sony do more to serve the "tail" with their broader libraries. In order to succeed next generation, Nintendo is going to have to move as quickly as possible to become the market leader as the tail provider. In fact, I would say that either Nintendo or Microsoft is more likely to take on this role than Sony, and I'll explain why later.
The good news, for Nintendo, is that none of the console makers currently serve the tail the way Amazon et al do, so there is an opportunity. I'll try to outline some of what is necessary to capitalize on the tail, and give suggestions for how Nintendo could do so.
First, and most important: hits are still necessary. Hits, like Halo, Zelda, etc are what draw people in. They're like that first free hit of crack that gets people to look at what else you have to sell. So I'm not advocating abandoning making blockbusters altogether, but supplementing them (admittedly, at some expense to the hits, but to the overall benefit of the company).
So, in order to be able to serve the tail, you need to have a library that is both broad (many titles, much of it crap) and deep (mainstream hits). These are some things Nintendo could do to achieve that end:
- Reduce licensing fees
- Present third parties with a choice of distribution channels.
- Offer multiple tiers of licensing fees depending support required in the development process and on which distribution channel the party wishes to use.
- Make the system easy to program for
- Bundle one or several "emulators" with the system with cheap software "dev kits" for the PC.
The fees option is self explanatory. Increasing the number of different distribution channels is something that is necessary when one truly gets a broad library. Simply put, you don't want to ship out a game to all the retailers if it is virtually guaranteed not to sell well enough everywhere to justify it. Keeping the present retailer centric distribution strategy for the "hits" is a good idea (probably charge the highest fees here, too, since it is the most expensive). Then, offer lower license fees for access to distribution channels that take less money. Some possible alternate channels include: burn on demand, rental chains only, online retailers only, electronic only, etc. The way I imagine a "burn on demand" service running is as follows - Nintendo, either directly or through vendors, takes in orders and then burns extremely limited runs of a game to ship to the consumer (I considered an "in store" version of this, but the potential for piracy is way too high if Nintendo doesn't directly control the burners). Nintendo may or may not even include physical instruction manuals, opting instead to distribute them electronically and letting the gamer and/or the store print them out. The "rental only" and "online retailers" only are self explanatory. Electronic distribution, too, is straightforward but deserves a comment. It would obviously only be for games (and maybe demos) that could fit on a memory card - maybe in RAM in the case of demos. In other words, this would the the distribution method of choice for very cheap and very simple games - we're talking Tetris clones, simple board game software, etc. The key is to sell these games cheap, and thus they must be licensed cheap. What's not so obvious is that Nintendo should continue to offer GameCube games through one or more of these alternate channels ($15 per game + S&H for burn on demand sounds reasonable).
The "emulators" comment is intentionally somewhat vague. Usually, one would refer to what Nintendo is most likely to do as "middleware." That is, software that takes care of much of the heavy lifting on the programming side of things. I think, however, that putting emulators on there might be a good idea. More specifically, I think it would be advantageous for Nintendo to expand it's library as much as possible by offering emulators for NES, SNES, N64, and if they can manage to make the deals, Sega Genesis and more. Offer the ROMS electronically distributed (fully encrypted with a crucial chunk of the ROM missing - requiring a brief download from Nintendo's servers in order to play - Hell, the entirety of NES ROMs could be considered the "chunk"). The key to keeping piracy of the ROMs down would, of course, be to sell them cheap - $5, but better less. Providing people with the tools to make fun new games inexpensively is also key. I'm not talking about fully blown dev kits, but dev tools for a specialized 2D "emulator" that would make puzzle games, board games, and games like Alien Hominid easy to make - justifying selling it at $10 or less electronically.
Ok, so Nintendo could have a really massive library. That is not enough. Nintendo also needs to help people to, basically, sort through all the crap to get at what they're interested in. To do this, Nintendo will basically need to emulate the above companies that have met the needs of their tails well. In short, Nintendo must provide some sort of online community. What's more, Nintendo should encourage people to review the games they've played - even a simple 1-10 on several categories should suffice, but full blown reviews would also help. With these reviews, Nintendo can offer genuinely helpful suggestions on what a player may want to try next based on what gamers with similar preferences enjoyed. Nintendo should also be able to get a much better grasp on what sort of markets exist for which sorts of gamers - improving their ability to serve the market.
Offering demos is also an important part of the sorting process - whether Nintendo lets you download them or order for several to be placed on a "burn on demand" disc you would then buy is an open issue.
That, I believe, covers the three areas mentioned in the Wired article: make everything available, cut the price in half then lower it some more, and help people find what they want. Granted, not all of this is immediately feasible, but it seems to me that Nintendo should be able to achieve all or most of what I've outlined by mid to late 2007. The important question, however, is this: will Nintendo do it? Honestly, I doubt that Nintendo will implement everything I've mentioned. Despite that, it is possible that Nintendo is moving in that general direction. Nintendo is always making noise about serving a broader audience, keeping development costs down, etc. We'll see.
All three companies, frankly, have their strengths and weaknesses for moving in this direction. Sony's weakness is that the PS3 looks to be even harder to program for than the PS2, though that shouldn't effect the simple games I have in mind as library thickeners too much. Microsoft's weakness is that they don't have the massive old library to tap into (Sony has PS1/2, Nintendo has NES, SNES, etc). The weakness Nintendo seems to have is perhaps both the easiest and hardest to overcome: a backward looking corporate culture heavily invested in the 20th century business model. Whether the all slowly move in the direction of tail service, suffering a protracted battle for dominance, or one of the three figures out how to serve the "tail" of the video game market effectively and achieves market dominance, only time will tell.
I encourage everyone to offer alternate suggestions, criticisms of mine, etc. Even though I have written this post in an essay-esque style, it should be clear from the tone and mountain of stylistic flaws that I consider this more of a brainstorming session. Hopefully there will be enough time for the info to filter back to Nintendo HQ to act on in a meaningful way with the Nintendo Revolution.
BlackGriffen
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