Nintendo Alternative Money: Simpler And More Profiteering

In October 2009, the US business week released the "best global enterprise ranking in 2009". Nintendo came out of the top 2500 listed companies in the world, and took the lead in the past 5 years of 36% CAGR. It pressed Google and apple to become the best king in the world.

The previously announced Nintendo 2008 fiscal year report (as at March 31, 2009) is even more impressive: $18 billion 600 million in sales, up to $5 billion 600 million in profits, net profit of $2 billion 800 million. In the hard times of the financial crisis and the general decline of corporate performance, this achievement is enough to make any company jealous.

What is the secret of Nintendo's headwinds?

Obsolete technology creates best sellers.

The development experience of Nintendo is legendary. In September 23, 1889, Yamauchi Bojiro founded a handicraft factory in the capital of Kyoto. After that, the small company set foot in the catering industry, the hotel industry and the taxi industry, but the diversification business was not successful. Later, it began to cut into the entertainment industry from poker, and even in 1980s, it entered the video game industry. During this period, many ups and downs, many staged a comeback miracle, and finally developed into the world's largest video game company.

Nintendo's success today is largely due to lessons learned from the biggest crisis in the company's history.

In the spring of 1973, Nintendo took the fate of the entire company in the construction of the new laser entertainment system. At first, tourists from all over the world came to visit. Unfortunately, in the autumn of this year, Japan was hit by the "first oil crisis", and people began to control consumer spending cautiously. In the UFO shooting range, customers' tracks disappeared at once, and letters from domestic and foreign countries demanding the cancellation of the UFO orders came one after another.

This is the biggest crisis in Nintendo's history, and the company is saddled with huge debts. This crisis has made Nintendo realize that entertainment is not a necessity, and the entertainment market is likely to disappear at any time.

The failure of the diversified economy, coupled with the impact of the oil crisis, until the end of the 1970s, Nintendo has been borrowing money. But the launch of an innovative product has become an opportunity to change Nintendo's fate. This is Nintendo's first portable LCD Game gameware & watch in 1980.

One day, Yokoi Ra, who had developed many kinds of hot products for Nintendo, found many office workers tinkering with electronic calculators while taking the Shinkansen. This phenomenon inspired his inspiration and developed "Ge & watts". "GM & watts" has been selling well, and has paid off all the debts that Nintendo has been carrying. Thanks to the money accumulated by gameand watts, Nintendo has officially entered the arcade game business. The role of "Mario brothers" and "big gold steel" born in Arcade Games has become a great fortune to maintain popularity in the FC era.

What Nintendo learned in this era is that even old and outdated technology, such as small LCD and calculator, can create a good product with ingenious creativity. Www.cye1.cn

New product innovation

In the game industry, in recent years, there has been a three strong situation: Nintendo, SONY and Microsoft. Nintendo's main products are home mainframe Wii and handheld DS series; SONY is home host PS3 and handset PSP series; Microsoft relies on Xbox360 series alone. The game software matching its host is also an important source of income for the top three players.

With 120 years of experience accumulated, Nintendo has a deep understanding of consumers' fickle demand, and thus refuses to be keen on market observation and judgement. Before Nintendo launched the Wii revolution, gamers have been tired of the long process of customs clearance in video games, hoping to get more pure pleasure from the game.

This change is not immediately realized by the players themselves, but Nintendo is acutely grasping this. When competitors are racking their brains to apply the latest hi-tech to products, Nintendo considers more consumers' real needs and feelings. This allows Nintendo to develop Wii without competing with the competitors to achieve high definition of the screen. Instead, it innovated from the way of manipulation of the game, using existing technologies to develop products that are simple, interesting and satisfying the needs of consumers.

Before Nintendo launched Wii in December 2, 2006, Microsoft and SONY have launched a new generation of home hosts Xbox360 and PS3. On the high technology content of the product, Microsoft and SONY, who are good at technological innovation, are more attractive to the players. They play a strong allure in the HD and 3D effects of the game. Xbox360 is much more game oriented, game quality 1080P, sound quality analog 5.1 channels, PS3 focuses on high-definition visual enjoyment, and can enjoy Blu ray DVD.

Wii focuses on somatosensory operation and the main sports leisure games. The so-called somatosensory operation is that the Wii recognition action is only based on the change of the controller's position and the angle track to recognize the action. For example, playing tennis with Wii Sports, you can sit on the sofa and shake your wrist to make the receiving action. Although the quality of Wii game is 480P, it still stays at the level of the previous generation, but it is more suitable for family members to play. This is different from the market target of Microsoft and SONY. Compared with SONY and Microsoft, Nintendo's most important thing is to create a game environment that can be enjoyed by men, women, young people, veterans and novice.

After Wii was launched, casual games and motion controllers became boosters for the sales growth of the game console. Wii implements Nintendo's idea that everyone can play games. Wii provides consumers with the greatest pleasure and highest value, not only the core players, but also the welcome of all family members.

In just 3 years, Wii swept across Europe and Asia. According to the statistics of video game magazine Enterbrain and research company NPD in June 2009, the sales of Nintendo Wii games in Japan are 3 times that of SONY PS3 and 2 times more than that of PS3 in the US.

On the contrary, SONY, who holds the winning of technology screen, has been in a difficult position because Blu ray DVD discs are expensive, and a game CD is worth 300~500 yuan. Even though PS3 has a powerful host function, 3D high definition images are amazing, but more game developers are struggling with high development costs. Therefore, the development of PS3 game projects has reduced the sales volume of PS3 hosts.

3D games, which cost money and money, often cost tens of millions or even billions of dollars. This kind of high input makes the game manufacturers nervous. In order to get back to the books, at any cost, the sales volume is over millions of sets, and it is very fortunate that otherwise, the loss of blood is bound to hurt badly. While Nintendo is much more low-key, although its development cost is very low, its game quality is always among the best. Therefore, it is also highly praised by professional gamers.

Host and game complement each other.

For the game industry, the sale of hosts and games is complementary to each other. Every additional game platform, whether Wii or DS, needs to be supported by the corresponding game players, and it can not be mutually exclusive. Years of experience and lessons have led Nintendo to uphold the idea that only by creating an environment where game developers can easily develop games can they produce good game works.

In Nintendo's game industry chain, Nintendo has mastered the manufacturing and sales of game console Wii and handheld DS, has the best first party development team, and has accumulated a large number of excellent second party and third party game development companies through equity participation and investment. At the same time, it has established a huge game software sales system in the world, integrating production, supply and marketing.

Nintendo has a unique market management system. This system is the beginning of the "Japanese game industry rules". The unique management system developed by Nintendo to prevent software from being "crude" is that game vendors can only develop games suitable for Wii and DS series only if they get Nintendo's license. The game content of game manufacturers must be examined by Nintendo and commissioned by Nintendo to produce game discs. Only in this way can they sell games in the market.

In terms of pricing, the game industry, like many works of art, is content oriented. Therefore, Nintendo tries to let players (consumers) evaluate the value of this product, comment and mark it, so that in the testing stage, Nintendo can get the pricing password of the product sensitively and accurately, and then make the batch production and market promotion according to local conditions.

The pricing of Nintendo involves the relationship between standard pricing, crowd pricing and portfolio pricing. The so-called standard pricing is a yardstick and reference for mainstream games; sub pricing is based on the age and preferences of consumers.

Nintendo pays special attention to the split pricing of games and games. You know that many people spend 15 thousand yen to buy a DS or 16 thousand and 800 yen to buy a DSL. These investments are for playing 2800 yen games, so the price of hardware can not be too low, otherwise it can not arouse consumers' compensation. The price of the software should be set in a proper way, according to the location, quantity and cost of the game itself, so that consumers can buy it several times. Nintendo is very cautious about the pricing and price adjustment of new games, and has always been steady and steady.

In terms of marketing strategy, Wii's success is not simply to throw money away, mainly because Nintendo changes its business philosophy in a timely manner. George Harrison, Nintendo's senior director of public relations, said: "when we notice that there is something interesting about playing Wii Sports on the Internet, we will immediately try to make it cause media and public attention. It is because we seize these small bits and pieces that our market can only seize the opportunity to develop. When we notice the trend of the public or creative new ideas, we will take advantage of them.

Threats from Apple

Over the past one or two years, the game industry has undergone significant changes in its structure. As a game platform, mobile phones have joined the ranks of competing with home hosts and handsets. Apple attacks the game market with iPhone and iPod Touch products. Cheap casual games attract a lot of players, and have a big impact on the sales of Nintendo, SONY and Microsoft, the three main manufacturers.

In October, Apple launched the upgraded version of iPod Touch, pushing the product to the same battleground as Nintendo handheld DS and SONY handheld PSP. The apple offensive is not just a handheld device, it may also invade home hosts such as Wii, PS3, Xbox 360, because the new gaming experience will focus on the mobile phone. Compared to the game software of every $30 or more per host company, each iPhone game with a download cost of less than US $1 has a unique cost advantage in terms of cost.

Some analysts pointed out that in the game market to attract players is no longer hardware, but software. Apple's online store App Store has more than 21 thousand different games, far more than Nintendo and SONY's total game. Another example is that in September this year's Tokyo game show 758 new games, there are 168 mobile phone as the platform, the number is more than doubled in previous years.

For game developers, the iPhone platform is quite attractive because of its simplicity, low cost and huge profit potential. This change is not natural for Nintendo and other 3 main manufacturers, because they all need rich game product lines to drive the sales of the main engine. If the host sales are not good enough, game developers will also be reluctant to develop games for the host, thus creating a vicious circle. Www.cye1.cn

In order to stimulate the sale of host computers, Microsoft and SONY have already started the price competition of home hosts. Nintendo finally joined the battleground in September 24th, announcing that the Wii price in North America and Japan would be lowered.

Nintendo's DS series new console DSi, launched in 2008, has increased the function of downloading music, pictures, movies and games through the Wi-Fi online mode, making it function close to iPhone. In October 2009, the updated handset DSiLL increased the screen size by 93%. In addition, Nintendo is considering bundling free 3G Internet access services in the next generation of DS handsets. Iwata So believes that 3GDS can enhance market competitiveness and effectively combat apple iPhone.

New challenge

Facing the attack from the old and new competitors and the decline of consumers' heat, the demand for Nintendo products is obviously cold. Meanwhile, like other companies in Japan relying on the international market, Nintendo's profits are also eroded by the yen.

In October 29th, the company lowered its profit forecasts for the full fiscal year while publishing its first half fiscal year 2009 results. This will be the first time in the last 6 years that Nintendo has seen a drop in profits in the full fiscal year. In the 2006~2008 fiscal year, Nintendo refreshed the company's net profit record for 3 consecutive years.

In the first half of the year, Nintendo reported a 34.5% decline in sales in the first half of the year to 548 billion yen, while net profit fell 52% to 69 billion 400 million yen (US $722 million). Nintendo expects that sales in the fiscal year will also fall by 18.4%, or 1 trillion and 500 billion yen, over the previous fiscal year, which is 300 billion yen lower than the initial forecast. Net profit will be reduced by 17.6%, about 230 billion yen; Wii sales will drop 23% to 20 million; and the sales of related software will decrease by 12% to 180 million sets. The sales volume forecast decreased by 6 million units and 40 million sets compared with the original forecast.

Iwata So, President of Nintendo, said: "the low market demand and the lack of enough game themes have led to a slowdown in Wii sales. It is very difficult to rebound from the downturn in demand." Nevertheless, Iwata So is still confident of Wii sales. It is reported that Nintendo Wii 2 will be on sale in the third quarter of 2010.

Whether Wii2 and the new generation of DS can continue the magic of Nintendo are waiting to be seen.