Nintendo Wii: A 'Revolution' in Gaming?

Nintendo's hand-held game devices were hugely popular and were a major source of revenue for the company. However, the company's stationary consoles were not as successful. In fact, Nintendo's console sales declined with the release of every new generation of consoles. In the 1980s, when Nintendo launched the NES, its only major competitor was Sega Corp. (Sega), which launched the Sega Master System, a not-too-successful game console. However, in 1991, when Nintendo launched the SNES in the US, Sega's Mega Drive/Genesis was the most popular game console in the market. The SNES was not able to dislodge Genesis from its pre-eminent position, partly because the Genesis, unlike the SNES, offered backward compatibility.

Faced with rising game console development costs, Nintendo was forced to reconsider whether it wanted to continue in the race to build consoles which had greater processing speeds or which supported improved graphics. "Give them (gamers) one, they ask for two. Give them two, and next time they will ask for five instead of three. Then they want ten, thirty, a hundred; their desire growing exponentially. Giving in to this will lead us nowhere in the end. I started to feel unsure about following that path about a year into development," said Genyo Takeda (Takeda), General Manager, Integrated Research and Development Division, Nintendo. In the game console industry, it had become an accepted practice for the console manufacturers to lose money on the hardware and to recover the loss by charging high licensing fees to game publishers and developers...