Co-Opetition - Adam M. Brandenburger [120]
If Nintendo jumped too quickly into the 16-bit game, there was even a risk that software houses and retailers would abandon the 8-bit market. Software houses might turn to 16-bit games and develop fewer new 8-bit titles. Retailers might cut the shelf space allocated to 8-bit games and discount the 8-bit titles they did continue to carry. The 8-bit market was Nintendo’s golden goose. Why risk killing it?
After Sega introduced its 16-bit system, these arguments might have seemed moot. Yet Nintendo was still in no hurry; consumers would wait for their 16-bit systems. A year after Sega introduced the Mega Drive, Nintendo gave Japanese consumers a reason to wait a little longer. It pre-announced its 16-bit Super Famicom system in late 1989 and began shipping the machines about a year later. Super Mario World, a 16-bit game developed by Nintendo’s ace designer, Sigeru Miyamoto, was released at the same time. Within five months, sales of the 32,000-yen ($200) Super Famicom overtook competing 16-bit systems. Nintendo President Hiroshi Yamauchi, expressing no surprise at Super Famicom’s success, reiterated his view that “the name of the game is the games.”7
Nintendo wasn’t in a hurry to jump into the 16-bit game in the United States, either. Following the pattern established in Japan, it wasn’t until September 1991, two years after Sega had introduced Genesis, that Nintendo introduced its 16-bit system to the United States. Renamed the Super Nintendo Entertainment System (Super NES), the machine was priced at $200, and games cost between $50 and $80.
The 16-Bit Battle When Nintendo finally entered the 16-bit market, the competition between Sega and Nintendo to sell 16-bit systems became intense. They competed with price cuts, threw in free software, and raced to put together the longer list of game titles. By the end of 1991 Genesis had 125 game titles, while Super NES had only 25. Nintendo claimed that close to 2 million Super. NES machines had been sold. But Sega argued that 1 million, at most, was a more accurate figure and that it was Genesis sales that had truly topped 2 million. In May 1992 Nintendo reduced the price of the Super NES to match Sega’s $150 price. Nintendo claimed to have a 60 percent share of the 16-bit market, while Sega boasted a 63 percent share! The same month, competition heated up even further when Nintendo and Sega each brought out stripped-down versions of their 16-bit machines for under $100.
Delaying the 16-bit battle was a very good reason for Nintendo not to rush into the 16-bit game. Once Nintendo jumped into the game, there was competition and, hence, much lower 16-bit prices. That shrank the 8-bit pie—and Nintendo’s added value in the 8-bit game along with it. The price of 8-bit cartridges came down $20, and only seventy-five new 8-bit titles came onto the market in 1991—fewer than half the number in previous years. The 8-bit pie wasn’t gone, but it was half-eaten.8
For as long as Nintendo let Sega have the 16-bit market all to itself, 16-bit prices remained high. These high prices cushioned the effect the new technology had on the added value of the old. By staying out of Sega’s way, Nintendo made a calculated trade-off: give up a piece of the 16-bit pie in order to extend the life of the 8-bit one. Nintendo’s decision to hold back was reasonable, given the link between 8-bit and 16-bit games.
Still, it was a hard call. By delaying, Nintendo granted Sega a temporary monopoly of the U.S. 16-bit market, and Sega was able