1.What where Microsoft motives in entering the games console market with Xbox ?

2.What were competitive advantages of Microsoft Xbox One and Sony's Playstation 4?

3.What are the competitive advantages of the original Wii and the new Nintendo Switch

4.What do you think Nintendo's chances are of creating a blue ocean come back with their Switch ?

200 of 807 Case study 1.2 Nintendo Switch .. . . . . .... ........... .... ....... ...................... When Nintendo Wii was launched in 2006, very few analysts would have predicted that it would one day be market leader in the games console market against the established PlayStation 3 (PS3) and Xbox 360 brands. But analysts can be wrong: in the week end- ing 23 August 2007 www.vgchartz.com data, which is based on sample data from retailers all over the world, indicated that Nintendo's Wii (which was released in November 2006 - one year after the Xbox 360) had passed the Xbox 360's lifetime unit sales, making Nin- tendo the new world market leader in both the games and console businesses. This had a big impact on third-party developers Wii and also influenced the decisions that the three major players (Microsoft, Sony and Nintendo) would make in the future. One factor that no doubt helped Nintendo's Wii to grow so quickly was the console's broad appeal across The Nintendo Wii all age groups, demographics and countries. However, Source: Annette Shaff/Shutterstock. Nintendo's first place in the world market came under massive attack from both Sony and Microsoft's new In the fiscal year 2014 Nintendo's recorded revenues sensing devices (see below). were US$5.6 billion. There was a loss in the company The big question now is whether the new Nintendo of US$0.2 billion during fiscal year 2014. Approximately Switch has the ability to repeat the Blue Ocean Strat- 80 per cent of the company's revenue is generated egy from 2006? from regions outside Japan. Nintendo - key facts and financial data Over the years Nintendo has managed to achieve higher returns on its investments, assets and equity Nintendo Co. was founded in 1889 as the Marufuku compared with the industry average. Nintendo has Company to make and sell 'hanafuda', Japanese game not raised any capital through debt in the past few cards. Abandoning previous ventures in favour of toys years. The company's total debt to equity ratio at the in the 1960s, Nintendo then developed into a video beginning of 2015 was close to zero compared with game company in the 1970s, ultimately becoming one the industry average of 12 per cent. Debt-free status of the most influential in the industry and Japan's third indicates the company's ability to finance its opera- most valuable listed company with a market value of tions efficiently. Additionally, having no debt obliga- over US$85 billion. tion provides the company with significant liquidity Today Nintendo (www.nintendo.co.jp) is engaged and financial flexibility. in the creation of interactive entertainment products. It manufactures and markets hardware and software The video game console industry for its home video game systems. The company pri- The interactive entertainment software market is char- marily operates in Japan, Europe and America. It is acterized by short product life cycles and frequent headquartered in Kyoto, Japan. In total the whole Nin- introductions of new products. tendo Group (including subsidiaries) employs about The game consoles are relatively expensive at the 5,200 people. beginning of the product life cycle. Hard-core game 152 Part I The decision whether to internationalize freaks pay dearly to have a console early, but sales is fairly predictable. We're making games that are really jump in years two and three, as Moore's law and expanding our base of consumers in Japan and economies of scale drive prices down and third-party America. Yes, those who've always played games developers release must-have games. By year four the are still playing, but we've got people who've never buzz will have begun about the next generation, and played to start loving it with titles like Nintendogs, the games consoles will often be found at the local Animal Crossing and Brain Games. These games are grocery store at discount prices. blue ocean in action. Nintendo has been operating in the video game console market since 1977 with colour television games, (Rosmarin, 2006) and is considered the oldest company in this market. It is one of the largest console manufacturers in the Part of Blue Ocean Strategy involves creating a world, and a leader in the hand-held console market. strategy canvas that depicts the current marketspace The company released six generations of consoles over and relative offering level for major attributes that the past two decades, including the Nintendo Enter- companies compete on. It helps visualize which offer- tainment System, Super Nintendo Entertainment Sys- ings cost more to compete on. It also helps companies tem, Nintendo 64, GameCube, Wii and Wii U. Nintendo to identify which values to eliminate, reduce and/or has dominated the hand-held games market since its raise and, finally, it helps to identify new values that release of the original Game Boy hand-held system aren't currently competed on. in 1989. Nintendo DS, the current hand-held console tegy canvas for the Nintendo Wii, compared with Microsoft's Xbox 360 and Sony'sOver the years Nintendo has managed to achieve Nintendo - key facts and financial data higher returns on its investments, assets and equity Nintendo Co. was founded in 1889 as the Marufuku compared with the industry average. Nintendo has Company to make and sell 'hanafuda', Japanese game not raised any capital through debt in the past few cards. Abandoning previous ventures in favour of toys years. The company's total debt to equity ratio at the in the 1960s, Nintendo then developed into a video beginning of 2015 was close to zero compared with game company in the 1970s, ultimately becoming one the industry average of 12 per cent. Debt-free status he industry and Japan's third indicates the company's ability to finance its opera- 201 of 807 pany with a market value of tions efficiently. Additionally, having no debt obliga- tion provides the company with significant liquidity I oaay Nintendo (www.nintendo.co.jp) is engaged and financial flexibility. in the creation of interactive entertainment products. It manufactures and markets hardware and software The video game console industry for its home video game systems. The company pri- The interactive entertainment software market is char- marily operates in Japan, Europe and America. It is acterized by short product life cycles and frequent headquartered in Kyoto, Japan. In total the whole Nin- introductions of new products. tendo Group (including subsidiaries) employs about The game consoles are relatively expensive at the 5,200 people. beginning of the product life cycle. Hard-core game 152 Part I The decision whether to internationalize freaks pay dearly to have a console early, but sales is fairly predictable. We're making games that are really jump in years two and three, as Moore's law and expanding our base of consumers in Japan and economies of scale drive prices down and third-party America. Yes, those who've always played games developers release must-have games. By year four the are still playing, but we've got people who've never buzz will have begun about the next generation, and played to start loving it with titles like Nintendogs, the games consoles will often be found at the local Animal Crossing and Brain Games. These games are grocery store at discount prices. blue ocean in action. Nintendo has been operating in the video game console market since 1977 with colour television games, (Rosmarin, 2006) and is considered the oldest company in this market. It is one of the largest console manufacturers in the Part of Blue Ocean Strategy involves creating a world, and a leader in the hand-held console market. strategy canvas that depicts the current marketspace The company released six generations of consoles over and relative offering level for major attributes that the past two decades, including the Nintendo Enter- companies compete on. It helps visualize which offer- tainment System, Super Nintendo Entertainment Sys- ings cost more to compete on. It also helps companies em, Nintendo 64, GameCube, Wii and Wii U. Nintendo to identify which values to eliminate, reduce and/or has dominated the hand-held games market since its raise and, finally, it helps to identify new values that release of the original Game Boy hand-held system aren't currently competed on. n 1989. Nintendo DS, the current hand-held console Figure 1 shows a strategy canvas for the Nintendo of Nintendo, had already had a lifetime sales of more Wii, compared with Microsoft's Xbox 360 and Sony's than 150 million by the end of December 2014. PlayStation 3, at the point of introduction in late 2006. The x-axis of the graph lists the primary sources of Wii's competitive advantages, at the time of introduc- Nintendo's launch of Wii tion (end of 2006): Nintendo launched the Wii in November 2006. Nin- . Price: Wii was 30-40 per cent cheaper than Xbox tendo's arguments for using this brand name were: 360 and Sony Playstation 3. . Wii sounds like 'we', which emphasizes this console CPU power: Wii had a comparatively low processor is for everyone. speed and no Dolby 5.1 (sound system). Both PS3 . Wii can easily be remembered by people around and Xbox 360 had processors that were far more the world, no matter what language they speak. powerful than you would find in most PCs. . Wii has a distinctive 'ii' spelling that symbolizes Storage (hard disk): in the basic model, Wii had no both the unique controllers and the image of peo- hard disk. ple gathering to play. High-definition video: both PS3 and Xbox 360 used high-end graphics chips that supported high- The genius of the Wii is that it has changed the definition games and were prepared for high-definition rules and invented a type of gaming with massively TV. Wii's graphics were marginally better than the enhanced interaction between player and game. PS2 and the original Xbox, but Wii paled next to the PS3 and Xbox 360. Wii's first attack - the Blue Ocean . DVD: both Sony and Microsoft provided the DVD Strategy opportunity. Sony even included a Blu-Ray DVD drive. Connectivity (online): the Xbox especially had posi- Nintendo was attempting to create a blue ocean by tioned itself as the online games console with creating a unique gaming experience and keeping the multi-player functions. cost of its system lower than Sony's and Microsoft's. . Motion-controllable: with its innovative motion con- In a Forbes.com interview, Perrin Kaplan, vice pres- trol stick Wii added new value to game playing. The ident of marketing and corporate affairs for Nintendo stick integrated the movements of a player directly of America, discussed its implementation of blue into the video game (e.g. tennis, golf, sword fights). ocean: . Unique gameplay: the new Wii gaming console Inside Nintendo, we call our strategy 'blue ocean." sensed depth and motion from players, thus adding a whole new element to the play experience. This is in contrast to a 'red ocean. ' Seeing a blue Family-oriented (large public): with the motion con- ocean is the notion of creating a market where there trol stick Nintendo opened up the console world to initially was none - going out where nobody has yet a completely new public of untapped non-gamers gone. Red ocean is what our competitors do - heated from the age of around 30. Parents and even grand- competition where sales are finite and the product parents enjoyed playing the Wii. Part I Case studies 153 Figure 1 Value curves (strategy canvas) - Wii versus Xbox and PS3 erformance level- d by customers 10 00 + Nintendo Wii - Microsoft Xbox 360 Sony PlayStation 3creating a unique gaming experience and keeping the multi-player functions. cost of its system lower than Sony's and Microsoft's. . Motion-controllable: with its innovative motion con- In a Forbes.com interview, Perrin Kaplan, vice pres- trol stick Wii added new value to game playing. The ident of marketing and corporate affairs for Nintendo stick integrated the movements of a player directly of America, discussed its implementation of blue into the video game (e.g. tennis, golf, sword fights). ocean: . Unique gameplay: the new Wii gaming console " our strategy 'blue ocean." sensed depth and motion from players, thus adding a whole new element to the play experience. 202 of 807 1 ocean.' Seeing a blue Family-oriented (large public): with the motion con- ng a market where there trol stick Nintendo opened up the console world to ut where nobody has yet a completely new public of untapped non-gamers gone. Red ocean is what our competitors do - heated from the age of around 30. Parents and even grand- competition where sales are finite and the product parents enjoyed playing the Wii. Part I Case studies 153 Figure 1 Value curves (strategy canvas) - Wii versus Xbox and PS3 Relative performance level - perceived by customers 10 00 + Nintendo Wii A - Microsoft Xbox 360 Sony PlayStation 3 N O Price DVD CPU power definition video rage (hard disk) Motion controllable Connectivity (online Unique gameplay High- Family-oriented (large put Factors of competition Table 1 World sales of games consoles (units) and market shares Year Sony PS4 + earlier Microsoft Xbox One Nintendo Switch Total percentage Total market mill. versions (%) + earlier versions (%) + earlier versions, units e.g. Wii (%) 2005 69 20 17 100% 24.3 2006 53 31 16 100% 24.4 2007 40 20 40 100% 39.1 2008 33 21 46 100% 53.7 2009 35 21 44 100% 49.5 2010 35 28 37 100% 49.2 2011 36 35 29 100% 39.5 2012 40 35 25 100% 30.0 2013 47 34 19 100% 27.1 2014 55 32 13 100% 32.4 2015 58 30 12 100% 32.9 2016 65 31 4 100% 28.0 2017 49 19 32 100% 41.1 Source: based on www.vgchartz.com. Wii's market shares compared with Current Nintendo Switch sales are pretty evenly split Microsoft (Xbox One) and Sony (SP4) - between the three major markets - 30 per cent have and their earlier versions. been sold in Japan, the American market (including Table 1 shows the worldwide sales of games consoles Canada and South America) accounts for 40 per cent, from 2005 to 2017, together with the corresponding and other markets (including Europe and Australia market share. and a few niche markets) for 30 per cent. The sales of 154 Part | The decision whether to internationalize Sony (PS4) and Microsoft (Xbox One) have been more While the hardware (consoles) market is dominated unequally distributed: Microsoft sells in North Amer- by three players, the software market is more open ica, whereas Sony's biggest markets are Japan, China and fragmented, with several regional players and and the rest of Asia. local developers. However, the games software indus- At the retail level, games consoles are sold through try is undergoing a period of consolidation. a variety of electronic and audio/video retailers, supermarkets, discount stores, department stores and Wii's second attack - the Wii U internet retail stores. After the two competitors, Sony and Microsoft, had launched their new Playstation Move and Xbox Kinect Nintendo's strategy in 2010, Nintendo came out with what it thought should be the new Blue Ocean Strategy. Wii managed to become a market leader by empha In November 2012 Nintendo's new Wii U was sizing its simplicity and lower price (than Sony and released for worldwide sale. The Wii U console and Microsoft) to break down barriers for new customers. controller prototypes were first revealed at the E3 2011 Nintendo has attracted non-tra CamePad is the main controller as women and those over 60 years old, with easy-to- for the Wii U. It features a built-in touchscreen, which2008 33 21 46 100% 53.7 2009 35 21 44 100% 49.5 2010 35 28 37 100% 49.2 2011 36 35 29 100% 39.5 2012 40 35 25 100% 30.0 34 19 100% 27.1 203 of 807 32 13 100% 32.4 OC 30 12 100% 32.9 2016 65 31 4 100% 28.0 2017 49 19 32 100% 41.1 Source: based on www.vgchartz.com. Wii's market shares compared with Current Nintendo Switch sales are pretty evenly split Microsoft (Xbox One) and Sony (SP4) - between the three major markets - 30 per cent have and their earlier versions. been sold in Japan, the American market (including Table 1 shows the worldwide sales of games consoles Canada and South America) accounts for 40 per cent, from 2005 to 2017, together with the corresponding and other markets (including Europe and Australia market share. and a few niche markets) for 30 per cent. The sales of 154 Part I The decision whether to internationalize Sony (PS4) and Microsoft (Xbox One) have been more While the hardware (consoles) market is dominated unequally distributed: Microsoft sells in North Amer- by three players, the software market is more open ica, whereas Sony's biggest markets are Japan, China and fragmented, with several regional players and and the rest of Asia. local developers. However, the games software indus- At the retail level, games consoles are sold through try is undergoing a period of consolidation. a variety of electronic and audio/video retailers, supermarkets, discount stores, department stores and Wii's second attack - the Wii U internet retail stores. After the two competitors, Sony and Microsoft, had launched their new Playstation Move and Xbox Kinect Nintendo's strategy in 2010, Nintendo came out with what it thought should be the new Blue Ocean Strategy. Wii managed to become a market leader by empha In November 2012 Nintendo's new Wii U was sizing its simplicity and lower price (than Sony and released for worldwide sale. The Wii U console and Microsoft) to break down barriers for new customers. controller prototypes were first revealed at the E3 2011 Nintendo has attracted non-traditional users, such exhibition. The Wii U GamePad is the main controller as women and those over 60 years old, with easy-to- for the Wii U. It features a built-in touchscreen, which play titles such as Brain Training and Wii Fit (launched can either supplement or replicate the game play in April/May 2008). shown on the main display. When using the 'Off TV Nintendo is highly dependent on subsuppliers, for Play' function, the controller can act as a standalone both hardware and software. The company commis- screen without the use of a TV. sions a number of subsuppliers and contract manu- Table 1 shows the worldwide sales of games con- facturers to produce the key components of game soles (in millions units) from 2005 to 2017, together consoles and assemble finished products. The com- with the corresponding market shares, which are illus- pany was not able to meet the growing demand for its trated in Figure 2. new Wii console, after its November 2006 launch, as The Wii U was available at two prices: basic (US$300 its suppliers were not able to ramp up their production in US) and deluxe ($350). to meet the demand. A shortage of key components In 2013 the new Super Mario Bros. U has been one or the finished products had a negative effect on the of the best-selling Wii U games. Also released in 2013 company's revenues. was the popular LEGO City: Undercover. In this original Nintendo is also very much dependent on its soft- LEGO game, exclusive to Wii U, players assume the ware suppliers, who all develop new games based on role of Chase Mccain, a tough police officer who is a a licensing agreement with Nintendo. master of disguise. Figure 2 Development of world market shares of PS4, XBOX One and Nintendo Switch 80 Sony PS4 + earlier versions 70 - Nintendo 60 Microsoft Xbox One + earlier World market share (%) versions 50 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Part I Case studies 155 When the plans for Wii U were announced at the Microsoft Xbox One end of 2011, the stock market was a bit disappointed. The question now was whether Nintendo could cre- The original Xbox was introduced in 2001 - six years ate another 'blue ocean'. These concerns about after the first Sony PlayStation 1 (PS 1). Microsoft con- Nintendo's Wii U also came tinues to target the 'serious' gamer segment with phones and tablet PCs were taking shares away from Xbox graphics, games and Xbox80 - Sony PS4 + earlier versions 70 - Nintendo 60 - Microsoft Xbox One + earlier versions 204 of 807 World mark 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Part I Case studies 155 When the plans for Wii U were announced at the end of 2011, the stock market was a bit disappointed. Microsoft Xbox One The question now was whether Nintendo could cre- The original Xbox was introduced in 2001 - six years ate another 'blue ocean'. These concerns about after the first Sony PlayStation 1 (PS 1). Microsoft con- Nintendo's Wii U also came at a time when smart- tinues to target the 'serious' gamer segment with phones and tablet PCs were taking shares away from the Xbox 360. The Xbox graphics, games and Xbox games consoles. Live internet gaming have been popular with the core user segment, primarily young males. The US market The competitors' response to remains the most important so far, accounting for Nintendo's Wii U nearly 50 per cent of the overall Xbox sales. Xbox is the console with the highest 'game attach' The two main Wii competitors have both undergone rate. This is defined as the average number of games some dramatic changes since the first console was each console owner buys. For the Xbox 360, Microsoft introduced, as discussed in the following. managed a 'games per console' average of 8 to 1 in 2008, the highest in the industry. Sony PlayStation PS4 The strength of Microsoft's software distribu- In 2008, cumulative sales of the PlayStation 2 (PS2) tion network has also kept the company alive in the reached 130 million units, making it the world's business, allowing Microsoft to have a presence in best-selling game platform. However, the 2006-07 more worldwide markets than Nintendo. Microsoft launch of Sony's new-generation PS3 did not trans- is strongly positioned in countries like China, India, late into the immediate success that the company had Malaysia and South Africa, all of which are growth hoped for. It was not as successful as the Nintendo markets, and this is promising for future sales of Xbox. Wii. Sony suffered from a perception that it was a In November 2010 Kinect for Xbox 360, or simply complex console only to be used in a darkened room Kinect , was introduced worldwide. It is a motion-sens- by qualified young men. The core age group used to ing input device for the Xbox 360 video game console. be a tight demographic group of 14-30-year-old men. Unlike its rivals, Microsoft's Kinect does not use a con- In September/October 2010 Sony launched the troller. Instead, a series of sensors allow the gamer PlayStation Move, a motion-sensing game controller to control the action using gestures, movement and platform for the PlayStation 3 (PS3) video game con- speech. Based around a webcam-style add-on periph- sole. Based on a handheld motion controller wand, eral for the Xbox 360 console, it enables users to con- PlayStation Move uses the PlayStation Eye camera to trol and interact with the Xbox 360 without the need to track the wand's position and inertial sensors in the touch a game controller, through a natural user inter- wand to detect its motion. face using gestures and spoken commands. In November 2013 Sony launched its new Sony Play- The new Xbox One was launched in November station 4 (SP 4), which is now the world market leader. 2013. Prior to its official release, the Xbox One received mixed reviews; the entertainment-oriented features were praised, but there was controversy surrounding a mandate for Kinect to be used at all times. XBOX ONE X set The PlayStation 4 The Xbox One Source: Peter Kotoff/Shutterstock. Source: Pe3k/Shutterstock. 156 Part | The decision whether to internationalize Table 2 Comparison of Wii U, PS4 and Xbox One Brand Nintendo Switch PlayStation 4 (PS4) Xbox One Manufacturer Nintendo Sony Microsoft Launch dates March 2018 November 2013 November 2013 (upgraded and more powerful PS4 Pro (Upgraded and more powerful Xbox One "roduced in 2016)205 of 807 The Xbox One Source: Peter Kotoff/Shutterstock. Source: Pe3k/Shutterstock. 156 Part I The decision whether to internationalize Table 2 Comparison of Wii U, PS4 and Xbox One Brand Nintendo Switch PlayStation 4 (PS4) Xbox One Manufacturer Nintendo Sony Microsoft Launch dates March 2018 November 2013 November 2013 (upgraded and more powerful PS4 Pro (Upgraded and more powerful Xbox One was introduced in 2016) X was introduced in 2016) Launch prices US$300 US$400 US$500 Source: different public sources. Table 2 shows a brief comparison between the Nielsen's gaming study also showed that the three competitors. vast majority of new-generation system owners had Microsoft has been aggressive in price cuts since owned a home console before. In fact, between 80 per the launch. In June 2014 it US$500 to US$400, by tak- cent and 90 per cent had earlier owned a PlayStation ing the Kinect out of the standard package. In Feb- 3, Xbox 360, or Wii. ruary 2015 they further cut the price to US$350. The However, the PS4, showed that it was successful increase in sales volume had been quite strong in the in capturing not only previous PS3 owners (66 per beginning of 2015, so industry experts thought it was cent), but also previous Xbox 360 (59 per cent) and only a question of time before Sony had to react. Wii (72 per cent) owners. This might explain why the Nielsen market study PS4 started off so well in sales, leading the early sales race against the Xbox One and Wii U (later Nintendo In early 2015, retail monitor Nielsen (Pike, 2015) Switch). released the results of its latest gaming study, this one examining the top factors shoppers considered Launch of Nintendo Switch when buying their new-generation console. The in March 2018 study, called 'Nielsen 360 Gaming Report' asked The Switch - a hybrid of home (plug into the TV) and 4,400 respondents in the USA what were the driv- hand-held consoles - represents an unnerving experi- ing factors behind the purchase of their consoles. ment for the company Nintendo, according to analysts For gamers aged 13 and up, 'better resolution' was eyeing the growth of mobile gaming and the success atop driving factor for PlayStation 4, while 'brand' of Sony's PS4 console. was the leading quality for Xbox One. Meanwhile, The Nintendo Switch is a unique system that can people gravitated most toward the Wii U for its be used either as a portable or a home console, and fun-factor', which may also be the reason why the it turns out Nintendo can track which mode you are Wii U was mostly popular among kids. Besides 'fun using when you play games. The information was factor', the Wii U owners also bought their console broken out during the company's six month financial because of the competitive price, and the kid-friendly report for the end of 2018. game library that Nintendo is known for. Mario Kart 8 And the data shows that Nintendo is on to some- and Smash Bros. are both examples of exclusive titles thing with its dual-purpose design. The data break- aimed at kids. down shows how players are using their systems Technically the Wii U is not as strong in process- based on registered Nintendo Accounts. The majority ing power or in screen resolution as the two other of players, a little over 50 per cent, use both the TV consoles, but besides the 'fun factor' and competi- mode and handheld mode. This is followed by around tive price, Wii U does have further selling points. Nin- 30 per cent of players who primarily use the tabletop tendo takes its time with development of new games or handheld mode, with under 20 per cent of players through flagship franchises and puts a lot of time and primarily using the Switch in TV mode. energy into new game ventures. Nintendo defines 'primary' as players who spend over In the first year of the PS4 and Xbox One life cycle, 80 per cent of their time in a particular mode. This flexi- a major talking point was resolution. Some multiplat- bility and versatility of the hardware is a key selling point form games were able to achieve higher resolution on for the Switch - combined with Nintendo's unmatched PS4 than on their Xbox One counterparts. first-party games - and this information shows that Part I Case studies 157 Con or the Pro Controller, are relatively expensive how- ever. Additionally, games are typically more expensive on the Switch relative to other consoles. The games on the Switch are typically priced right at the US$60 price range, quite expensive compared to other games con- sole platforms. It can be played at home or on the go, adding value to the already appealing price point. SWITCH It is not exactly an impulse buy at that price, but the CCIN Switch is priced well enough that people feel comfort- able picking it up as a second system, or even as their first new console in a long time. Price is not every- thing, but a lower price is better and the Switch seems to be priced just about perfectly for many buyers. The Nintendo Switch At these prices Nintendo will probably make a loss Source: Wachiwit/Shutterstock. on selling the hardware, but from the moment the consumer buys one piece of software, that entire cus-In early 2015, retail monitor Nielsen (Pike, 2015) Switch). released the results of its latest gaming study, this one examining the top factors shoppers considered Launch of Nintendo Switch when buying their new-generation console. The in March 2018 study, called 'Nielsen 360 Gaming Report' asked The Switch - a hybrid of home (plug into the TV) and 4,400 respondents in the USA what were the driv- hand-held consoles - represents an unnerving experi- ing factors behind the purchase of their consoles. ment for the company Nintendo, according to analysts "better resolution' was eyeing the growth of mobile gaming and the success 206 of 807 itation 4, while 'brand' of Sony's PS4 console. Xbox One. Meanwhile, The Nintendo Switch is a unique system that can PEUNIC ylavitateu must toward the Wii U for its be used either as a portable or a home console, and 'fun-factor', which may also be the reason why the it turns out Nintendo can track which mode you are Wii U was mostly popular among kids. Besides 'fun using when you play games. The information was factor', the Wii U owners also bought their console broken out during the company's six month financial because of the competitive price, and the kid-friendly report for the end of 2018. game library that Nintendo is known for. Mario Kart 8 And the data shows that Nintendo is on to some- and Smash Bros. are both examples of exclusive titles thing with its dual-purpose design. The data break- aimed at kids. down shows how players are using their systems Technically the Wii U is not as strong in process- based on registered Nintendo Accounts. The majority ing power or in screen resolution as the two other of players, a little over 50 per cent, use both the TV consoles, but besides the 'fun factor' and competi- mode and handheld mode. This is followed by around tive price, Wii U does have further selling points. Nin- 30 per cent of players who primarily use the tabletop tendo takes its time with development of new games or handheld mode, with under 20 per cent of players through flagship franchises and puts a lot of time and primarily using the Switch in TV mode. energy into new game ventures. Nintendo defines 'primary' as players who spend over In the first year of the PS4 and Xbox One life cycle, 80 per cent of their time in a particular mode. This flexi- a major talking point was resolution. Some multiplat- bility and versatility of the hardware is a key selling point form games were able to achieve higher resolution on for the Switch - combined with Nintendo's unmatched PS4 than on their Xbox One counterparts. first-party games - and this information shows that Part I Case studies 157 Con or the Pro Controller, are relatively expensive how- ever. Additionally, games are typically more expensive on the Switch relative to other consoles. The games on the Switch are typically priced right at the US$60 price range, quite expensive compared to other games con- sole platforms. It can be played at home or on the go, adding value to the already appealing price point. SWITCH It is not exactly an impulse buy at that price, but the CCIR Switch is priced well enough that people feel comfort- able picking it up as a second system, or even as their first new console in a long time. Price is not every- thing, but a lower price is better and the Switch seems to be priced just about perfectly for many buyers. The Nintendo Switch At these prices Nintendo will probably make a loss Source: Wachiwit/Shutterstock, on selling the hardware, but from the moment the consumer buys one piece of software, that entire cus- players are not ignoring one mode for another. Nin- tomer relationship becomes positive, in terms of prof- tendo thought that players wanted to use both modes, its for Nintendo. The purpose of the business model and now it has real-world usage data showing that play- is to drive the installation base for the hardware, and ers are in fact taking full advantage of that choice. then to drive a strong tie-in ratio with all the software The reason this is such great news for Nintendo is (games). that it is a feature that its competitors won't be able Parents feel safe letting even younger kids play with to match in the near future, if ever. Neither Sony nor the Switch, and the system's biggest games appeal to Microsoft will ever be able to release Mario or Zelda just about every demographic that exists. Nintendo games on its console, nor are they likely to offer a sim- builds in easier modes so that kids and parents can ilar product that operates in two different ways. play together and have fun, from the co-op mode of If you are in the market for something that you can Super Mario Odyssey to the racing assists available in hook up to your television to play on the big screen Mario Kart 8 Deluxe. before taking the same hardware and games on a The Switch has access to games that parents want flight across the country, you do not have a lot of other to play and feel comfortable letting kids play, and options out there. those that kids want to play and double as a fun dis- Not only does the Switch not have much com- traction on long car rides. Plenty of parents use these petition, it is unlikely to get any in the near future. as excuses to get a toy they want to play with. Nin- Neither Sony nor Microsoft has much appetite for por- tendo has mastered the art of making hardware and table gaming devices, and the Switch is already selling games that work with families. better in its first year than the PS4 and Xbox One did in theirs. Nintendo is likely to keep this very lucrative market completely to itself. Questions Not only are The Legend of Zelda and Super Mario two of the biggest names in gaming, but Nintendo 1. What were Microsoft's motives in entering the also released a new game in each series during the games console market with Xbox? Switch's first year. Each one set a new standard for 2. What are the competitive advantages of Microsoft's Nintendo games' already high bar for success. Xbox One and Sony's PlayStation 4? The Nintendo Switch sold for US$299.99 at launch, 3. What are the competitive advantages of the origi- lower than the PS4's US$399.99 launch price and cer- nal Wii and the new Nintendo Switch? tainly lower than the US$499.99 launch price of the Xbox 4. What do you think Nintendo's chances are of creat- One. The accessories, such as an extra left and right Joy ing a 'blue ocean' come-back with their Switch? Source: Based on www.nintendo.com and different other public sources