Nintendo isn't doing anything new. What they are doing now is what video game companies did in the seventies and eighties: focus on mass market (choosing pong over computer space, etc.), tapping into new demographics (Pac-Man for females), integrating hardware and software to create new type of game experiences (most arcade game makers), and focusing on a family friendly console (Atari 2600, NES, and so on).
The 'truths' of the industry then were:
-1st Party Software was most important (since it defined the hardware and first party games led the way of the 'philosophy' of the system. First party games were responsible for carving out an installed base for any third party companies)
-Gaming had to aim at the 'mass market' (People thought Defender would flop because it was too 'hardcore'. Such was the mentality then that games ought to aim to be for everyone.)
-Purpose of hardware was to serve the software (Controllers and other parts of the system should be designed with the software in mind.)
The 16-bit Generation was the turning point. Sega focused on 'competition', on processor speeds and graphics, harsh advertising blitz, and all to 'steal' marketshare from Nintendo. Sega's real success came in growing into new areas (young adult male market, europe which Nintendo had little presence), not from 'stealing' marketshare. Nintendo 'competed' back with the SNES in similiar way as Sega did. At the end of the 16-bit generation, the 'truths' of the console industry became:
-3rd Party Software was most important (having hits like Street Fighter 2 exclusive to the SNES shaped and pushed SNES's sales. Genesis's Mortal Kombat having blood shaped the system's reputation and pushed its sales. EA's sports games became a major factor)
-Gaming had to aim at the 'hardcore' (at those who play the most. Remember all the 'in your face' advertising of that era? Remember how games kept getting more and more complicated? Remember 14 button combos of Killer Instinct?)
-Purpose of software was to serve the hardware (Games were now to be designed for the hardware, to take advantage of the hardware, to show what the hardware could do. Console industry became focused on horsepower and graphic upgrades.)
After the so-called 16-bit 'console war', a series of changes occurred. Sega convinced that competition, not growth, that better hardware, not software, were the reasons for its success, began to throw out hardware to 'compete' such as the Sega CD to the 32X. Saturn was remade to 'compete' with the Playstation. Sega destroyed itself. Nintendo, believing their success in the 16-bit generation was due to technology, competition, and graphics focused on them. There was the Virtual Boy flop. The N64, impressively designed by Silicon Artists, became mostly irrelevant. Gamecube, which was graphically superior to the PS2 and cheaper, also failed.
The after effect of the '16-bit War' was that both Sega and Nintendo stopped using their strengths as integrated software and hardware companies. This allowed a wave of new competitors to enter (since anyone can add in 'better technology'). Many of these new systems were trying to double as 'multimedia platforms' which is what the PS3 and Xbox 360 are aiming at today (and have always aimed at). Playstation succeeded much due to Sony's experience with electronics and entertainment but more by focusing on a mass game library. Population increases and multiple console ownership pushed the 'growth' of the console sector. But in terms of absolute popularity, games were not becoming more popular. Console penetration of households in America was still at where it was last reached by the NES Era. In Japan, gaming went into decline.
After fifteen years, Nintendo finally abandoned the '16-bit War Myths' (perhaps it was the death of Sega that woke Nintendo up?). The reason why the DS and Wii are selling is because they are relying on the 'truths' that created the console industry in the first place (hardware serving the software, focus on mass market, penetrating new demographics, etc). The reason why the PS3 is having trouble is because it is relying on the 'truths' created by the 16-bit generation 'war': software serving the hardware, focus on hardcore, focus on technology).
16-bit 'console war' has turned into a strange myth. People love the idea of 'console war' because they love the idea of 'competition' between console companies making better games. But they're wrong. Competing against disinterest gave us Donkey Kong, Pac-Man, Super Mario Brothers, Zelda, Tetris and Metroid. But games competing against other games gave us Sonic, Donkey Kong Country, Starfox (and that expensive superfx chip), and other games that were very impressive then but aren't that good.
When I see Sony talk about how their "technology" practically guarantees console success, I think of the 16-bit Myth. When I see Xbox 360 Forums chatter in excitement about a '16-bit console war' between Microsoft and Sony, I shake my head. Just as the Fourth Generation (16-bit) altered all companies' thinking, by the end of this Seventh Generation, every console company will begin acting like Nintendo. Already, they are beginning to use Nintendo's talking points ('growing the market', etc).
The Console Wars are over. After this generation, no one will seriously believe the 'truths' established during the 16-bit generation.
