Nintendo: The Deviant’s Advantage

A fellow named Watts Wacker wrote a book a few years ago called "The Deviant’s Advantage: How Fringe Ideas Create Mass Markets". Used copies of the book are available on Amazon for as little as one cent, plus shipping and handling.

Wacker may not have been thinking of Nintendo when he wrote the book, but he should have been. The game company has just announced that it has begun making money on its hardware sales.

In most industries, that would not seem to be much of an announcement. Sell things at a loss and make it up on volume. But, in the video game business, companies often use their game consoles as a loss leader and make money on the software they sell. Some industry analysts think that Sony could be losing as much as $200 on each PS3. The division of Microsoft that sells its Xbox lost money last year.

The head of Nintendo has now set his sites on selling as many Wii game consoles as Sony sold PS2s. That is around 120 million units. The Wii is often sold out now, so Nintendo’s first challenge is to get production up.

But, when Wall St. looks at Nintendo what its should see is a company that turned the video game business on its head. Instead of marketing feature-rich, next-generation technology products like the Xbox 360 and PS3, it put out a game platform that almost anyone can use. It moved the video game business away from the 19-year-old who plays for 10 hours a day and has developed skills to do open heart surgery through a PC.

Nintedo was up against long odds. The heavy duty machine has been the foundation of the industry for at least the last five year. Now, Sony (SNE) and Microsoft (MSFT) are playing catch up.

And, grandma is in the living room  playing Super Mario Brothers on her Wii.

Douglas A. McIntyre