Imagining the next gen: tips

So many articles show up on N4G regarding the "next gen" -- usually they're "shooting for the moon", and miss by a wide margin.

Lets put this to rest: next-gen guesser journalists, take note. Start thinking like the companies that build the hardware, rather than pulling up a shopping list to build a gaming PC, and console-ifying it.

(Step 1) Set a price for the console, that the target consumer can be comfortable with, and that is justified, given the competition when the new hardware hits the shelves.

To Nintendo this means "price for families" and "make money from hardware". To Sony this means "premium user experience, that promotes other electronics sales", and to Microsoft this means "stop competitors for Windows/Office from making it into the livingroom".

In short, Nintendo won't make a cutting-edge console, and they won't make one until they can provide the Nintendo experience reasonable prices for the family, either. Mostly that means something akin to hitting the $299 price point upon release, and selling families the "Nintendo Experience" in a console that MS or Sony would sell for something closer to $250 (closer to "at cost").

For Sony, this means pushing the next generation of electronics hardware into the livingroom. Usually this equates to pushing the best TVs available at release, the best sound systems, and if there are any other new sources of income to push (like new disc formats), that goes in as well. A new Sony console might cost $499 upon release, but its guaranteed to be a substantial leap over the previous generation... it has to be, or the rest of Sony's business suffers.

For Microsoft, this means simply earning a place in the livingroom, and keeping the Office/Windows monopoly safe. Search with Bing. Browse with a MS product. Use Windows IM. Use Live. Most of all: keep the PC in the picture. US law states that operating systems are required for all new PC sales, practically ensuring Microsoft's continued PC monopoly -- but consoles threaten that, especially with today's modern browsers providing so much functionality that a PC used to be required for, and console input devices becoming dangerous close to the mouse/keyboard paradigm. Microsoft's next generation of hardware wants to be strong enough to compete with Sony for "hardcore" consumers, yet with wide enough appeal to threaten Nintendo, and place itself into the hands of children and families. They have to strike the middle ground to succeed.

(Step 2) Looks to the mistakes, and successes, of the last generation, in terms of *making money*, and use that example to build the future.

Already Microsoft and Sony are rushing to bring the Wii audience to their consoles. This will continue into the next generation, as the console market continues to expand into the "Blue Ocean", making Microsoft's PC defense strategy even more important to them, and the market richer, and more appealing, to Nintendo and Sony alike.

You can believe that all of the next generation will target the casual audience in a serious way. While competition is good for advancement, the three current hardware manufacturers will become nothing but more and more alike, despite differing goals.

(Step 3) Ensure 3rd party support, by making sure your platform will be embraced by them. All 3rd party software pays licensing fees to the hardware manufacturer, and this is the largest source of income for 1st parties, when done well.

Nintendo and Sony both failed, in this regard, this generation. Nintendo, with their "less is more" strategy, pitted the Wii against two consoles, which, in 3rd party eyes, share a common baseline -- making their astounding marketshare lead lose almost all meaning, especially in light of the strange, new demographics the Wii attracted. Sony with their "funky hardware is best... deal with it" strategy, turned off 3rd party developers to eeking out their console's potential, and gave their primary competition enough room to push Sony out of the top 3rd party spot early on. In the end, that strategy is paying off somewhat... but will it be enough? WIll it justify its expense? Likely not. Expect both Nintendo and Sony to change their tune next generation, ever so slightly. The Wii HD may not be so far behind. The PS4 may be much friendlier to harness.

[msaraann]

This guy knows what he's talking about.

[n to the b]

nice blog! much of your logic seems sound. I am wondering, however:

is 3rd party really important to nintendo? if they can make enough games with high enough demand on their own... keeping things in-house = less having to share the $.

also, what if another company jumps into the console race (like apple as others have suggested)? any thoughts?

[sdtarm]

"is 3rd party really important to nintendo? if they can make enough games with high enough demand on their own... keeping things in-house = less having to share the $."

this is the most stpid statement ive read today, and yesterday, and this month and this year, basically my whole life 0_0

just read the blog, u know what ur talkin about bud

[n to the b]

thanks for the constructive criticism. "statement" isn't exactly true either since I framed it as a question.

[Trroy]

3rd party is really important to the hardware manufacturers.

Even on the Wii, Nintendo probably makes near $30 gross revenue on each full-price, 1st party game sold, and makes $4-8 off each 3rd party game sold, via licensing fees that they charge the 3rd parties for the right to put those games on their hardware.

On top of that, only the 1st party titles have cost-of-goods and development costs to offset Nintendo's income from them. The 3rd parties pay those costs on the 3rd party titles. The 3rd party titles are where most of the money is at, for all console hardware manufacturers.

3rd party software income is the biggest form of income for all hardware manufacturers. Nintendo does so well with their 1st party stuff, that you might think they're good without 3rd parties, but the truth is that even Nintendo's stellar 1st party revenue pales compared to their relatively weak 3rd party revenue.

[Malice-Flare]

i like the insight into the three companies you have brought:

1) Nintendo really does their own thing.

2) Sony would like to regain the cutting edge and thus justify their premium

3) for MS, i never though of them as really just trying to preserve their Windows/Office monopoly. what happens when they finally butt heads with the
Entertainment industry of which Sony is a part of and may have different ideas about how to establish their standards (Blu-ray) for example?

anyway, something to think about...