HBS-Power-Play-(A)---Nintendo-in-8-bit-Video-Games

HarvardBusinessSchool9-795-102Rev.July12,1995ProfessorAdamM.Brandenburgerpreparedthiscaseasthebasisforclassdiscussionratherthantoillustrateeithereffectiveorineffectivehandlingofanadministrativesituation.ThecasedrawsonreportsbyAnnaMinto(MBA'93),MichaelMaples,andMichaelTuchen(MBAs'94).AssistancefromResearchAssociateMoniqueBurnett,RenaHenderson,BradIpsan,andResearchAssistantJuliaKouisgratefullyacknowledged.Copyright©1995bythePresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685orwriteHarvardBusinessSchoolPublishing,Boston,MA02163.Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,usedinaspreadsheet,ortransmittedinanyformorbyanymeans—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.1PowerPlay(A):Nintendoin8-bitVideoGamesOnestrongcompanyandtherestweak.HiroshiYamauchi,President,NintendoCo.,Ltd.1Theoriginsofhomevideogameswentbackto1966,whenanengineeratSandersAssociates,aU.S.militarysystemsconsultingfirm, developedaball-and-paddlegamecalledOdysseythatcouldbeplayedonaTVset.Buttheindustryreallybeganin1972withthefoundingofAtariCorporation,whichenjoyedhugesuccesswithatabletennisvideogamecalledPong.By1982,theU.S.homevideogameindustryreached$3billioninretailsales.Thenthemarketcollapsed,withsalesplummetingtounder$100millionin1985.Afloodoflow-qualitysoftwarewasblamedforthebust,andhomevideogamesweredismissedasyetanothertoyfad.TheJapanesecompanyNintendo(thenamemeanssomethinglike“Workhard,butintheenditisinheaven’shands”)beganlifein1889asamanufacturerofhandmadeplayingcards.InthepostWorldWarIIperiod,thecompanyexpandedintoavarietyofnoveltytoysandgames.In1977,NintendobeganmakingahomevideogamesysteminJapanunderlicensefromU.S.televisionmanufacturerMagnavox—whichhadlicensedtheSanderstechnologybackin1971.In1983,Nintendolaunchedanewvideogamesystem,theFamicom(“FamilyComputer”),inJapan.Thecompanyalsodevelopedgamesspeciallytailoredtoitsnewpieceofhardware,suchasthehitsTheLegendofZeldaandMetroid.In1985,NintendoreleasedthesmashhitSuperMarioBrothers.“Nintendomania”hadbegun.TheU.S.launchoftheFamicom,underthenameNintendoEntertainmentSystem(NES),followedin1986.By1990,homevideogameshadbecomea$5billionworldwideindustry.ANintendoFamicom/NEScouldbefoundinoneoutofeverythreehouseholds—inbothJapanandtheUnitedStates.CumulativesalesoftheSuperMarioBrothersgameseriesalonetopped40millioncopies.1DavidSheff,GameOver:HowNintendoConqueredtheWorld(NewYork:Vintage,1993),p.71.PurchasedbyJohnChew([e-mail])onMay09,2012795-102PowerPlay(A):Nintendoin8-BitVideoGames2AsurveythatyearfoundthattheNintendocharacterMariowasmorepopularthanMickeyMouseamongU.S.children.Frommid-1990throughmid-1991,Nintendo’sstockmarketvalueexceededthatofSonyorNissan.(RefertoTableAbelow,andtoExhibit2forfurtherfinancialdataonNintendo.)TableAxxxAverageStockMarketValues,July1990throughJune1991Company(¥trillions)Nintendo2.406Sony2.212Nissan2.032Source:DatastreamHomeVideoGameSystemsVideogameswereaformofhomeentertainmenttargetedprincipallyat6-to14-year-oldboys.PlayersofvideogamescontrolledgamecharactersonaTVscreen,vanquishingfoes,seekinghiddentreasure,playingsports,andthelike.Ahomevideogamesystemconsistedofthreetypesofcomponent:aconsole,controllers,andcartridges.Theconsolewasessentiallyamicroprocessor-basedcomputeroptimizedforgraphicsprocessingcapabilities.Itwasdesignedtoreceiveinformationfromthecontrollers,processitaccordingtoinstructionscontainedinthegamecartridge,andsendsignalstotheTVmonitor.Controllerswerehand-helddevicesusedtodirecttheon-screenaction.Often,morethanonecontrollercouldbeattachedtotheconsoleallowingforgameplayamongseveralpeople.Whenaplayerpushedthebuttonsorjoystickonthetopofthecontroller,asignalwastransmittedtotheconsole.Cartridgescontainedchipsencodingtheinstructionsforaparticulargame.Theyweredesignedtobeinsertedintotheconsole.Atthebroadestlevel,threetechnicalfactorsdeterminedthequalityofthegamesthataparticularvideogamesystemcouldrun:datawidth(inbits),clockspeed(inMHz),andtheamountofRAM(inbytes).Earlymachineswere4-bitsystems.Later-generationmachineswere8-bit,then16-bit,and,bytheearly1990s,32-bitsystems.Earlymachinesranat2MHzandhadupto16kilobytesofRAM.Newermachinesranat12.5MHzandhadupto2megabytesofRAM.Exhibit1liststechnicalspecificationsofvarioushomevideogamesystemsand—forthesakeofcomparison—thoseofleadingpersonalcomputersofthesameperiod.Thetechnicallimitationsofearlyvideogamesystemsrestrictedon-screenobjectstotwo-dimensionalshapesthatcouldmoveonlyfromside-to-side.Soundswerelimitedtobeeps,bells,andbursts.Forexample,Pac-Man(homeversionintroducedin1982)wasan8-kilobytegamethatcontainedfewerthan20differentscenesanddepictedonlyoutlinedshapesinanarrowrangeofcolors.Bythemid-1980s,256-kilobytegamesbecameavailablethatboastedmorerealisticgraphicsandsounds,andwerebothfasterandmuchmorecomplex.Nintendo’sTheLegendofZeldaPurchasedbyJohnChew([e-mail])onMay09,2012PowerPlay(A):Nintendoin8-BitVideoGames795-1023(1987),forexample,contained600separatescenes,includingfo