I thought it was interesting to read in todays WSJ (sorry, subscription only), that Nintendo, although in last place in videogame console and software sales behind rivals Microsoft and Sony, has massively higher profits.
Nintendo has been recording healthy profits in part because it has relied on products that are simpler and less costly to make. Despite its third-place position, it earned $841 million on sales of $4.35 billion last fiscal year. It expects its new system -- dubbed the Wii to sound like "we" or "whee!" -- and its games to be profitable within a year.
By contrast, Sony and Microsoft are spending billions of dollars developing their machines, with little return so far. Sony's games earned $75 million on revenue of $8.19 billion in the fiscal year ended in March 2006. Microsoft has not yet earned a penny from its Xbox business, analysts say.
I think there is an important but hard to define lesson in both business and technology here.
The most profitable part of Nintendo's business has not been its consoles that hook up to TV sets, but rather its handheld DS system. The DS has been more successful with women and older people than other videogame platforms.
As a kid, I wasted countless hours playing games on the old Atari 2600 with graphics horribly primitive compared to the average cell phone of today. So I know first hand that super impressive graphics aren't necessary to draw people into a videogame.
There was also a time only two years ago when I got into playing chess on my PocketPC, which played a really mean unbeatable game (at least unbeatable to a regular person like me). Then I bought a more powerful chess program for my desktop PC, but discovered I liked playing on the small handheld device better.
I can see how a device that's not the most super-powerful, but that is portable, easy to use, and not too expensive, could be a more fun product than the latest XBox or PlayStation. Maybe I should buy one of these DS devices?
On the other hand, I think the DS is not the ideal portable videogame device because its software comes on physical cartridges. If the software has a bug in it, there's no way to fix it because the cartridge can't be updated. A better device would be like an iPod where you download the games from the internet and transfer them to the device using a USB cable.