Nintendo Wii: A 'Revolution' in Gaming?

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Case Details:

Case Code : BSTR247
Case Length : 21 Pages
Period : 2004-2006
Pub Date : 2007
Teaching Note : Available
Organization : Nintendo
Themes: Differentiation | New Product Development
Industry : Media, Entertainment, and Gaming
Countries : Worldwide

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Nintendo's Slide in the 2000s

Nintendo's hand-held game devices were hugely popular and were a major source of revenue for the company. However, the company's stationary consoles were not as successful. In fact, Nintendo's console sales declined with the release of every new generation of consoles. In the 1980s, when Nintendo launched the NES, its only major competitor was Sega Corp. (Sega), which launched the Sega Master System, a not-too-successful game console. However, in 1991, when Nintendo launched the SNES in the US, Sega's Mega Drive/Genesis was the most popular game console in the market. The SNES was not able to dislodge Genesis from its pre-eminent position, partly because the Genesis, unlike the SNES, offered backward compatibility.

The SNES was also incompatible with several US-made TVs, resulting in image distortion. This too proved to be a dampener on sales. However, sales of the NES and the hand-held devices were still strong, which meant that Nintendo was still the biggest player in the gaming (hardware) industry...

Making the New Console

Nintendo, however, soldiered on. Immediately after launching the GameCube, the company started work on its next console. Initially, Nintendo aimed to make its new console "faster and flashier" so that it displayed great graphics at high speeds. However, one year into the development of the new console, the company started to rethink its approach.

Faced with rising game console development costs, Nintendo was forced to reconsider whether it wanted to continue in the race to build consoles which had greater processing speeds or which supported improved graphics. "Give them (gamers) one, they ask for two. Give them two, and next time they will ask for five instead of three. Then they want ten, thirty, a hundred; their desire growing exponentially. Giving in to this will lead us nowhere in the end. I started to feel unsure about following that path about a year into development," said Genyo Takeda (Takeda), General Manager, Integrated Research and Development Division, Nintendo. In the game console industry, it had become an accepted practice for the console manufacturers to lose money on the hardware and to recover the loss by charging high licensing fees to game publishers and developers...

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