Making Money or Making Friends...

It's been a while since I've updated and the reason for this is a combination of laziness, general busyness at work, and moving into a new apartment. It certainly isn't lack of inspiration. I've actually been almost too inspired recently. I keep starting to write extremely long dissertations on subjects that are way too large to compress into just a few paragraphs and then I never take the time to edit them down into something legible that has a concise point. Today I'm going to try again by taking a huge topic and doing my best to compress it down to as few paragraphs as possible... and I just wasted one of them explaining this to you!

Today's huge topic is this: Nintendo and Microsoft have almost completely opposite business strategies. Has anyone else even considered this? Nintendo's goal is to make money regardless of what happens to their brand name and Microsoft's goal is to make a brand name regardless of how much money it costs. Microsoft's Q4 financial results for 2004 were released last week, and according to these papers, the Home and Entertainment Group, which includes the Xbox division, had a $339 million operating loss. It's apparent that Microsoft is still losing money on the X-box, but they are obviously doing so in an attempt to gain market share. Nintendo on the other hand, had a $204 million profit in its first fiscal quarter. This is admittedly largely due to the Game Boy Advance, but it shows that Nintendo's focus is squarely on profit.

Their differing strategies seem to extend into their games as well, with Nintendo supporting existing brands to make fans happy and Microsoft trying to creating new brands in an attempt to make new fans. If you look at Nintendo's GameCube releases this year, you'll notice that every single game is based on an existing brand, if not a direct sequel. Pikmin 2, Konkey Konga, Paper Mario 2, Metroid Prime 2, Starfox, Mario Tennis. In fact, the only original title being released by Nintendo is Geist, and that doesn't exactly look to be a good thing. Microsoft's first party titles due out by the end of the year include Kingdom Under Fire, Forza Motorsport, Fable, Jade Empire, and Sudeki. Although Microsoft will also release several sequels, such as Outrun 2, Halo 2, Unreal Championship 2, Blinx 2, and Conker, overall Microsoft seems far more willing to attempt to create new franchises than Nintendo does.

The disparity between the two companies' release lineups likely exists as a result of Microsoft and Nintendo's differing business strategies. Nintendo seems unwilling to invest the money required to create a new franchise if there is a chance that the new franchise won't be profitable. This doesn't mean that Nintendo is lacking in innovation; it means that Nintendo's innovation is forced to exist within their existing franchises. This year Microsoft canceled three games: Psychonauts, Oddworld, and True Fantasy Live. Interestingly enough these three cancelled titles were probably the most innovative titles on Microsoft's release schedule. This shows that although Microsoft is intent on creating new brands they aren't necessarily doing so with a focus on innovation. The titles were canceled presumably because they were projected to have lower sales numbers than were required to make up for their development costs.

Although they use completely opposite business strategies, Microsoft and Nintendo do have one thing in common. They both continue to battle for second place, just as they have been since they were released almost 3 years ago. Which strategy will be better in the long run? We may have to wait until the next generation starts to find out...