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Good news come in bundles

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Another chain in what seems to be Nintendos “All the Right Moves” Wii launch is the announcement that the new console will come bundled with a first-party sports game. This means, that for the first time in decades, a company releases a console in a state that actually allows you to use it without having to resort to more purchases. This, naturally, got all the game publishers up in arms.
There are some very good reasons for Nintendo to pull that one off. First, they are the only company out of the three (along with Sony and Microsoft) that isn’t selling their hardware for a loss and compensating for that by putting a high price tag on the actual games. This “razor blade” business model (also known as the “Loss-Leader” model) has dictated the stripping of the console out of anything but the actual hardware and one controller. Any “peripherals”, such as memory cards and added controllers are to be bought separately. The console manufacturers also charge a “licensing fee” from game publishers for the priviledge of allowing them to run the game on their console, kicking the games’ price tag to new levels with each release.

Now, along comes Nintendo. They have “lost” the console race 2 times now, and need to put a firm foot at the door with their launch. They also have a truly innovative product (probably the first major innovation since the Atari 2600 days) which, as with any innovation may become the new de-facto standard or it may vanish in a puff of smoke. They also have a product which they sell without a loss, so for them, any console sold is not just another unit with profit potential (when games will be sold for), but a real profit for the company, making any game sold for an immediate profit as well. So they want to encourage people to buy their console, even if they won’t ever buy another game for. For Sony or Microsoft, a customer buying only the basic hardware with no extras is suicide. In this sense, they try to do everything but make their console usable out of the box.

There is another reason for this behaviour by Nintendo. If this works, more people will buy a Wii, making Nintendo’s market share bigger than it might’ve been had they used the Loss-Leader model. Bigger market share will mean that more companies will develop games exclusively for the Wii. Launch numbers are always fine, but the true test comes with the second year releases, when companies look at the launch numbers and decide who is the leading horse they want to bet on. Companies will still create games for all three, but the losing horse usually get less third-party exclusives, and the release catalog tends to be cluttered with ports of dubious quality.

Another angle that most articles forget to mention is that Nintendo isn’t contending with the Wii alone. Under the company’s mantle lie the market dominating handhelds, such as the GameBoy Advanced in its many flavours and the Nintendo DS. This allows Nintendo to not develop a “lose all/win all” attitude and keep their products in the sane zone when it comes to pricing, and quality, and to introduce innovative features that other companies run away from, such as the motion-sensor controller for the Wii or the touch screen for the DS. Game publishers may not like it (although they’ll forget all about it if the bet pulls through), but it does seem to be another Good Thing that comes courtesy of Nintendo.

Written by Erez

Sunday, September 17, 2006 at 20:49

Posted in Uncategorized

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