The Rise Of Nintendo

September 23rd 1889 the Dakotas Montana and Washington wouldn't officially be States until later that year London was trying to find Jack the Ripper and Edison's team was working out motion pictures but in Kyoto Japan fusa Jiro Yamauchi had begun manufacturing playing cards setting in motion the company that would one day dream up game boys super Nintendos Luigi Mario and Princess Peach [Music] and what we're executing is completely different from what they're doing there's never a time when they're going to be in the building more than five minutes Nintendo is part of an ever more crowded video game market up against companies like Sony Microsoft Apple and Google when Nintendo first got into the home console business in the 80s it dominated but ever since things have been more complicated the competitors are obviously Sony and Microsoft Microsoft goes far beyond gaming Sony certainly in this generation that dominated with the ps4 and mobile gaming has completely changed the playing field Nintendo was seen as the king of the handheld market for a very long time and that market has now been taken over by the mobile games business the global video game market was worth almost a hundred and fifty billion dollars in 2019 mobile gaming made up nearly half of that you go back to the days where they were really dominant was when they had the DS and Wii platforms and they were dominating in in both segments you know Nintendo was generating operating profit of in excess of 500 billion yen around five billion dollars and now at the peak of switch we're looking somewhere around 350 billion yen so about three and a half billion dollars but at the beginning Nintendo didn't have anything to do with video games Nintendo spent decades focused on playing cards playing hearts very good business until the 1950s but they also realized if they continued doing playing cards they will not be able to survive this may be a trend things might change so that's why I started to the toys that's why I started to go into various other businesses in 1949 21 year old Hiroshi Yamauchi was named Nintendo's new president he would go on to run the company for more than 50 years the company went public in 1962 early on in his tenure Yamaguchi took Nintendo into several new business ventures the company at one point sold ramen noodles ran a taxi service and produced a small toy robot vacuum cleaner in the 60s and 70s you would see them with sort of electronic toys dabbling in electronics and by the end of the 70s they had produced a home pong console and they saw video games as a way forward for the company a new thing to experiment with it was a smart move the market was already huge and had been rapidly growing in 1979 Nintendo started producing arcade games with names like sheriff space fever and then in 1980 radar scope but radar scope was a failure for the just established Nintendo of America so it was reworked into a new game by a young artist named Shigeru Miyamoto who would eventually become one of the most famous and beloved figures in all of videogame history that reworked game released in 1981 was Nintendo's first big hit Donkey Kong while this was happening people were in general really excited about video games arcades were huge the Atari 2600 had already come out in 1977 the video game market in the early 1980s had lots of investment lots of new companies everybody and their mother was making video games for the Atari everybody goes to arcades and plays arcade games by 1982 around a hundred companies were fighting for a foothold in the industry that year arcade games brought in twenty seven billion dollars revenue from consoles was 14 billion dollars Bally manufacturing stands to make a hundred million dollars selling pac-man machines then in the US the video game crash of 1983 happened the video game market is very cyclical there are a lot of boom bust cycles the market had become oversaturated as manufacturers focused ever more on quantity not quality everybody in their mother who had an Atari system had at least one or two games they bought at that point for 50 bucks which were awful unplayable garbage in 1983 the New York Times reported that demand was a hundred percent and manufacturers output was up 175 percent at the same time many consumers were moving from their Ataris and in televisions to home computer systems from 1982 to 90 85 revenue from arcade games dropped 66% console revenue dropped 93% Atari lost five hundred and thirty six million dollars in 1983 that same year it dumped fourteen truckloads of discarded game cartridges in a New Mexico landfill it opened up is basically IP and and everybody started producing very low quality games and that's what led to the crash of home gaming console business despite the market crashing in the u.s. in 1983 Nintendo released the family computer or Famicom in Japan it did well there but when the company wanted to release a North American version it had to deal with the market in shambles a lot of people at the time said you know Nintendo you missed the boat here you know you guys don't know what you're doing but that's also exactly why they succeeded is because the market was at the perfect point for them to come in and completely take over so Nintendo reworked the Famicom gave it a new housing renamed it the Nintendo Entertainment System or NES and released it in North America in 1985 the NES established what is considered the third generation of video game consoles it was breaking into a market that other companies had been working in for years the biggest player at the time was Atari but it's hairy like its competitors had just taken a huge hit one of Nintendo's first key decisions in the u.s. was marketing the NES as a toy not a video game Nintendo was the one who said we're gonna make this for kids we're gonna do a heavy marketing push for toys get it out of electronics cuz nobody's buying it in electronics and in 1986 the system was the hottest toy on the market for Christmas in the 1987 the same thing happened interactive or video games will lead the holiday charge to the cash register retailers overwhelming choice for the season's biggest hit will once again be the Nintendo Entertainment System very exciting and challenging challenging each other its two-player games by 1987 Nintendo had taken 65% of the hardware market and Atari was down to 24% that's compared to its 80% just a few years prior the other thing that Nintendo decided to focus on was producing nacho systems that worked well but vitally good games if the quality bar can be raised then the overall market for video games can be broadly expanded you could start to tell stories you could do something other than just shoot the aliens and don't die and it worked really well the total market at retail in in 1988 is some 2.3 billion dollars in a hardware sense it's probably about eighteen and a half million pieces of hardware in 1988 and of that Nintendo has just an excess of 80% of those those customers the protagonist in the first version of Donkey Kong was called jump man but in the North American version he was renamed by after that came the arcade game Mario Brothers and then with the NES and once again designed by Shigeru Miyamoto Super Mario Brothers [Music] will be the I have this very ingrained deep memory of sitting in my babysitter's basement and playing Mario for the first time and just having my mind absolutely blown Nintendo from about 86 until about 89 completely dominates the United States home video game market and they continue to dominate it after 89 it's just that in 1989 Sega shows up with the Sega Genesis and Sega's entire aura is that they're not Nintendo they're in your face they're extreme their logo is and Nintendo is sort of caught off guard by having competition and with the launch of the Genesis the console wars as we know them now really start to take off [Music] Sega did manage to take some of the market but Nintendo would ultimately win that war in 1989 at released the Gameboy which did two handheld gaming what the NES did the console gaming Nintendo had been experimenting with handheld systems since 1980 with its game and watch systems but the game boy took things mainstream then the Super Nintendo was released in 1990 so that's the new Super Nintendo Entertainment System but in 1995 it took a sharp left turn and released the Virtual Boy [Music] for a freak and it was awful it really was there was nothing good about it it was an attempt to find the fun in the VAR away before VR even existed certainly a major misstep from Nintendo but on the other side it is a testament to their willingness to experiment and to find the fun the following year Nintendo went back to basics and released the Nintendo 64 hottest game system in history and I guess I must be talking about n64 then in 2000 Sony launched the PlayStation 2 and Nintendo decided that they were gonna do the same thing this time 128 bit the Gamecube but they launched a year late so Nintendo and Microsoft kind of split up what was left over after Sony dominated and Nintendo licked their wounds went back to the drawing board and decided we're gonna do something different you can see from the period where the n64 launches to that period of GameCube time that they're struggling a little bit they said that famously we're gonna swim in a blue ocean not a red ocean we don't want to be there with all the other sharks competing with one another we're gonna do something different in 2004 Nintendo released the handheld Nintendo DS which would become its best selling device then in 2006 it released the Wii more than a thousand people lined up to get a Wii and Nintendo officials were proud to report they had enough for everyone it killed it they went from being the leader in 85 and 90 to being the laggard in 95 and 2000 to being the leader again in 2006 it was targeting a different set of values then what more mainstream gaming was focused on at the time I was the first person on the west coast to get a Wii there are literally pictures of me and my Mario overalls like holding a Wii above my head [Music] Louise hardware was launched after the Xbox and all these other things it was slower than all of those other things people were salivating at the mouth for this thing Steven Spielberg was down there at e3 waving it around and everybody's lined up for hours to play with this thing why cuz it's fun then in 2012 the Wii U was released and it was the biggest commercial failure since the Virtual Boy the Wii has sold a hundred and one million units the Wii U's sold 13.5 million in Japan many companies have a tendency to bring new products to market very quickly the time production to market is much shorter so companies develop quickly if some products fail that's not such a big problem the idea is that you can only keep customer interest if you constantly produce new products that are interesting for the consumer while the Wii U was a commercial failure some see it as a necessary step toward Nintendo switch released in 2017 the Wii U was a half step I feel like the Wii U is Nintendo trying to do the switch before they could do the switch and I don't know there was a mistake while the Wii U was definitely not a commercial success I don't know that you would have a switch without commercially successful and critically praised the switch and its games have been seen as a return to form for a Nintendo the company's revenue jumped 116 percent the year after the console was released you sold 2.7 4 million units of your snooze switch console in just the first month are you gonna be able to keep up this pace we're certainly working hard too but lately it hasn't been able to keep up with the pace right now with the global coronavirus pandemic switch consoles are suddenly sold out almost everywhere as gaming overall is up 75 percent since early March the switch is a great console people will pay $300 plus another 50 just to play breath of the why and that's how good Nintendo games are and if they weren't that good we still would not have Nintendo consoles because nobody else is making games on Nintendo consoles that anybody really goes to crazy about games along with the consoles they're played on have always been important to Nintendo the consistency of their quality is seen as a uniquely Nintendo feature their so consistently the best at making certain kinds of games it makes it inevitable I guess it's sort of like the Beatles in a way it's like you reach a certain level and it's like the Beatles are just gonna keep getting passed down to generation and generation generation and Nintendo's the same way in an industry where a lot of other video games are now focusing on a very realistic experience an amazingly graphical accurate experience high frame rates technical specs Nintendo said we don't care about any of that we're focused on fun they are going down to strategy which is all about complexity center of the living room we just want to bring consumers gaming fun and those games are where Nintendo makes a lot of its money they make a little bit of money on the hardware but most of the money is made on the software side and not as reliant on third-party software as Sony is Nintendo is you know it's all about their own games Nintendo has also been famously protective of its intellectual property with non Nintendo games you can often choose what kind of device you want to play it on Nintendo games can almost always only be played on Nintendo devices people do not like being locked into the platform that they are playing the game on example you can play fortnight on your phone on your console on your PC you name it and your progress carriers from platform to platform and people love this it's it's like how people use Netflix if they would take their software and say anybody wants to play our software it can play it they would make a lot more money so what does the future look like for Nintendo some see its perceived disinterest in mobile gaming as a misstep and as an obvious next move they let mobile pass them by and they haven't figured out how to participate in mobile what we are disappointed mainly is that the company's not showing an intent and the speed when it comes to mobile games the real unlocking of value happens in mobile game platform one thing they have that nobody else has is a gigantic library more than a thousand handheld games and if they were to emulate Apple arcade and put a thousand games on it they would have a hundred million subscribers paying them five bucks a month it's not reflecting the share price because they haven't monetized it yet but if you're looking at Nintendo going forward I think that's the answer Nintendo has published mobile games in the last few years like Super Mario run but they've always taken a backseat avoiding mobile games could be a strategic move for Nintendo considering what happened when Sega stop making consoles in the early 2000s once it abandons own consoles the Dreamcast being the last of the consoles that Sega developed and started developing games for other consoles other platforms the popularity of those titles never kind of got repeated on other platforms you know I think Nintendo is aware of what happened to Sega and they realize that if they move away from that captured audience and really focus on other platforms there is a strong possibility that they'll get diluted and kind of lost at sea because there's just so much game content coming out on the mobile platform there's also the emergence of cloud gaming like with Google stadia Microsoft X cloud or NVIDIA GeForce now games are going on the cloud they're gonna be played on the cloud they're gonna be increasingly Hardware agnostic you know Nintendo can't afford to ignore cloud gaming you can see how their years behind the playstation network as well as Microsoft's and now you've got the king of the network Google coming in it's gonna be very challenging for them just the quality of games alone is unlikely to sway the gamers if you don't have the quality of network the robustness of the network gaming that game is required and in that case you could ask yourselves where does that leave Nintendo another eventualities that longtime Nintendo employees like Miyamoto will one day age out of the company I first started I always thought I would be young and now I find that when I come to these types of events and get out among the other game developers somehow I'm the oldest guy in the room people like to say Shigeru Miyamoto's like the Walt Disney of Nintendo in many ways like Nintendo is Miyamoto Miyamoto is Nintendo they're so interlocked whether or not Nintendo can survive without Miyamoto is a bit like asking if Apple can survive without Steve Jobs it's the same level of importance to the company so using that as a framework I would say the answer is yes Miyamoto has infused so much of his DNA into the company Miyamoto sounds and obviously he's been a driving force of the gaming business initiative for Nintendo but Nintendo has a very deep bench Nintendo has a very very strong development base I think that some of the talent that they have is once in a generation talent and can never be replaced so I wonder what happens to a post Shigeru Miyamoto Nintendo this love for Nintendo and its character is something that consistently sets it apart from its competition Mario and Miyamoto have no equal typically seen as conservative with what it allows its IP to be used for Nintendo has been recently exploring new things there's a Mario Lego set coming out a Mario animated movie there is even a Nintendo theme park in development at Universal Studios Japan I personally looked at that and was like oh my god how can I get tickets how can I get there please no offense to Ubisoft but if they were like Ubisoft world I don't know that as many people would be like I need to be there now with so many successes under its belt and it's monumentally impactful characters and other IP Nintendo is in a position where it can still easily experiment and take risks as of December 2019 Nintendo had just over eight billion dollars in cash and deposit alone study now in the last 31 years that I've been in the market I see a Nintendo actually struggling for cash financially Nintendo is not a really a company we need to worry about but it is of course a risky business that the expectations are that Nintendo must be innovative firms ever and this may be a problem but Nintendo's case we can say that they have very strong and very profitable side businesses that will basically secure survive [Applause] [Music] you

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Id: whW1qJZwxs0

Length: 20min 46sec (1246 seconds)

Published: Sun Apr 12 2020