Chuo University Speech(Nov 25th, 2011)
"The Structural Transformation of the Game Industry"

(Continued from previous page.)*

The last point is in the parenthesis because this was not a intended outcome, but they made the save data function available, which actually was a pretty big deal. It was Nintendo, Japanese company that gave birth to the game console industry, so initially the publishers were mostly Japanese, who were previously creating games for the amusement facilities. The exceptions were Square, Enix, and Koei, and these companies had a PC game background. So, we were the exceptions, and we were not exposed to the game arcade culture at all, and thought it was just natural to have the save function. It was a must for the RPG and the simulation games. The arcade games and how they were played did not incorporate the concept of saving the data, so this was totally new for the players, and it went flying. My message here is that a new element opens the window for new entrants, which creates new things to allow diversity, and such dynamism would further build up the ecosystem.

Nintendo does it again with a disruptive innovation, the Gameboy. In my view, Mr. Yamauchi may deserve to be respected highly even over Steve Jobs.


Thereafter, Nintendo enjoyed the golden decade, which was later followed by Sony's PlayStation. Please refer to slide 12. It says continuous innovation. This was not like Nintendo's disruptive innovation, but it did subvert the universe.

Some say that Sony overtook Nintendo, but that is not a historical fact. The consumers and publishers dismissed the Nintendo business model, so it was self destructive, and Sony happened to be the one that stood out among the rest. In reality, there were two wars, but they were mistakenly perceived as if there were only one, suggesting the hegemony shifted from Nintendo to Sony, but this is urban myth and is not accurate.

What truly happened was that the mask ROMs were really expensive, and the distribution margin was huge as the initial inventory management was a big challenge. So the games cost 8,000 to 10,000 yen. It's probably beyond your imaginations, but during the later phase of Nintendo era, the Dragon Quest series for instance cost over 10,000yen. Despite the consumers paying such a high price, and despite our diligence for the development, the business was not easy.

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