Nin­tendo, Mi­crosoft go for broke on their video game strat­egy

Lodi News-Sentinel - - Business - By Matt Day

LOS AN­GE­LES — Nin­tendo was hemmed in on both sides and in deep trou­ble.

The com­pany’s Wii U videogame con­sole, an ef­fort to add a small, semi­portable screen to the hit mo­tion-sens­ing Wii, was a flop. And Nin­tendo’s hand­held con­soles, de­scen­dants of the leg­endary Game Boy, were suf­fer­ing as peo­ple opted to play games on smart­phones in­stead.

This was in 2014, the year the Ja­panese gam­ing gi­ant recorded its third con­sec­u­tive an­nual loss, a set­back that fol­lowed decades of prof­itabil­ity. Crit­ics called for the com­pany to re­boot its hard­ware, or per­haps re­duce the em­pha­sis on its own de­vices by bring­ing beloved char­ac­ters like “Su­per Mario” or “Zelda” to smart­phones.

“You gotta ei­ther go back and do some­thing that’s more (tra­di­tional) con­sole­like, or go for­ward and do some­thing that’s all mo­tion, like the Wii,” said Phil Spencer, the head of Mi­crosoft’s Xbox gam­ing busi­ness, de­scrib­ing the pre­vail­ing in­dus­try opin­ion at the time. “And they didn’t.”

In­stead, Nin­tendo dou­bled down on its ef­fort to build a con­sole that com­bines mo­bile and liv­ing-room gam­ing, de­vel­op­ing the Nin­tendo Switch.

So far, it has been a wild suc­cess. Nin­tendo has strug­gled to make enough de­vices to sat­isfy de­mand since its launch in March, and at the E3 trade show here ear­lier this month, Nin­tendo had a bit of its swag­ger back.

Spencer’s Mi­crosoft is try­ing to pull off a sim­i­lar re­bound. His team is go­ing back to the roots of the Xbox busi­ness: push­ing the bound­aries of the power you can pack into a gam­ing ma­chine.

The com­pany’s Xbox One X, un­veiled at E3, is — as Mi­crosoft’s mar­ket­ing mantra re­peated con­stantly — the most pow­er­ful con­sole ever made, aimed at hard-core gamers who want ev­ery bit of graph­i­cal re­al­ism they can get.

Mi­crosoft and Nin­tendo had taken a sim­i­lar path: Fac­ing spec­u­la­tion that they would have to re­boot or re­think their video-game busi­nesses to re­spond to ri­val Sony’s dom­i­nance, they in­stead dou­bled down on what makes their de­vices stand out.

Liv­ing-room bat­tle­field

The com­pe­ti­tion to sell liv­ing-room video-game con­soles is among the old­est bat­tle­fields in video gam­ing, dat­ing to the emer­gence in the 1980s of Atari and Nin­tendo de­vices that plugged into tele­vi­sion sets.

The cur­rent gen­er­a­tion be­gan in 2012, with Nin­tendo’s Wii U. Sony’s PlaySta­tion 4 and Mi­crosoft’s Xbox One fol­lowed a year later.

Sony, with a hard­ware pack­age that was easy to use for both game de­vel­op­ers and con­sumers, and a laser fo­cus on draw­ing the best games, quickly took a wide lead.

In Tokyo and the Seat­tle area, Nin­tendo and Mi­crosoft plot­ted their re­sponse. Mi­crosoft’s cam­pus in the Seat­tle-area city of Red­mond is ad­ja­cent to Nin­tendo of Amer­ica, the Ja­panese com­pany’s sub­sidiary for the West­ern Hemi­sphere. Nin­tendo, which set up shop in Red­mond a year be­fore Mi­crosoft came to town in 1986, sold Mi­crosoft some of the land that be­came its cam­pus dur­ing one of the com­pany’s growth spurts.

Cul­tural di­vide

Far more ground sep­a­rates the two cor­po­rate cul­tures.

Mi­crosoft, which helped put a com­puter on ev­ery desk with Win­dows and to­day runs a sprawl­ing busi­ness-soft­ware em­pire, got into gam­ing at first through ex­per­i­ments in en­ter­tain­ment CD-ROMs. Dab­bling in en­cy­clo­pe­dias turned into com­puter games that pushed the bound­aries of PC hard­ware and high­lighted the power of Win­dows.

The com­pany’s dive into con­soles be­gan when some lead­ers in the Win­dows unit wor­ried that Sony’s pop­u­lar PlaySta­tion would con­quer the liv­ing room and shut Mi­crosoft out.

The Xbox con­sole was born in 2001, a brand Mi­crosoft tried to as­so­ciate with raw com­put­ing power and graph­i­cal fidelity.

Since then, Xbox — which is far more pop­u­lar in the U.S. than abroad — has also been closely tied to hard-core gamers. Mi­crosoft’s most pop­u­lar fran­chises, “Halo” and “Gears of War,” are both “shoot­ers,” the top U.S. con­sole-game genre.

Nin­tendo strikes a more light­hearted tone, one ex­plic­itly aimed at ap­peal­ing to a broad range of peo­ple — “from 5 to 95,” as Nin­tendo of Amer­ica chief Reg­gie Fil­sAime says.

Its more re­cent ef­forts haven’t fared so well. With the Wii U flag­ging, Nin­tendo ac­counted for about 5 per­cent of global con­sole and con­solegame sales last year, re­searcher IDC es­ti­mates. But in­stead of drop­ping the con­cepts the de­vice ex­plored, Nin­tendo dug deeper.

In Oc­to­ber, the com­pany an­nounced a new con­sole that kept the Wii U’s por­ta­ble small-screen con­cept, but rebuilt the de­vice as a sleek, table­like tool that could be plugged into a tele­vi­sion dock for tra­di­tional play.

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