Saturday, July 05, 2008

Microsoft Xbox 360 VS Nintendo Wii

1. Does Xbox have profitablity? Has Xbox gotten out of that $5 billion debt they were in? What about that $1 billion or so they lost last year due to the 360 recalls?

2. Do Xbox hardware manufacturing techniques really work? How come Nintendo can make a console that is decently powerful (no way near as powerful as Xbox and PS3, though), sell it for less than Xbox (they always have the cheapest consoles), sell far more than Xbox and PS3, and still make a profit on every single console unit sold (not relying on game sales alone)? Are the Xbox hardware plans and techniques truly better than that?

3. Xbox Live has an advantage in their online strategy over other online strategies, and they need to continue to capitalize on it. However, the other online strategies are also good. So I don't think many people are saying, "I gotta get Xbox Live!" I think they're saying something more like, "I gotta play Halo 3 on Xbox Live!" So it's more like an improvement and bonus rather than a driving sale (still very valuable though).

4. I think Xbox 360 capitalized on Sony's mistakes in several ways: powerful system, first to market, stronger initial 1st and 3rd party support, pioneering cordless controllers that ship with the hardware, an incredibly strong online strategy, and a powerful lineup of coming Xbox 360 games that is/was focused directly on the adult market.

5. I think Xbox should copy Nintendo's motion control ideas and innovate on them, coming up with their own successes in those areas.

6. However, I don't think Nintendo is doing exactly what some might think they are doing. You see, back with the N64 Nintendo had some great 1st party games. That interest built a decent third-party selection of many games that were exclusive and, obviously, geared toward the family market. Sony also hit the family market strong with the PS1 with Crash and Spyro leading the way to a lot of family-market, third-party support. Then, Nintendo did the same thing with the GameCube, but their games weren't as good in that generation and they didn't really innovate much in hardware or other spaces, so the third party effect was a little less dramatic for the GC. Xbox barely beat Nintendo in that round (Console War 4). Playstation 2 came across as the end-all console of adult games and family games.

7. Then Nintendo decided to change leadership and bump up that wacky guy who was leading HAL and who was responsible for the Smash Brothers games and lots of other weirdness. That's when Nintendo DS and Wii came out, and it's when Nintendo took the online plunge. Suddenly Nintendo was attacking non-gamers in all fronts: brain age, Nintendogs, Wii Sports, Wii Play, Miis, Mario Kart wheel, Wii Fit, Wii Music, Internet gaming on DS, and Mario Party 8 with Wii Remote games.

18,595,723 units sold

Brain Training
13,232,264 units sold

More Brain Training
11,312,032 units sold

Mario Party 8
5.30m units sold

8. So now Nintendo had strong first-party sales on a console. They are in the number one spot in hardware sales (and software sales, but not by much). And Xbox 360 was then kicking Sony to the side and cornering the adult gaming market. So, what happens? Simple. The market splits. Wii has more exclusive titles than Xbox does (barely), because they are attracting all the family titles. There aren't too many kiddie platformers on the 360 (especially successful ones), and there aren't too many violent games on the Wii (especially successful ones). There are only a few family games that aren't on the Wii, and there are only a few violent games that aren't on the 360. For the first time ever, the market has split between family titles and adult titles.

9. So when people say that Wii only has a price point and a Wii mote going for it, I don't think that's accurate. Nintendo always has the price point advantage, and they do it with a bigger profit margin than Xbox or PS3 can get on their hardware. So that's not going away. If Xbox or PS3 lowers their prices and eat more debt on hardware, Nintendo can lower their prices and still make profit on their hardware. Xbox and PS3 can't compete there.

10. Xbox can start doing motion-control games, but Nintendo's already innovating at the next level beyond that. It would take Xbox years to catch up (but I still think they should go for it).

11. Xbox can try appealing to non-gamers, but that's not the 360 image at all. They're known for shooters. And They'd really have to try hard to break into Nintendo's monopoly on the family market. Xbox's strong sales on Lego IJ and decent Viva Pinata sales show us that it's possible (I'm hoping Banjo-Kazooie will help a little in this area). Look at Sony. For Sony to break into the family market and maintain good control over third-party family games, they had to release a Crash game and a Spyro game every year (plus strong support on other sides). They've since done that with Ratchet and Jak. Now they have to try to do it again since Nintendo has cornered that market. So Sony's exactly where Xbox is, struggling in that area. Take a look at Lego IJ. The #1 sales for Lego IJ were on the PS2, followed by the DS, Wii, then the 360 and PS3. That helps show that Sony had the family market on the PS2, but now they're even behind the 360 on the PS3. That's why I think Banjo will help, even if Sony has already gotten a Ratchet title out.

12. I think many are on to something with the fact that Microsoft might want to bring Blu-Ray to Xbox. If Xbox is going to compete with Sony being compatible with the current movie medias, then they might have to. Yes, Xbox would be putting money in Sony's pocket, but part of Microsoft's strategy has been to be DVD compatible, and if Blu-Ray becomes half of what DVD is now, Xbox would be changing their strategy to not support it.

So this is how I would splay out the current advantages:

1. Nintendo: price point, they make money on every system sold (good news for them), Wii-mote innovation, non-gamer health titles, non-gamer intellectual titles, non-gamer casual titles, popular 1st party series (like 30 of them), and a general monopoly on the family market.

2. Sony: Blu-ray (and income for those movie sales as well), MGS4, stronger marketing techniques (this comes across in 3rd party commercials, news media, etc.), coming 1st/2nd party titles (GT5, Jak 4, God of War 3, Killzone 2, Resistance 2, Socom 4, etc.), and coming 3rd party exclusives (Final Fantasy 13, etc.).

3. Microsoft: Best online strategy, coming 1st/2nd party titles (Gears of War 2, Banjo-Kazooie 3, Halo Wars, Fable 2, etc.), and generally the strongest sales of non-exclusive 3rd-party games.

I think Xbox is losing the 3rd party exclusivity battle on the family games front to Wii and now slowly on the adult games front to Sony. If Sony has more "killer" titles coming out than Xbox does, and they're buying key exclusive titles like MGS4 and FF13, then they'll quickly grab the adult 3rd-party games market from Xbox, and pass the Xbox 360 in this console war.

So when the typical Xbox fanboy sees this, they bring up software sales. Nintendo is selling more software than Xbox, overall, on Wii. What's worse is that a higher percentage of those sales are Nintendo-made, which means they are selling more games on their system and making a higher rate of profit since more of those games are theirs. Plus they're also making a profit off their hardware.

I hear Nintendo recently changed out their corporate plates and eating utensils to help the environment. Now they use gold.



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