When I was 18 I did a school project, called simply "project". It's something most kids get to do in swedish schools around that age (usually the last year of what we called the Gymnaisum, approximately corresponding to College)). What the project is to be about is decided by the school, and depending on what kind of school you go to, it can be about anything really. My school was kind enough to allow me to write about anything I wanted because the point of the project was not so much the result, as the possibility to experience and learn the scientific method. To decide for a subject, narrow it down (you always have to narrow it down), collect relevant data and gather it into a result that is interesting and has a point. I had a class mate who did a dance show. I decided to write an essay on a subject that really intrigued me - games. More specifically, I wrote a nearly 70 page long essay on the question as to how Nintendo managed to throw a basic monopoly of the console gaming market into the gutter. My text was in large based on the great book Game Over by David Sheff, a book I really recommend by the way if you're into these kind of things. The answer to my question was simpler than I had thought.
Why did Nintendo lose their console gaming market monopoly? Self-confidence. The belief that the company ruled the interests of the gamers, and not the other way around. I won't give you an entire background history on Nintendo, suffice to say they've done a bunch of things before they decided to try out the gaming market. The former CEO of Nintendo, Hiroshi Yamauchi, was in many ways a pure genious when it came to following his intuition and deciding what would work and what wouldn't. But that is all in the book. To grasp the control Nintendo had on the market, you need some quick information about how and what Nintendo could do during their heights (which lasted somewhere between 85-95). To get a license to create games to the Famicom (as the NES is originall called) companies had to agree to terms that shocked most people, like a royalty of about 20% of all sales, and payment for each cartridge created in advance. That way Nintendo would make loads of money even if the game never sold. But Yamauchi just told them that no one forced them to get a license, and if they wanted one they had to agree to the terms. In most cases, getting a license for Famicom games still quadrupled the annual income of a company. Companies that couldn't afford it tried to create their own, un-licensed cartridges. Nintendo didn't look kindly to those companies and forbade any magazines who wrote about Nintendo games to also write about un-licensed games or publish their advertisements. The Nintendo magazines were officially independent but because they completely relied on information provided by them by Nintendo, they obliged. This example is just a drop in the ocean of the close to despotic way that Nintendo ran the market.
But then something happened. Actually, a lot of things happened. If you're not interested in this run down and want to cut to the chase of this post, you can skip this part. This is of course a wrap up and not the whole truth. Like I said, if you want to know it all, read the book!
In 1986, Nintendo started a collaboration with Sony in which they were going to build "the next big console". It was going to upgrade the Snes with a CD-rom, and it was going to be awesome in every way. No one doubted that since Nintendo had basically revolutionized the market with both their NES (Famicom) and their SNES and had games that just were in another league of other game consoles such as the Amiga. Sony were basically done with the console, when Nintendo pulled out. Sony didn't agree to some of the terms that Nintendo had asked for, so Nintendo decided to accept a collaboration with Phillips instead, who offered a lot better terms (ie, agreed to Nintendos without much question). Sony announced that they would release their gaming console anyway, since it was pretty much done. Most gaming magazines, which wrote 99% about Nintendo games, mockingly wrote that it would be really interesting to see how the gaming console that Nintendo had declined to produce would turn out to make it on the market, especially with Nintendo themselves as the competitor. Needless to say, no one thought Sonys new console, named Playstation, would make it very far. Especially not Nintendo.
Around that time, Nintendo only had one really big comptetitor, which was Sega. Nintendo were still Goliath against Segas David, but Sega had a small but strong fan base which shouldn't be ignored. Initially, Sega really didn't have much to put against Nintendo. There are plenty of awesome games to the Master System, but the sales never even came close to the ones of Nintendo. Not to mention that Nintendo had loads of really big games - Zelda, Mario, Metroid to mention a few - where Sega basically only had Sonic. Nintendo couldn't care less about what Sega did, just as they couldn't care less about what Sony did. They still had 95% of the market.
In 1992 was Mortal Kombat released to both the SNES and the Mega Drive. Sega allowed Midway to do their game just as they wanted, whereas Nintendo decided that they didn't want all that blood thrown around. Games were for children, and children weren't supposed to see that kind of stuff they argued. This is where Sega made the first move that would soon spell Nintendos downfall, because Sega had understood something Nintendo hadn't. Markets change. It had gone 10 years since Nintendo really entered the scene and made video games a thing for common people. That also meant that all the people who had started out with the NES and who really loved video gaming were 10 years older now. They would've gone from being children to being teenagers. Teenagers who liked violence and blood and who didn't like other people telling them what they could and couldn't watch. SEGA knew to exploit this Nintendo mistake immediately. They launched the rumours that described the Nintendo console as a "console for children" and if gamers wanted "real games" they had to play SEGAS consoles. The players agreed. Nintendo had no right to censor games for them and they started jumping ship. Because Nintendo really did think their gamer base was mostly made up of 6-10 year olds as it had been during their glory days, they continued to make games aimed at those children. When the Nintendo 64 was released most people agreed - the games were mainly designed to fit children. If you wanted grown up games, you had to go somewhere else. Nintendo never really managed to wash this brand away, and I remember how I had defend my Nintendo 64 to people who were dead set that there was nothing to play on it but games for small children.
Sony released their Playstation just after the SNES and some years before the Nintendo 64, and managed, miraculously really, to launch some great games to it like Final Fantasy. Somehow Sony had convinced Square to take the next part of their big seller series Final Fantasy to their console instead of Nintendos next console. Actually, it wasn't very difficult to understand why. Sony offered Square free hands and the new technology of the cd, which allowed Square to not only do exactly the game they wanted, but also to include butt loads of awesome 3d cut scenes, something they had been wanting to do for a long time. To most game designers it was like getting their hands untied, to be able to create a game exactly like they wanted to and without being buried under a mountain of terms and regulations. Nintendo didn't believe in the cd system, and the Nintendo 64 was therefor yet again played with cartridges. In a combination of Nintendo turning down games they thought were too violent, and game developers themselves preferring the free hands they were offered at the competitors, more and more great games showed up on other consoles than Nintendos. Suddenly, the game series that had been Nintendos great strength - Zelda, Mario and Metroid as mentioned, were also all that Nintendo had left that interested people.
Instead of reacting to the threat that Playstation turned out to be, Nintendo took their time with the Nintendo 64, just as they had done with the SNES. They "knew" that no one really cared about the Playstation and weren't worried that it would completely repaint the market while Nintendo were absent working on their next, big thing. In reality, this is exactly what happened. When Nintendo 64 finally was released, 2 years after the Playstation, Sony had been able to deal a fatal blow to Nintendo and shown everyone that their position on the throne wasn't set in stone. The Nintendo 64 had to be pretty dang awesome to be able to battle the damage the Playstation had done, but people were deeply disappointed.
Nintendo were staggering under the pressure of not being able to make the Nintendo 64 as interesting as the Playstation. That is when the final blow came. Sony released the Playstation 2, and it was compatible with every game to the Playstation. People were flabbergasted. Why had this never been the case before? Why couldn't people play their NES and SNES games on their N64? Since the games is what really makes the money, Nintendo had always argued that there was no reason to make a new console if people only played the old games. People had to buy the new games. Sony, ready to do anything that would please the player public, decided that using this could be a winning strategy, and it worked. Suddenly everyone realized that there was no reason to buy any other console than the Playstation 2. The library of games available to it was just unbeatable, and Sony managed to grab not only veteran gamers, but just about any parent who tried to decide which console to buy their kid for christmas. Just about anyone who decided whether to buy the Playstation 2 or another console inevitably decided for the former making the Playstation 2 the best selling console to date. Nintendo had by then lost basically the entire market to Sony, and noticed it of course. They desperately tried to save a sinking ship, releasing the Gamecube just shortly after the Playstation 2 and having accepted the cd-system (although not a regular one). But it was too late. The Gamecube wasn't backwards compatible either and Nintendo had been firmly branded the "childrens games"-company. Everyone were sure Nintendo would go the same path that Sega had done, closing down their console development and focusing solely on producing games.
Nintendo were down for the round, but definitely not for the match. They managed to get back to the arena because they learned from their mistakes and because Sony didn't. A new competitor came on the scene - the Xbox. The Xbox had one triumphant card - an enourmous economical backing, which would allow them to survive the first years of horror that were needed for them to be able to launch, make people interested, and have them stick, before they were out of money. This is something many mmorpgs recently launched have lacked. To be able to get a foothold in the fierce competition, you have to have the money to be able to go with negative figures for years until you've found enough of a player base to keep you afloat. Initially, Xbox's were sold for less than production cost, just to catch peoples interest. This was something Microsoft could do and they knew how to use it to their full advantage. Nintendo went down with the Gamecube, licked their wounds and made a full blown retort with the Wii. They looked back at their mistakes and figured how to best be able to learn from them and use that knowledge to their advantage. Sony and Sega had been able to get their foothold by pleasing the new adult gamer market. Nintendo decided that they too had to find a new market, previously untapped. They found the non-gamer. Everyone should be able to play games, even people who never played games. With the Wii, they definitely managed to make a come back through these non-gamers. Nintendo had also realized the power in backwards compatibility, and made the Gamecube games compatible with the Wii.
Sony on the other hand, went and made the very same mistakes that Nintendo had done. They decided to keep the launch of their console up to a year after the new Xbox 360 was launched, as did Nintendo with their Wii. Problem was they thought it would suffice to simply launch a better version of the same old. The key is to either launch your system first, or to launch something different (and still good) enough for it to be more interesting than the one that came first. Playstation 3 was neither. But that wasn't the only mistake. Sony too thought they had their player base in a firm grip and that basically nothing could get the players to prefer another console over theirs. After all, they had ruled the market for some 10 years (deja vu anyone?). They decided to not make the new console backwards compatible, and it was also by far the priciest console of the 7th generation. Sony had become too sure of themselves, and basically recreated the very same mistakes that had spelled Nintendos downfall.
Whenever I see how a big company loses market shares, it's often preceded by decisions as the above. The company decides that they have nothing to learn from their own market, that instead the market should adapt to their needs, which usually haves the market travel over to the competitor instead. It's war out there, and if you get too sure of yourself, you will be shot down.
The reason for this rather lengthy post (beside that it is an interesting subject) is that I have been monitoring the decisions of Blizzard, and especially their responses to other mmorpg launches, very closely. They could've easily made the same mistakes as Nintendo (and Sony, and loads of other companies), become too sure of their own greatness and lost market shares because they didn't listen to their market needs. When Activision bought Blizzard, I was very afraid this is what would happen. But I must hand it to them, they have been really good at listening to the players and trying to find a good way to mediate between their visions and the players needs, handing out just enough sparkly ponies for us to stick around and for new players to choose them over the competitors. One great example of Blizzards plasticity is how they have incorporated various addons into their own UI over the years. What better way to acknowledge a player need? Overall Blizzard have been really active in their responses to competitor launches, having some interesting content of their own ready to keep their players interest and most importantly show them that they really care for us (and our money) and don't take us for granted. With the competition growing ever harder however, the margin for error becomes smaller and smaller. In the end, one delayed patch could spell the beginning of the end, and I will continue to watch the process of things to see how they unfurl in the future. It will be very interesting indeed.