Nintendo game machines are one of the most sought-after items for children and even adults. But it was company’s award-winning game console — the Nintendo Wii — that changed the face of global gaming when it was released in 2006. So, how exactly did a fraught Japanese family business that had roots in making playing cards pocket a market capitalisation of around $40 billion, put together a stable of iconic characters, games and consoles, and come to dominate the world’s most fiercely competitive industries? That’s the story Daniel Sloan tells in this book.
The Kyoto-based gaming giant was controlled by the Yamauchi family and despite the success of the playing cards business, known as hwatu in Korean, Hiroshi Yamauchi, who became the president in 1949 when Japan was going through its post-World War II recovery, realised the company was incapable of surviving on one product.
Sloan, Tokyo correspondent for Reuters for 15 years, painstakingly illustrates how Yamauchi began humbly, through a deal with Disney to feature its characters on playing card decks. Yamauchi also made several wrong moves in his bid to expand the business — including love hotels (motels that rent by the hour), selling instant rice and developing bowling alleys. Nintendo’s good days began in the mid-1960s, when it set up a games development department and followed it up with a laser shooting gallery for arcades. One thing led to another and soon Nintendo was launching home video systems and a portable unit called Game Watch. The family computer or “Famicom” in Japan, which was introduced in 1983 and became the Nintendo Entertainment System internationally, was the device that placed the brand firmly in the global entertainment industry.
But succession issues began to dog Nintendo after five decades of the same boss and when it began to lose its global sales title to Sony. The company faced the prospect of becoming an industry also-ran when its second major console failed and newcomer Microsoft found a toehold with consumers. Just as Yamauchi — a power-hungry man who demanded that all other family members quit, leaving no illusions about who was really in charge — had crafted Nintendo’s move into electronic gaming, he also devised Nintendo’s comeback when Microsoft and Sony began powering ahead. Interesting anecdotes provide some insights into the man. Sloan writes, for instance, “On the outside of the family compound of a man who had earned billions of dollars from children’s entertainment, a sign told neighbourhood youth not to throw balls against the sides of his mini-fortress. It seemed to fit the image of a man who seldom found little of the “fun” his company frequently preached.”
For all those quirks Yamauchi remained the consummate strategist, re-looking the existential corporate crisis and implementing an “outside-the-box” strategy. He brought in a new chief who was neither family nor Kyoto-born nor Nintendo-bred. This was 42-year-old software maven Satoru Iwata and a bevy of video game artistes, including legend Shigeru Miyamoto, who went on to make the decade like no other in corporate history. The chapter on Satoru Iwata taking charge — and the way Nintendo was brought back to the top — is one of the most interesting parts of the book.
Iwata went on to modify the gaming industry’s approach with his “Blue Ocean” strategy, Sloan writes, which involved laying nets in consumer markets. The company launched Nintendo DS, a handheld gaming device, which thrived against a new portable console from Sony and Microsoft while its self-training software widened the definition and demographics of gaming.
Written in a journalistic style, Sloan’s book comes through as well-researched and drawing on a wide range of sources. A stirring story about creative turnaround strategy, Sloan’s intended audience appears to be those interested in how Japanese business works and what makes the company tick rather than gamers.
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In the foreword, the author makes it clear that “Nintendo in no way facilitated my undertaking,” and the books mirrors his statement. Notoriously media-unfriendly, the Kyoto-based firm appears to have provided Sloan with no direct quotes or insights. This only heightens the fascination of how a gaming company dwarfed US-based gaming giants, Sony and Microsoft. In fact, sections on Nintendo’s two gaming rivals, comments and insight from analysts and historians who have followed Nintendo over the years lend some much-needed perspective.
Nintendo’s development of the DS was followed by Wii consoles, freed the now $30 billion video game industry from a sedentary experience to a more engaging activity. Sloan writes, “With a new hit product and games, as well as a new definition and demographics for the entertainment field, the Kyoto giant reached heights and wealth that all three generations of its past leadership could only have dreamed of.” Having established a strong foothold in the handheld gaming market, the $250 Wii — which analysts estimate produce a $50 profit per unit — helped Nintendo sell 475,000 Wii consoles in 13-odd days in the US alone.
It’s not hard to draw parallel between Nintendo’s leadership and Steve Jobs. Yamauchi, like Jobs, was notoriously stubborn, achieving incredible (or impossible, depending on which side of the divide you were) deals with suppliers that left them struggling to find a margin while Nintendo amassed a vast war-chest. Nintendo, like Apple, believes in being fiercely protective of the software that was allowed onto its platform. Jobs, too, closely vets what is allowed on his machines, an attitude that is there for all to see with Adobe over its Flash video software.
PLAYING TO WIIN: NINTENDO AND THE VIDEO GAME INDUSTRY’S GREATEST COMEBACK
Daniel Sloan
John Wiley & Sons
256 pages; $24.95