Nintendo’s Genre Innovation Strategy: Thoughts on the Revolution’s new controller

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I’m still jet lagged from my recent trip overseas, but I managed to stay awake for the new Nintendo controller announcement. I must say that I’m feeling like an excited Japanese school boy waiting in line for the latest Dragon Quest.

I’m not going to tackle whether or not this innovative device will be a market success for Nintendo. There will be so much riding on the 1st party titles, the 3rd party support and the actual technical implementation of the controller that any comments at this point are at best opinions and at worst propaganda.

What we can however discuss in some detail are the two central philosophies behind the Revolution controller and their market implications.

  • The increasingly hardcore nature of the game industry is causing a contraction of the industry.
  • New intuitive controller options will result in innovative game play that will bring new gamers into the fold.

Is Iwata-san spouting nonsense or is Nintendo actually onto something?

Genre maturity leads to market consolidation
In past articles I’ve discussed two key concepts. The first is genre addiction and the second is the genre life cycle. These both have major market implications for both individual game developers, but also for the market as a whole.

To briefly recap, genre addiction is the process by which:

  • Players become addicted to a specific set of game mechanics.
  • This group of players has a strong homogenous preference for this genre of games, creating a well defined, easily serviceable market segment.
  • Game developers who release games within a genre with a standardized set of play mechanics are most likely to capture the largest percentage of the pre-existing market.
  • Over time, the game mechanics defining the genre becomes rigidly defined, the tastes of the genre addicts become highly sophisticated and innovation within the genre is generally punished by the market place.

Genre life cycle is the concept that game genres go through distinct stages of market status as they mature:

  • Introduction: A new and addictive set of game mechanics are created.
  • Growth: The game mechanics are experimented with and genre addiction begins to spread.
  • Maturity: The game mechanics are standardized and genre addiction forms a strong market force. Product differentiation occurs primarily through higher layer design elements like plot, license, etc.
  • Decline: The market consolidates around the winners of the king-of-the-genre battles that occurred during the Maturity phase. New games genres begin stealing away the customer base. With less financial reward, less games are released.
  • Niche: A population of hardcore genre addicts provides both the development resources and audience for the continued development of games in the genre. Quality decreases.

What we see here is the consolidation of game designs over the life cycle of the genre. Early examples within a genre tend to have a wildly diverse spectrum of game mechanics that appeal to a broader spectrum of players. As the genre matures, the game mechanics become more standardized and the needs of the genre addicts more homogenized. As the market segment consolidates and standardizes, the majority of the players are well served. They get more polished games that have greater depth. Who could argue that a tightly polished game like Warcraft is a bad thing?

How maturity reduces the number of total game players
Goodbye people on the fringes: The people on the fringes, however, are left out. In the evolution of the RTS genre, there was an interesting offshoot in the form of the Ground Control games. These sported an interesting 3D perspective that was never truly adopted by the mainstream RTS producers. Most players within the identifiable RTS market segment did not enjoy these games and so it was not in the best interest of the game developers to include the innovative features in their designs.

However, some players enjoyed these titles quite a lot. As the mechanics for RTS games become highly standardized, these fringe players were alienated by games in the mature genre. A 2D Warcraft title just didn’t provide the same rewards that this fringe group was looking for.

Some of those gamers left gaming. It may take being alienated from several genres, but eventually a few decided that there were better activities to spend their time on. The market was simply not serving their needs. This shrinks the market.

Goodbye semi-hardcore: The mainstream group, however, fares only a little better. When you recycle the same standardized game mechanics, you put players at severe risk of burnout on a genre. There are only so many FPS many people can play before they don’t want to play them any more. This is less of a problem for the super hardcore players. However, it is a substantial problem for the less hardcore players.

As the less hardcore players burn out on the game mechanics of their favorite genres, they too are at risk of leaving the game market. The result is a steady erosion of the genre’s population.

What is left is a very peculiar group of highly purified hardcore players. They demand rigorous standardization of game mechanics and have highly refined criteria for judging the quality of their titles. With each generation of titles in the genre, they weed out a few more of the weaker players.

This is a completely self-supporting process with strong social forces at work. Players form communities around their hardcore nature. They happily eject those who do not fit the ideal player mold. They defend the validity of their lifestyle with a primitive tribal passion.

There is no internal force within a genre lifecycle that can break this cycle. Only external forces can do the trick. The question is, who would want to break this cycle and who wants to maintain it?

Who genre maturation is good for
Genre maturation is great for the very small minority of AAA developers that can serve the hardcore market. They release titles known as genre kings that are able to address the needs of a large percentage of an existing, well defined segment of genre addicts. Genre kings dominate a particular genre with impressive financial results. The amount of money genre kings such as Halo 2, Half Life, Warcraft, Grand Turismo and other rake in is an inspiration to both developers, gamers and publishers everywhere.

Hardcore genre addicts easily pay for themselves. On average they are willing to spend substantially more on games than the casual or the fringe gamer. When a genre becomes standardized, there is literally an explosion of revenue that comes from successfully tapping into a uniform set of needs. This scalability is a basic attribute of software and is a major mechanic behind hit making in the game industry.

As long as new genres are being created and money gained from better capturing homogenous segments genre addicts is high, the industry as a whole grows with a few fat king of the genre companies taking in the majority of the money.

Who consolidation is bad for
However, when the majority of money and effort is spent on capturing existing markets and not enough is spent on seeding new genres, the natural erosion of less hardcore players begins to decrease the overall market size.

It is easy to ignore this trend. Overall player numbers may decrease in certain genres, but remember that hardcore players spend more and flock to specific games in great numbers. So total revenues keep going up, and the revenues of hit titles keep going up. It seems silly to shout that the sky is falling when there are so many examples of over-the-top success. This is the current state of the American game market.

Only after the trend has been going on for some time does the erosion become too much to ignore. The substantial decreases in the overall revenue of the Japanese market place over the last five years provided a major warning signal. You could easily argue that similar erosion has occurred in the PC market.

People who are less likely to care:

  • Sony and Microsoft have built strong brands around servicing the hardcore players of existing genres. To say that the sky is falling shows a lack of faith in the hardcore market – that could be very damaging.
  • Major genre king developers like Blizzard, Valve, Epic and Square. Their bread is buttered. They own the mature genres and will milk them for many years to come.

People who are more likely to care

  • Companies that serve a diverse user bases: Oddly enough, both EA and Nintendo are in this group. They are broadly diversified such that major trends in industry directly affect their bottom line. Sony is in a bit of a pickle since they fit this definition as well. (Hence they’ll release the Eye Toy, but keep their main controller for the PS/3 as standard as humanly possible)
  • Companies that value brands over genres: People often look at Nintendo’s releases of a half dozen Mario games a year and assume that they are all clones. In fact, they are typically radically different games across a wide variety of genres. Nintendo gains their value from the Mario brand, not ownership of a specific genre. Brand-based companies rely on the creation of new genres since they can take that brand into the genre for a low risk profit opportunity.

Nintendo needs new genres
That last point about the strategies of brand-based publishers is an important one. Nintendo needs new genres to make money.

Nintendo makes the majority of their money by leveraging their brand recognition during the early to mid-stages of a genre’s life cycle. The power of the Mario character can establish a Nintendo game as an early genre king and help tap into a new market segment for great profit. However, as they get later into the life cycle, the standardization of the genre mechanics and the intense demands of the hardcore population reduces the power of the brand.

A few major games will dominate the mature genre and it is unlikely that Nintendo’s will be one of them. Nintendo’s fixation on new genres and their unwillingness to pander completely and utterly to the existing hardcore audiences has made their name mud with many of the most vocal elite in the game industry.

Product innovation leads to increased profitability
C’est la vie. You can’t have it all. Focusing on product innovation at the expense of commodity markets is a classic business strategy that is used successfully in non-game companies around the world. Companies like 3M are required as part of their strategic plan to have 30% of their revenue come from new products. They are constantly exiting markets when strong competition emerges and constantly competing with themselves by offering new products that outdate their existing products. Nintendo releases new genres where other companies release new products, but the basics are the same.

The non-business person looks at this strategy with horror. Nintendo invented the 3D platformer, yet they have no major product in that niche at the moment. Surely this is the most obvious sort of stupidity. However, consider the following portfolio management issues:

  • The likelihood of getting a genre king early on in a genre life cycle if you invented the genre is quite high. Competition is limited.
  • The cost of creating a genre king early in the genre life cycle is low. You can rely on things like simplified graphics and limited amounts of content. The neo-retro graphics of most Nintendo games has a lower cost of production than the realistic look of many of its competitors.
  • The cost of creating a genre king late in the genre life cycle is high. Customers demand realistic graphics, voiceovers, cut scenes, loads of extra content, etc.
  • The risk of having your game not becoming king of the genre goes up. The competition is simply greatly increased. Mario is a great game, but would it own the entire genre if it were forced to compete against Jax and Daxter, Sly Cooper, Prince of Persia and others?

What you find is that selling innovative products early on can be dramatically more profitable and less risky than selling commodity products. The early market might not be as large, but the money is much better. You see this over and over again. Nintendo sells less but makes more money. Sony and Microsoft sell more, but make less profit.

Consider this tidbit. The Xbox, which focuses on highly mature genres catering to hardcore gamers has production costs of $1.82 million a title. The Gamecube costs half as much at $822,000 a title. The real kicker is that the Nintendo DS only costs $338, 286 a title to develop for, even less than the Gameboy. Some of these costs have to do with the hardware and development kits, but for the most part they are derived from the scope of the projects. Being able to develop successful titles at 1/5th the cost of your competitors is a major boost to your bottom line.

Thus, Nintendo’s profitability and need to innovate go hand in hand. They need those new genres because the old ones quickly become too competitive and too expensive.

New controller features as a source of Innovation
The new controller is best seen in light of this larger corporate strategy.

One of the easiest ways of creating a new genre is to invent a new series of verbs (or risk mechanics as I called them in my Genre Life Cycle articles). One of the easiest ways of inventing new verbs is to create new input opportunities. Nintendo controls their hardware and they leverage this control to suit their particular business model.

And this is exactly what Nintendo has done historically. The original Dpad, the analog stick, the shoulder buttons, the C-stick, the DS touch pad, link capabilities, the tilt controller, the bongo drums…the list goes on and on.

Each time, they also bundle the controller innovation with a series of attempts at creating new dominant genres. Not all attempts are successful, but a few of them are highly successful. The 2D platformer, the 3D platformer, the Pokemon-style RPG, and the virtual pet game all come to mind as successes. By seeding a genre and by owning the key hardware platform that the new genre lives on, Nintendo achieves a position of financial stability and security that is unheard of in the game industry.

As a side note, folks who argue Nintendo should just make games for other platforms are completely missing the point. Nintendo needs to control their hardware platform in order to force innovation to occur in the control mechanisms. Other console manufacturers who rely on the hardcore audiences and standardized genres don’t see this need. They would happily standardize the console platform and make it into a commodity. Microsoft has historically made major comments about having one universal development platform.

The moment Nintendo loses control over their hardware, they lose a major competitive advantage in terms of creating new genres.

The new controller
The new controller is yet another logical step along a path that Nintendo has been pursuing for many years. We are likely to see some very obvious patterns repeated.

  • It allows for a wide variety of new verbs that are unique to Nintendo’s hardware platform
  • There will be a number of genre-seeding attempts that take advantage of the new verbs that are available. With luck and a lot of skill, one or more of these will become a major new genre. New genres bring in new gamers who are loyal to Nintendo.
  • Nintendo will leverage their powerful brand to encourage early adoption and dominance of this genre. I’ll make a bet that Mario, Pokemon or other major Nintendo brands will be a major element of their new genre attempts.
  • As the years pass and the genre becomes mature, hard core gamers will consolidate within it and begin demanding more polished experiences. Craftsman-oriented companies will wrest control of the genre away from Nintendo.
  • Nintendo will innovate once again in order to maintain higher profit margins.

Some predictions about the games
There are also some obvious predictions that we can make about the game designs based off the standard genre lifecycles.

  • Early titles will be essentially technology demos that showcase a specific core mechanic. There will be one or two major titles such as Mario 64 of yore that are highly evolved, but these will be few and far between due to the cost associated with evolving an entirely new genre over the span of a single game.
  • Most early titles will sell small numbers, but will end up being decently profitable due to their low cost. The example given of Brain Training on the DS, which was created in a mere 4 months comes to mind. Even though it isn’t selling what are typically considered ‘blockbuster’ numbers, it is an unqualified financial success. During this period a large number of new genre attempts will be successfully vetted.
  • Only after a year or so will 2nd generation ‘polished’ games start to emerge. The cream of the core game mechanics tested in the first generation will be layered with all the traditional trappings of a modern video game.
  • One or two ‘major new genres’ will emerge. These will be highly profitable and Nintendo will attempt to turn some of them into exclusive franchises. Mario Kart and Mario Party are good examples of this from previous generations.

So when games come out slowly and only appear to be technology demos, I wouldn’t worry too much. A ‘gimmicky game’ is really just another name for a new core game mechanic that hasn’t been polished. Donkey Kong is considered shallow and gimmicky by children playing it for the first time in this modern age. Yet it sported the same core game mechanics that eventually blossomed into an entire genre of highly polished 2D platformers.

In the past, Nintendo built these new genre attempts internally. They got to own the IP and enjoyed the resulting success that comes from being one of the few to understand the benefits of innovation. The result has been a focus on a small number of 1st party development efforts and a trickle of titles. Unfortunately for them there are other innovative people in the world. New genre successes such as GTA on other consoles provided substantial and painful competition.

I see this changing somewhat with the DS. We are starting to get some wacky ideas from smaller companies and Nintendo seems to be a bit more welcoming of others. Nintendo needs to pursue this path further by allowing new companies to join the experimentation stage.

Nintendo’s strategy of pursuing innovation benefits the entire industry. It brings in new audiences and creates new genres that provide innovative and exciting experiences. The radical new controller is a great example of this strategy in action.

Surprisingly, this also benefits Microsoft and it benefits Sony. As the years pass, the hard core publishers that serve mature genres will adopt previously innovative genres and commoditize them. Their profits will be less, but they’ll keep a lot of genre addicts very happy. Everybody wins when a game company successfully innovates.

I see both of these strategies as a necessary and expected part of a vibrant and growing industry. Industries need balance and Nintendo is a major force of much needed innovation that prevents industry erosion and decline.

On a slightly less analytic note, I for one can’t wait to play the new games on the Nintendo Revolution. With all the new game ideas that will be demonstrated, it is certainly a great time to be a game designer. A couple years down the road, I suspect that this will also be a great time to be a gamer. 🙂

Take care


  1. Anonymous says

    I think it has to do with more than what is saiid here. You overlook the large following that Nintendo has. I know thos who will follow Nintendo wherever it goes, if is in a positive direction or a negative. The fact of the matter is Nintendo cannot die.


  2. Anonymous says

    This a very high level strategy, but it can be dangerous when it infects the actual process of games design: A good game is frequently the result of someone making the game they want to play. Genre addiction in itself as a business strategy without this feature produces turgid games, a better model of genre development is the idea of playing someone else\’s game then making the game you wish it was, or exploring the areas that you feel they did not take advantage of. This will expand the market also, but not necessarily the \”community\”. Equally, innovation can allow cheap games, expanding the market does not mean moving into stupid land! Those people who like your new genre are not just unwashed game-phobes who must be given the minimum game possible or they\’ll freak. Instead, they are people who find to their surprise that at last someone has made the sort of game they feel like playing! Now development of the themes they enjoy may not be high scores and collectables, in fact they almost definitely won\’t be, but they will still appreciate that development. Give them a game without depth and they will not play it for long. The better games companies act more like artists, although the genre brushes they use might change. There is another kind of hardcore from the addict, it is the game player who is almost a game designer, they will appreciate good games of any genre, and if you stop providing them, then you will have new competition!


  3. Anonymous says

    I like the Wii Remote over the Classic Controller and Gamcube Controller.I am old fashioned though. I was amazed when you could play games at When you still could. The Wii Revolution is amazing. I can\’t wait for some of the titles. Especially Star Fox.


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  7. Anonymous says

    Hi,I am simply amazed by how oour predictions became true.You must have a very clear sight or super power 😉 !I\’m glad Nintendo was capable of reviving the interest in games and prove that there a lot of room for innovation and improvement.There is too much of the same crap, and far less titles than we used to have 10 years ago.Regards,Richard LopesBlog:


  8. If I were you, I would have been unbearably smug when Guitar Hero took off a few months after you posted this.


  9. hah, well predicted … just to point out how far reaching the \”revolution\” has truly been, I was watching my kids (5 and 8) and their cousin (7) play earlier. They took my daughter's hello kitty digital camera (3.2 megapixels, it was pretty cheap), which has an SD card in it. They put it in the Wii and were looking at their pictures that they take and turning them into puzzles. The fact that the wii is contributing to creative behavior above and beyond playing the wii games is amazing to me.


  10. As cool as the Wii was, we know now that it didnt quite turn out to be the runaway success that Nintendo had hoped. Though it was innovative and influential, the wiimote really ended up serving as a springboard for more refined motion control which followed it. As a long time fan of Nindendo (having owned every Nintendo system since SNES and the original gameboy) I do feel a sense of loyaly to them, but I'm not just some rabid fanboy. My primary gaming platform has been a PC since the late 90s. I've gone from hating utterly the original playstation to owning a PS2 and now PS3.Even so, I dont want to see Nintendo go the way of Sega. With the next generation of systems just over the horizon, it looks like Nintendo has only one last chance to make it or break it in the home console race. With more big franchise games being released, their 3DS is starting to build speed, although it does not yet seem to have hit it's stride. I'm sure that Nintendo fans like myself are eager to witness their entry into the coming console war, but there is indeed a bit of trepidation mixed with the eagerness. No doubt there will be new and exciting wonders to behold, but will the next console battle be Nintendo's Waterloo?


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