For a while it appeared as though Japan’s booming video game business was immune to the country’s drawn-out economic bust. As Japan slumped into a deep recession, the industry flew an inverse trajectory, reaching a dizzying peak in 1997 thanks to the invigorating success of Sony’s PlayStation. But soon enough the long winding lines of consumers that greeted each new high-profile game release in Akihabara also began to shrink as the nation’s previously insatiable appetite for electronic entertainment waned. In 2002, America overtook Japan as the world’s biggest consumer of video games and in 2003 Europe nudged into second place.
Of all the video game console manufacturers, Nintendo had the most to fear from this decline. Just as game sales were in dramatic regression in the company’s key home territory, so Sony’s PlayStation 2 had cast a long shadow over the GameCube, with Microsoft’s newcomer selling 2 million more units of its Xbox than the one-time Japanese leader of the home console market. Moreover, for both Sony and Microsoft, video games were just one component of a sprawling empire. If their respective game divisions performed poorly for a time, other areas of the business could take up the slack. For Nintendo, as with Sega before it, there was no fallback. If the company couldn’t turn its speeding decline around, it would have little choice but to follow Sega in turning its back on the console hardware business to focus exclusively on publishing.
It was into this tumultuous landscape that Nintendo’s new president, Satoru Iwata stepped in 2002, replacing Hiroshi Yamauchi at the helm of a company headed for disaster. In November 2003, for the first time in the company’s history, Nintendo announced a loss for the beginning half of the fiscal year. In the same breath, Iwata-san proclaimed that the company was developing a new system, neither a successor to the GameCube nor the Game Boy Advance, but a system that would “go back to basics” in the hope of attracting gamers of all ages, and players with no prior experience of games.
With the growing success of adult-focused games and online connectivity, the direction made little sense. While the desire to widen the boundaries of the games industry to encompass a broader mass market appeared logical, Iwata’s statement that “you can’t open up a new market of customers if you can’t surprise them” seemed cavalier in Nintendo’s immediate context. A year later, when the Nintendo DS was unveiled, method still seemed to have been overtaken by madness. The silvery, somewhat bulky handheld system – decidedly not, as Nintendo was only too keen to emphasize, a successor to the GBA – opened like a book to reveal two screens, one of which was a touch screen that could be interacted with using a stylus. Despite the in-built microphone and wireless connectivity there seemed no way that this Game & Watch style throwback could be anything other than a side-project for the company. Sony dismissed the system as a gimmick, ‘a knee-jerk reaction’ to its futuristic, widescreen PSP handheld system, while many developers seemed equally sceptical and confused as to how to employ the system’s idiosyncratic capabilities.
Within 12 months, Nintendo had not only proven its detractors wrong, but had turned around the company’s fortunes. In the space of just one year the Nintendo DS sold 13 million units while the handheld accounted for 45 per cent of all software sold in Japan in 2005, enabling Nintendo to leapfrog Sony’s control of the software market. As with the Game Boy, Nintendo began to iterate on the hardware, releasing the DS Lite and then the DSi in various incarnations, and by 2010 over 135 million units had been sold globally.
Most significantly, the Nintendo DS had proven Iwata’s assertion that chasing innovation rather than technological superiority was the key to Nintendo’s future, a simple ideological shift that would have a profound effect.