Avoiding the Performance Trap

“We got stuck with the reputation that we were the brand parents wanted their kids to have, which is the kiss of death.” - Nintendo marketing director George Harrison (1994)

In a previous post titled, Too Much of a Good Thing: Explaining the decline of Guitar Hero and Rock Band, I wrote about how the “Guitar Hero Bubble” would inevitably result in a decline in instrument simulation games. Some readers took exception to this comment.

Nintendo fell into the same trap in the early 1990s when it began to release new Mario titles at an unsustainable pace. The resulting crash almost killed the Mario brand.

Given the continued strength of the Mario brand, some readers found it hard to believe that at one time gamers rejected Nintendo’s famous plumber. In response to one such reader, I wrote,

The Mario “bubble” is discussed in Chapter 2 of the book, titled “Nintendo’s Dark Age.” Basically it refers to the rapid expansion of the brand in the late 1980s and early 1990s, a time when Nintendo enjoyed a near monopoly in console gaming worldwide. Nintendo then made a number of serious errors that saw its market share drop off sharply against competitors, namely Sega and later Sony.

One mistake occurred when Nintendo saturated the market will ill-conceived Mario games that gave Nintendo the reputation of being an educational company that offered games for small children. By this time, the demographic had matured and Sega was able to capitalize on it with Sonic the Hedgehog.

George Harrison, Nintendo’s marketing director at the time, recognized the problem in 1994 when he said, “We got stuck with the reputation that we were the brand parents wanted their kids to have, which is the kiss of death.”

As late as 1989, Nintendo enjoyed an 80% market share in the US, and its power over retailers warranted an anti-trust investigation by the US Department of Justice.

Then in 1991, when Sega introduced Sonic the Hedgehog, Nintendo began to see its fortunes decline.  That year, US sales of Sega home game consoles were nearly double Nintendo’s sales.

Instead of retrenching with higher quality games that could breathe new life into Nintendo’s powerful franchises, the company took the opposite approach, licensing the Mario brand to third parties and releasing as many spin-off products as it could. They included re-releases of classic games, educational programs for PCs, and tie-in products, such as movies and merchandise. Few of the products released during this period demonstrated the type of innovation that had made Nintendo the leader in game consoles.

Educational Titles Released in 1991-1993

• Mario is Missing!
• Mario Teaches Typing
• Mario’s Time Machine
• Mario’s Early Years: Preschool Fun
• Mario’s Early Years! Fun with Letters
• Mario’s Early Years: Fun with Numbers
• Super Mario Bros. & Friends: When I Grow Up

By 1993, Nintendo’s market share was down to 45%, compared to Sega’s 55%. Sales revenue fell by an additional 23% that year.

Table: Nintendo Market Share (Select years, excluding handheld consoles)

Nintendo was rightly worried about its declining fortunes as noted by Nintendo Director Hiroshi Imanishi,

This is not competition for market share. This is mutual bashing that will ruin the whole market. [The Daily Yomiuri, December 21, 1994]

Although competition did not ruin the market, it proved to be a stressful time for Nintendo. It also opened the window to new competitors, chief among them Sony, which went on to lead Nintendo by a margin of 10 to 1 in unit sales by the end of the decade, despite a massive increase in advertising spending by Nintendo.

Mario Bros. as a brand was in decline compared to Sonic the Hedgehog and other new intellectual property. However, Nintendo did not give up on Mario. In 1996, the company released Super Mario 64, which saw a return to the tried and true Mario formula, only this time in 3-D. Andrew Pollack of the New York Times wrote,

Sales are being buoyed by just one game, Super Mario 64, which perhaps exemplifies what Mr. Yamauchi means by creating new experiences. Super Mario 64 is drawing rave reviews for its ability to let the mustachioed plumber with the red cap run in three dimensions, into and out of the screen as well as across it. Some American game magazines say it is the best video game ever. [The New York Times, August 26, 1996]

Nintendo’s comeback was short-lived however. Prior to the launch of the Wii in 2006, Nintendo’s market share had declined to the point that some questioned whether the company would continue to compete in the hardware market or follow Sega’s example and focus exclusively on software (In 2001, Sega exited the hardware business after giving up most of its market share to Sony).

In 1996, Nintendo sales were buoyed by just one game, Super Mario 64

Admittedly, the collapse of the “Mario Bubble” was not the only contributor to Nintendo’s decline. However, it is an example of how brand equity can quickly erode when product quality suffers and too many games are released over a short period of time.

For a complete discussion of Nintendo’s declining years, see Innovation and Marketing in the Video Game Industry: Avoiding the Performance Trap, pages 29-46.