How the Wii is Beating the Xbox 360 and Playstation 3

This last weekend I finally broke down and bought a Wii to keep my Xbox 360, PlayStation 3 and various other technology toys company. At the end of the day as I cradled my now-worn-out right arm, the irony of the fact that the two game systems which most likely belong in someone’s bedroom were focused on family room content while the one game system that belonged in a family room didn’t do any of the multimedia stuff the other two do.

This seemed just too weird not to talk about and this dovetails with my piece last week where I suggested that the market was trending more and more to a hosted model.

Xbox 360 and PlayStation 3

It is amazing how much better both of these systems have become since I first received them. The Xbox 360 now does a really good job of pulling media from my home server and has one of the best download rental libraries currently in the market – granted the time it takes to start a movie is still excessive but it has come a long way from where it first started.

The PlayStation 3 (PS3) has even come farther – but then it had farther to go. I still think the PlayStation interface is more in-line with a home entertainment product than a gaming system and is vastly more pleasing to the eye. The PS3 too has begun to pull from networked content, though it doesn’t do it as well or as consistently as the Xbox (I’m getting a lot of UPnP errors) and it doesn’t seem to size the video as well – but it didn’t access this stuff at all at first and they too are starting a download movie service. Finally, the PlayStation 3, of all of the consoles, looks the most like a high-end stereo component.

What I think is kind of funny, however, is the games on both the Xbox 360 and the PS3 tend to lend themselves to individual users, despite being marketed as social machines. Most of the games are fun to play but not to watch, and team play is generally best done with people whom each have their own game systems and in their own homes. In short, for the primary reason you are likely to buy an Xbox 360 or a PlayStation 3 (for the social aspects), you will find them better placed in someone’s room so they can play it privately rather than in a common room like a living room or family room. Yet, to enjoy the media features, the ideal place to put the products would be in the family room and not the bedroom.

Neither product is particularly portable, and moving the content from either box to another room of the house would likely cost more (by a significant margin) than simply buying another console. For both products it’s like someone didn’t really think the “use case” all the way through.

The Nintendo Wii: The New King

Of the three consoles, the Wii is by far the most popular. I can say that because there was only one store in my area that had them in stock, and this trend is spread throughout the rest of the country. So if you are planning to give one for Christmas, you’d better buy it now. This product has been in short supply every Holiday season since it launched and demand appears to only be increasing. EA has recently indicated they made a huge mistake by not betting on the Wii more heavily and instead focusing on the Xbox 360 and PS3.

The games for the Wii are largely designed for family play. As many have discovered, you actually need a good sized room to play them or you are likely to take a lamp or a TV screen out with the controller which encourages broad hand movement. The Wii, which generally hooks to High Definition TVs and exists in a common room, doesn’t put out a high definition signal and doesn’t embrace the multimedia stuff the other two products seem hell bent on providing.

The Wii just does games which makes me wonder what would happen if someone like a Cisco who did do media extenders licensed or bought the Wii platform. Cisco has this whole Visual Networking initiative and the result could easily up the available market for Wii games by something like 10x. It probably won’t happen, but Cisco is one of the firms that could actually afford Nintendo and the result would clearly wake up the consumer market. (They just bought Pure Networks which has what many think is the best home networking software product).

Now if you think this is farfetched, realize that Comcast has begun to offer the Wii to Triple Play Customers and suddenly an integrated product doesn’t seem so farfetched.

One interesting thing to remember about the Wii is that the product is artificially constrained, when comparing market share between the three companies, the numbers generally include significant inventories in stores for the other two products, the Wii sells out, which suggests there are more Wiis actually in use and more demand for the product than either of the others. One analyst thinks that Nintendo is unbeatable.

Wrapping Up

The interesting lesson here (and one taught by the Palm Pilot and the iPod) is that creating a product that is simple and does its primary job well while addressing an unmet need can lead to unusual success. At its peak Palm had a higher stock market valuation than GE and the iPod is what saved Apple. Nintendo is enjoying somewhat similar success albeit with a product that sells in substantially lower volumes right now.

You have to wonder if either Sony or Microsoft are getting this lesson and what it means for the next generation of players due to market starting in about 24 months (assuming a 5 year cycle). Microsoft does seem to be moving to supply a similar capability to the Wii’s motion controller but the question of simplicity and cost remains. Will they keep it simple and cheap and try for a record, or will they try once again create products that are anything but and let Nintendo expand their growing lead.

We’ll see. Oh, and seriously, if you plan to buy a Wii this year, you need to do it now. Supply is already short and we aren’t even in August yet.

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