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Wednesday, October 05, 2005

10/05/05 Rope-A-Dope: Nintendo Is Smarter Than We Think

Rope-A-Dope: Nintendo Is Smarter Than We Think

Free Image Hosting at"On October 30, 1974, Muhammad Ali and George Foreman faced off in the "Rumble in the Jungle." The much-anticipated fight featured Ali breaking out a new style, later named the “Rope-A-Dope,” with a seemingly-suicidal strategy. Ali let the hard-punching Foreman hit him and hit him and hit him. Ali played defense, laid on the ropes, and let Foreman wear himself out. Much to the surprise of just about everyone, it worked. Ali survived, George Foreman punched himself into exhaustion, and Ali put together a furious barrage in the late rounds that knocked Foreman out.

On October 03, 2005, Nintendo, Sony, and Microsoft are gearing up for the next round of the ongoing console wars. Conventional wisdom says Nintendo is doomed. Twin dreadnoughts known as the PlayStation 3 and Xbox 360 are sailing over the horizon. All we know about the Revolution is it has a nifty controller. Nintendo even admits outright that the Revolution won’t be as powerful as the other two console entries. Furthermore, Nintendo is putting on a PR blitz suggesting it’s going to do other than make “more shiny.”

To the gaming industry, this isn’t just blasphemy, it’s outright suicide. Conventional wisdom states you have to use the beefiest processor possible and come out with videos showing shiny things. If you don’t, you’re just not cool enough to run with the big boys.


Not all is well in Big Boy Land. Microsoft’s Xbox division has lost over $4 billion. Things don’t look better for the 360. The current best guess is $75 lost per console sold. Sony’s behind, but not by much, and plans to lose $1 billion in the first year of the PlayStation 3. That figure doesn’t include the billion-plus dollars it spent developing the Cell processor.

Furthermore, anyone who spends one second with Yahoo and the keywords Sony PlayStation losses finds a history of Sony throwing millions down the console black hole. Since 2001, Sony has been pursuing market share and bragging rights with nothing to show for it but negatives on the balance sheet. Sony is also fighting on another front, battling Nintendo for the portable market and losing millions there, as well.

Nintendo’s profits aren’t doing great, but they are the one company that can talk of “profits” in this sector. So, we come to my theory.

Nintendo is watching, leaning against the ropes, letting the big two punch each other and throw punches at it, and just waiting for them to tire each other out.

I’m starting to think it’s a sound strategy. After reading the interviews I linked above, I’m willing to revise my estimate of Nintendo, and change them from “mad geniuses” to “mad geniuses who know what they’re doing” on my personal opinion sheet. Nintendo is making a dangerous gamble on a new strategy. All the talk coming out of Nintendo HQ centers around bringing new people into the industry with a fun, inexpensive console that’s really cool to play. Nintendo doesn’t seem concerned with showing off the shiny and getting hardcore gamers. On the surface, this is suicide, but I’m going to cut them some slack.

Nintendo has the luxury of the long view. They’ve been around since 1889 and I guess relative upstarts like Sony and especially MS look pretty silly compared to a hundred-plus years of gaming industry experience. Just to give you some idea of the challengers they’ve faced and beaten, here’s a list of companies that lined up to go toe to toe with the Big N in the years after the original NES: Sega, Atari, Commodore, Amstrad, NeoGeo, NEC (TurboGrafx 16), Watara, Philips, Apple (Pippin via Bandai), and Bandai (Playdia, Wonderswan, Pippin). I guarantee no matter where your allegiance lies, you recognize two or three of those names." [more]

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