With the news that Nintendo turned a rather nice profit in the last quarter, I had planned a quick rant article about how Nintendo was doing right by being different. However, it occurred to me that I could go further with this idea than merely stating that it’s a profitable enterprise to be easily differentiated from your opponents. Nintendo allows me to perfectly illustrate the idea of a market niche.
In today’s modern interconnected world, we have access to a mind-blowingly large myriad of options for every item we may choose to obtain. Something as simple as a soda lets you choose between 10 – 30 choices depending on where you go and a lot of them may blend together. Merely taking up space on a shelf in store doesn’t guarantee high sales but nothing helps make customers remember a certain brand than by it standing out from the pack. At the time Surge originally came to market in the 1990’s, nobody had thought of a citrus soda with enough caffeine to kill a rhinoceros while looking like something drug out of the bottom of Chernobyl. Surge did just that, and by doing so, burned itself in the minds of everyone who came of age in the 1990s. Think about it: with all of the “energy drinks” that litter store shelves today, do you really think anything being as instantly recognizable as Surge, would have any kind of a response to its re-release on Amazon this year?
The very reason that we call it a “niche” is due to the influence of evolution upon market philosophy. In Darwinian evolution, organisms often find their niche where their respective adaptions allow them to fill a role in a given ecosystem perfectly. Once an organism finds a niche it allows them to do what all organisms exist to do: create new generations of their species. A species without a niche will either evolve further to fit into the ecosystem or simply go extinct. This applies to the market, as at its core, the market is a Darwinian system where only those fit for the market conditions survive to profit another day and unfit companies go under. This is a good thing as it encourages companies to satisfy consumer wants & desires so they can keep going. No free market capitalist has ever thought something was “too big to fail,” however, it is an uphill battle for companies as it means they are constantly having to consider a myriad of factors that could lead to a loss of sales while innovating their own products enough to keep them fresh in the minds of consumers.
The interesting thing about niches is that sometimes they exist to be filled and other times they are created by the very company that fills them. Amazon’s niche is simply a internet version of a mall that’s been condensed into one storefront, while Netflix created its own niche that had never existed before the advent of the internet. While any of us could have imagined an all-in-one store such as Amazon before the internet became popular – Yes, kids, there was a time before the internet – few of us could have imagined paying a small fee to stream video content to thousands of different devices, some that could even do so wirelessly from nearly anywhere. While you may carve your own niche in the market, the sad truth is that a niche can also disappear just as quickly and easily. In the 1970’s an unemployed marketing executive had a brilliant idea to put rocks in decorative boxes and sell them as “Pet Rocks.” This became a huge fad, making lots of money, but very quickly burned out. A similar phenomenon would be the Tamagotchis of the 1990’s; both items were essentially artificial “pets” that were insanely popular for a short period of time, but didn’t exist in the market before. With both of these trends, the niche was gone before too long, leaving both items as amusing bits of trivia for crappy shows on VH1.
Beyond this, a niche can be made useless by the very groups filling it. This can be by pricing themselves out of the market, such as how IBM did with consumer end laptops before selling that section to Lenovo, or how Nokia’s insistence on proprietary operating systems could be argued as leading to their downfall from the number one mobile phone producer. I wanted to mention this so that you realize that just as the market shifts all of the time, niches can come and go like snowdrifts. What is extremely profitable today could be just another bankrupt and forgotten company tomorrow. After all, how many of us remembers pets.com?
A market niche can also mean a very specialized market, such as gaming itself. Most companies on the planet are niche market oriented as they focus on a very narrow product or service. After all, you don’t see McDonald’s brand cars or Chevrolet french fries. If a company wants to succeed in the modern globalized market, then it has to have a focus otherwise its products just become muddled. Consumers tend to trust the work of specialized companies, which is why a new Microsoft operating system is accepted – with caveats on more than a few occasions – but IBM’s O/S 2 of the 1980’s floundered. Similarly, whenever Nintendo released the Virtual Boy in the 1990’s it was given the benefit of the doubt, but Apple’s Pippin console died in obscurity. It’s because we have come to know these companies as ones that properly fulfill their niche so we can trust them when they introduce new items, but we are more than a bit hesitant when a company steps out of its comfort zone. Sometimes a company will introduce something so far out of its wheelhouse that it actually works. Many people would recognize the South Korean company Daewoo as a manufacturer of cars, but did you know they also make a line of handguns? Not even making that up.
Okay, so I can assume that all of this makes sense to you. Just as organisms that want to survive the perils of evolution seek a niche to where they can live to pass their genes on – the most unappealing way you could possibly say “get laid and make babies” – companies want to find a niche in the market to survive and make money. What you may be wondering is why I singled out Nintendo for this article, and that is a simple answer. I singled out Nintendo because they voluntarily singled themselves out in the console market.
Before the combustion engine and electricity were both common place, Nintendo has done business how they wanted to throughout their long history. While originally created as a card manufacturer who later became highly regarded in their native Japan as a toy company, here in the West, the name Nintendo is sometimes literally synonymous with “video games.” This is a spectacular proof of their willingness to defy conventional wisdom. In the time immediately following the Great Gaming Crash of 1983, conventional wisdom declared that video game consoles would never sell in the US again. Nintendo thought differently. By wisely including the robot, ROB, and positioning the Nintendo Entertainment System as a toy, they got around the fact that buyers were avoiding stocking anything gaming related. When 1985 came around and the NES debuted nationwide, Nintendo had recreated the entire American gaming market single-handedly. To this day, how many of us know at least one person who calls anything gaming “Nintendo” or any cartridge game a “Nintendo tape?” Not only did Nintendo find itself a very profitable niche, it resurrected the entire market that niche rested in. Very few companies can ever claim such an honor, but Nintendo pulled it off.
I could go further into details with stories of Nintendo carving its own path: the use of intentionally outdated technology to make the Gameboy easier and cheaper to manufacture thereby selling millions, the Wii making motion controls and gaming appeal to the masses, etc. Instead, I really want to focus on the newest generation of consoles, and why the WiiU’s niche is not the same as PS4/Xbone. It’s the essence of a niche market, and one that is starting to once again reap high profits for Nintendo.
The new generation of consoles have been derided by many – including myself – for what seems to be a culture of vapid homogeneity. Neither console really differs itself games-wise from its main competitor, although PS4 is certainly doing better now with exclusives. While Sony and Microsoft relentlessly attacked each other in the realm of graphics, where diminishing returns seems to be taking hold, Nintendo went with a different direction. Instead of worrying about who got an “exclusive” of two weeks with the latest DLC, to whatever brown shaded quasi-realistic military shooter it was, or the same cookie-cutter renditions of tired tropes that seems to be what gets called AAA nowadays. Nintendo stuck to its guns and made the software and hardware it wanted to make. By simply not bowing to what conventional wisdom says a modern console must be, Nintendo keeps itself at the top of gaming again.
This is not to say the road hasn’t been rocky. The Wii U sales started off abysmal and a marketing department who couldn’t find their asses with two hands and a GPS, conspired to cause Nintendo profits to sink for months. While this would have sank most companies, Nintendo bravely soldiered on thanks to the massive war chest they accumulated during the Wii’s tenure. The Wii is one of the greatest success stories in business, period. In just a few years a console that was much weaker than its competitors outsold both of them combined. The Wii has sold 100 million units worldwide, which is short of the PS2’s 155 million, but the PS2’s lifespan was almost twice as long. To put it in perspective how fast the Wii sold, let’s look at the PS4 which has sold a very respectable 25 million units worldwide in its nearly two year existence. Meanwhile, the Wii sold 20 million in its very first year. Not only is that amazing enough on its own, but Nintendo is the only manufacturer who made a profit on the very first console it sold that generation. Nintendo has the kind of money that lets you buy small South American nations to play real life Tropico.
This is all possible because Nintendo found a niche that the other consoles were ignoring. Instead of chasing power and higher polygons, Nintendo went the route of more simplistic games that focused on fun, innovative gameplay over HD textures. While not everyone can enjoy a new Far Cry or Crysis, very few people ever say no to a game of Wii Bowling. Beyond that, the Wii was not only backwards compatible with its predecessor, the Gamecube, it also sold for much less than the Xbox 360 or the PS3. By deliberately making a cheaper console with a mass market style of fun gameplay, the Wii did the kind of numbers that sales executives could only dream about. At its height the Wii shipped 1 million units per month despite never having the kind of third party support that Microsoft or Sony enjoyed. The Wii really aimed to capture the non-gamer market, which the other consoles could only make futile gestures towards. Nintendo used their niche of classic Nintendo IPs to keep a foothold in the standard gamer market while simultaneously expanding to those who otherwise wouldn’t care to own a console at all. This gambit paid huge dividends, which allows Nintendo to keep experimenting without worry about loss of profit.
To get the experience of Nintendo’s flagship titles, you have to own its hardware. I’m not suggesting Nintendo hasn’t made serious missteps in the marketing of this console – whoever came up with the name Wii U should have been canned – but Nintendo stays in the gaming market by simply not worrying about competing directly with Sony or Microsoft. They’ve accomplished this by targeting select audiences: gamers who want something different, parents who want a less violent suit of games and people who just love straight up, fun games. Nintendo is able to make the kind of games they want to make, because they’re not trying to do the same thing as the other consoles. That’s a very freeing concept indeed.
The Wii U is a really interesting console, and I happen to love mine; however, I initially held off on buying not because I disliked it, but because there were no games yet that interested me. The horrific marketing the Wii U suffered from a dismal slate of games at launch ended with the release of Super Mario 3D World, followed months later with the knockout combo of Mario Kart 8 and Super Smash Bros Wii U. With this trio of amazing games the Wii U had the advantage of having the highest rated exclusives, which is what tends to sell consoles.
Let’s look at those three for more evidence that Nintendo aims for a different niche than the others. For some reason many AAA developers have apparently developed colorblindness and decided that reality is nothing but myriad shades of dull brown with enough bloom to blind a third world country. Instead, Nintendo realized that there are more than three colors and decided to use them in a way that makes Crayola jealous. Wii U games, especially those made by Nintendo themselves, are full of bright, vibrant colors that prove HD technology can be used to stunning effect in things besides drab shooters. The imagery works with the soundtrack of often jazzy big band styled music to create an atmosphere with a upbeat and happy feel. While everyone else worries about if their drab polygons are escaping the diminishing returns inherent with graphics today, Nintendo is crafting these colorful worlds that remind us all that HD technology can be used for many colors and it looks absolutely amazing. Mario Kart 8 is one of the most beautiful games I have ever played, and it’s because there is so much color in every screen.
Instead of being about a bleak war or a gritty urban deconstruction of the American Dream, these Nintendo games reconstruct what it means to game: games are supposed to be fun. Mario Kart isn’t about who’s the best – though there are no gaming arguments like Mario Kart arguments – it’s about having a blast with a bunch of friends. Super Smash Bros is a fighting game that is about being a chaotic, crazy couch co-op dose of fun without worrying at all about memorizing combos or endless juggling. Nintendo differentiated themselves by breaking down each game genre to its core components and rebuilding them back into a fresh take on the standards that are designed to be fun first and foremost. Instead of making a commentary on the tropes of gaming or media as a whole, Nintendo seeks to find what makes games fun and bring that back to the highest importance. In simply reconstructing why these games are fun, Nintendo has been reconstructing gaming and reminding us all why we started playing in the first place.