Nintendo’s Network Effects
http://www.businessinsider.com/nintendos-wii-u-is-a-major-flop-2016-1
The above article is a breakdown of how the Nintendo Wii U has failed to properly sell in the way they were expecting. In fact, it’s been generally considered one of Nintendo’s biggest flops ever. Selling only 10 million units, it’s 1/10th of the sales of the Wii and half the sales of Nintendo’s previous worst-selling console, the Nintendo GameCube. Because of the lack of Wii U sales, there has also been little to no third-party support for software titles on the system. This even further hurts its sales as the console is really only worth purchasing for Nintendo-produced software.
This plays very well into what we’ve learned in class about positive network effects. Especially today, video games rely heavily on a network. Online games are huge now with MMO’s and online multiplayer in first-person shooters. When there is a lack of users on the Wii U, it dissuades people from purchasing the console. There is an equilibrium point that needed to be reached for users to start increasing naturally due to the positive network effects. However, because Nintendo wasn’t able to get enough people on board at the start, the console has had very poor sales and is being used less and less. This also keeps third party video game developers from spending time and money to port their games to the console since they don’t expect good returns. All of these factors together make the console nearly unsellable, and even attempts to release bundles at a bargain to lower the market price below the equilibrium point proved unsuccessful. The only thing to do now is move on with their next console, the Switch, and learn from their mistakes via network effects.