Speaking to a packed ballroom at Tokyo’s Imperial Hotel this year, Satoru Iwata – the diminutive, bespectacled chief executive of Nintendo – announced that the Wii console had sparked a “paradigm shift” in the $30bn games industry.
It was a grandiose statement but no rolled eyeballs or sceptical sighs were seen or heard. The numbers alone support Mr Iwata’s words. The Wii is outselling Sony’s PlayStation 3 by a tremendous margin, both in Japan and in the key US market.
Nintendo, a company with sales one-eighth those of Sony, has just for the first time superseded it in market capitalisation.
Nintendo, a small, Kyoto-based company founded in 1889 as a manufacturer of trading cards, is proud of its distinction of also being the oldest surviving games console maker. The company has an extremely strong in-house software development team – a rarity for a hardware maker – churning out hits such as Super Mario Brothers and Pokemon. Analysts this combination has helped give Nintendo a more holistic view of the market, compared with rivals Sony and Microsoft.
Whereas Sony and Microsoft are still betting heavily on selling to their key demographic – males aged 18-35 – Nintendo has embraced a completely different strategy of marketing to women (its most recent advertising campaign for its DS handheld games player features Nicole Kidman), children and parents.
Mr Iwata has said Nintendo’s goal is to get the console out of the bedroom – referring to the bleary-eyed teenager playing games until the small hours – and into the living room, where all members of the family can enjoy Wii sports games using the motion-sensitive wand.
Another factor that has boosted sales of Wii is its $249 price tag, compared with $300-$400 for the Xbox 360 and $599 for the PS3, although prices of all three consoles are expected to be lowered by the crucial holiday shopping season.
Some analysts have pointed out, however, that consumers will tire more quickly of the Wii and its lifespan will be only five to six years, compared with 10 for Sony’s technologically superior PS3 and Microsoft’s Xbox 360.
“A major shift has occurred in how people use home game consoles,” wrote Kota Ezawa, analyst at Nikko Citigroup, in a recent report. “We believe growth in applications for games consoles makes it difficult for a single console to achieve a dominant market share.”
When asked if he was envious of the Wii’s success, Kaz Hirai, the new chief executive of Sony’s games division, said: “The question is in four years from now or five years from now, what kind of games [Nintendo] will have available. This is not just a question for the Wii, because at the end of the day it’s about the software,” Mr Hirai said.
Critics point to Nintendo’s weak online game service as a potential liability, and some analysts predict that sales momentum could slow in September amid the release of games such as Halo 3 and Grand TheftAuto 4 for the PS3 and Xbox, which are targeted at hard-core gamers.
But for now, it appears Nintendo’s gamble to target a different audience has reaped it some handsome dividends.