 a Wii: a service about which Nintendo could not care less. Do you think that Nintendo would pay some attention to this, now that they are losing money? You might. And you'd be wrong.
The two opposing philosophies of business and design clash on the Xbox in ways that are unmatched anywhere else in the technology world. Microsoft gives us trailers, movies, and TV shows... all of which are available freely on the web. So, of course, Microsoft doesn't give us access to that. Noooo. That would be much too easy. Microsoft would rather restrict your access to freely available stuff. Of course, then they have to answer the question of why anyone would watch media on their Xbox that they could watch on their computer? Aside from saying "yeah, but it's on your TV... ooooooh," Microsoft hasn't really provided an answer.
So as a platform, the Xbox sucks compared to a computer. Hell, it sucks compared to an Android tablet plugged into a TV. But that's fine, right? I mean, the Xbox is primarily about having fun with games. So as long as it gets that right, it's good. And arguably, the Xbox is getting a lot correct in this regard, but only for a particular demographic. They are the ones who are buying 4,765,897,492 copies of Call of Duty on launch day. I am not a member of that demographic.
I want to put a video game into a system, turn the system on, and play. On the Xbox 360, you cannot do this. You have to sign in. You have to update. You have to have ads streamed to your system.  If I had more abilities with my system, as I mentioned, this wouldn't be necessarily bad. I might put up with it if I could easily play any video file from my computer on my Xbox, browse the real internet and watch Hulu and Youtube, install my own software, or otherwise have a system that isn't tailored and restricted in such a way as to try to milk me for as much money as possible. As is apparent from the demographics of the system, only the hard-core gamers care enough to let Microsoft do that.
The Wii provided at least part of what I wanted. It was a game machine. I put games in and I played. Nothing else. The Wii had a few fun things to play around with -weather, news, Netflix, etc.- but it was primarily a game machine. I appreciated that. But as I have been hitherto saying, that is no longer enough. Nintendo still limits what can be put on the system. They still deny the threat of cell phones and tablets. They still say that a business model of cheap games could never work.
Much like Microsoft, Nintendo's sales have been in free-fall. As I write this, Nintendo has just announced its first annual loss ever. Sales of the Wii missed targets by 25%, the same for the 3DS, and nearly 50% for the DS. And yet, instead of realizing that a sea change has happened, instead of recognizing the complete paradigm shift that is taking place, the president of Nintendo reaffirmed that no changes to strategy are necessary.
I've wasted more time in Angry Birds than I care to admit.
Nintendo's myopia is only further confirmed by their quixotic quest to stamp out system modding and piracy. It reveals a company that is just as clueless as Microsoft, but their DNA allowed them to stumble into the best model, one where games are paramount and easy to use. Now, the games that Nintendo so treasures are moving to different platforms, ones that are more liberated, cheaper, and easier to use: to wit, computers, cell phones, and tablets.
For example, for the most part, I've moved over to free games online at places like Armor Games and Kongregate precisely because I can simply press a button, play, and then leave when I want to. Most of these games are no where near the epic experiences that Nintendo and their ilk provides, but obviously, at least for me, the value of that extended experience is not enough to get money from my pocket and place my butt on the couch.
I am just an anecdote. But all three major video game companies hitting the skids is not.
At the root of these myriad companies' problems is the same thing: value. As the world advances, where value originates changes. Entertainment once came from traveling minstrels, then centralized theaters, then movies, then home media. In turn, home media companies had to compete with computers and video games. And now everyone must compete with the internet, pocket computers, and even new forms of book distribution. There are more competitors for consumer attention and dollars than ever before, and with a middle-class that is earning less than they have in over two decades, if you fail to deliver value, your customers will leave.
The very heart of value is enabling. A company creates more value by enabling more things. A company reduces value by charging more for the same thing or charging the same for less. Value comes from providing something new, be it completely new or simply a new price. Growth comes from value. Life comes from growth. Life provides the ability to continue providing new things to customers. If you are not growing your value proposition, you are shrinking. If you are shrinking, you are dying.  This is the nature of business.
Cell phone manufacturers are an excellent example of this phenomenon. One only has to look at the list of once-great brands that have since either fallen by the wayside or been completely eliminated. Motorola was once the absolutely dominant American brand. They went from a major player, earning billions, with double-digit market share in 2005, to irrelevancy and bankruptcy in 2008. Nokia went from the #1 cell phone company on Earth, to fighting for its very life in only three years.
The dramatic fall in the cell phone industry is only one place where this happens. Any industry where the quality of the product fluctuates so wildly can experience similar upheavals. By quality, I don't mean manufacturing quality, I mean quality in the sense that the product is suffused with a set of particular qualities that affect buying decisions. Qualities such as cost, desirability, color, brand, speed, etc.
You see similar wild drop-offs in any industry where the desired qualities change so quickly. In cell phones, which have evolved into pocket computers, it is because technology on that scale is evolving at an incredible rate. People always want the best screen, the most memory, the newest material, and so on.
But as I said, this isn't unique. Fashion, entertainment, interior design, and even baby names all see similarly rapid rises and falls. All that's required is a change in sentiment and boom, the entrenched players fail. And with the internet, changes in sentiment can be near-instantaneous.
Defending one's business from this is recognizing where value comes from and charging hard at it. There are many fashion brands that have been permanent fixtures on the Saks Fifth Avenue shelves. They do this because they reinvent their style every year. They chase the next big value shift. Only when a company rests on its laurels, does the market have a chance to grow around it.
There are two ways to provide value: the superstar model and the appliance model. The former is manifested in a fashion company. They are always trying to find the next new thing. They understand the basics of what they provide, but are always attempting to break the mold. Of every company in the technology market, the best one that I think exemplifies that is Google. Just look at all of the weird crap with which Google has experimented.
The latter model, appliance, means that a company knows what their product is being used for and simply provide more and better of the same. They are always on a quest to lower costs or provide a better experience. To use the example of the cell phone industry, Apple was the superstar with the iPhone. Other companies could have competed against that by making their phones with better screens, more memory, better audio quality, better materials, etc. It's still a phone, just better in every way than the previous model.
The appliance model, and the potential longevity it provides, is best manifested in the automotive industry. With every iteration, they build something that's fundamentally the same, but better: more power, better materials, lower cost, nicer stereo, etc.
While the superstar model gets all of the attention, I think that both models are of equal value. Both will, when executed properly, generate a great reputation and allow your company to continue. The superstar can easily rest on its groundbreaking efforts and simply make better versions. Apple is doing this with the iPhone. Likewise, an appliance company can leverage its reputation to attempt a new product type. The best companies frequently cycle in and out of both models.
As regards the video game industry, Nintendo brilliantly took both routes. They created a superstar new product while also focusing very much on the core experience of game play. Microsoft and Sony, with their explosive and flashy new systems, appeared to be shooting for superstar status, but actually took the appliance approach. Their game systems didn't try anything new. They had the same controllers. The same setup. The same games. The same ever-ageing demographic.
A middleman’s business is to make himself a necessary evil.
The loss of focus on value is greatest in the industries that were most predicated on middlemen. The music business failed so quickly because it was constructed around record companies that existed because it was, at the time, hard for artists to directly connect with fans. Now, instead of focusing on the value that they could still be providing, the record labels are obsessed with trying to force the world back into an