Design lessons from the Nintendo Wii

"Every time we ship product to the market, whether it's in Japan or here in the U.S. or in Europe, it sells out in a matter of days.... If you see one, buy it. Don't assume that you can come back later and find one." --George Harrison, SVP of marketing and corporate communications, Nintendo of America, quoted by Reuters

For a marketing guy, Nirvana is when the world gives you permission to say something utterly outrageous, without anyone questioning it or even believing that it's marketing. Nintendo reached Nirvana two weeks ago.

Coincidentally, that's also when I wandered into the local Wal-Mart, on the off chance that they might have a Wii in stock. I had been looking for one for eight months, ever since my wife shocked me by telling me that she wanted a Wii for Christmas. (This from a woman who has traditionally had about as much interest in video games as I have in quilting. Her only explanation: "It looks like fun.")

Anyway, I walked into Wal-Mart, and sure enough, there was a single Wii box locked into the glass display case. Did I follow Mr. Harrison's "advice," and buy it on the spot? You bet I did, especially after the clerk told me someone else had called the store and tried to reserve my Wii. Tough luck, buddy. Wal-Mart doesn't do reservations. Try Toys-R-Us.

So I bring the Wii home, and now I find that I'm going through stages in my feelings about it, much like the Kubler-Ross model of the stages people go through when confronting grief (link). The stages of grief are denial, anger, bargaining, depression, and acceptance. The stages of Wii (so far) are delight, disgust, and anticipation. I have no idea what'll come next.

The delight stage was all about discovering the controller. There has been plenty written about the Wii's wireless, motion-sensing controllers, but until you actually play with them it's hard to understand how much fun they can be. I set up the system after everyone else was asleep, feeling that it was my responsibility to do some thorough testing that night, so there would be no risk of the family being disappointed if the system didn't work properly.

The first thing I tried was the Wii's tennis game, which was astonishingly easy, and fun. You just swing the "racket" at the right time, and you'll hit the ball. The controller has a vibrator in it, so you feel a little jump when you make contact. But the best feature is that there's a speaker in the controller too, so when you hit the ball you hear the familiar pock sound from your hand, rather than the television. I didn't notice the speaker when I set up the Wii. The first few times I hit the ball, I kept wondering how Nintento had manipulated the TV's stereo to make it seem like the sound was coming from my hand.

The tennis game's graphics are embarrassingly bad (it's like playing tennis against a salt shaker with a head on it), but the gameplay was so fluid and immediately rewarding that I didn't care.

Great new technology products give you a rush, a feeling of empowerment as you realize that you can now do things you simply couldn't do before. The first time I used a Macintosh was all about that. HyperCard was the same. And WordPress came pretty close. The Wii fits in that company because it opens up a whole new paradigm of gaming.

After testing the tennis game tennis thoroughly, my arm started to tighten up, so I decided to try some different games. That was when I entered the second phase of Wii discovery...

Complete disgust. There have been plenty of press reports about people accidentally throwing the Wii's controller through a window when they got too enthusiastic, but I may be the first person who almost did it intentionally. In contrast to the tennis game, some of the Wii's games are infuriatingly bad. The Wii's golf game is ridiculously difficult to control -- I couldn't even get my golfer to point in the right direction, let alone control a shot accurately. Fortunately, the game requires you to give up on a hole after 20 shots; otherwise, I might still be playing. Even a simple whack-a-mole simulation became an exercise in frustration as I tried in vain to position the hammer on the screen.

The common denominator of these games is bad use of the controller. The golf game has several modes, in which you choose direction for a shot, elevation, and so on. The controller's just not accurate enough to make it work. In Whack-a-Mole, the problem is that you're supposed to move the controller like the tip of a joystick -- forward, backward, left, right -- like the slider on a Ouija board. That's OK on a table, but when you're holding the controller in midair your arm gets tired really quickly. Human arms aren't designed to move like that on an ongoing basis.

The ironic thing is that those games actually work pretty well on a traditional joystick.

There's a lesson here about the strengths and weaknesses of integrated systems design. The controller on its own would not have been successful -- it's terrible for controlling traditional games. But the games on their own would also have failed -- bowling was one of the worst games on the Nintendo GameCube, but it's one of the best on the Wii. To get a breakthrough, you have to design the hardware and software together as an integrated system.

But that same integration also presents a lot of challenges to game designers. The Wii requires a thorough rethink of how a game is structured and what you can do with it. You can't just take an existing game, port it directly, and expect it to work well. At a minimum, the whole interface has to be rethought. But really what we should be doing is rethinking what sorts of things you can do in a game. What about a game in which you draw images on the screen using the controller, or conduct an orchestra? I don't know if either of those would be entertaining, but it's the sort of stuff we should be thinking about.

Which brings me to the third stage of Wii discovery...

Anticipation. I have one word for you: lightsaber. Like every boy who grew up watching the Star Wars movies, I've always had a secret desire to play with a lightsaber. Not one of those plastic things they sell at Toys-R-Us, I'm talking about a real lightsaber that makes that buzzing noise and can cut through steel like butter. I'm not sure what I'd use it for -- it seems a bit like overkill for tree pruning -- but I know I want one.

With the Wii, we finally have a device that can make it happen, at least in simulation. Supposedly there's a Lego Star Wars game on the way for the Wii, which will let you control your lightsaber directly. I am both impatient to get it and dreading it. The dread comes because this is a port of an existing game rather than a redesign. Some reports say you won't really have full control over your lightsaber (link).

The disappointment could be crushing, so I'll have to test it before I let the family try it. To protect them.

One thing's for sure -- if it works, my wife's not going to be wasting the Wii on tennis anymore.

Mobile video: Is there a there there?

[Reposted due to a correction. Sorry if you get this twice on your feed.]

I recently I spent a couple of days at the Global Mobility Roundtable, an annual conference that brings together mobile-related academics and a selection of people from the mobile industry. This year's conference was in Los Angeles, so it also drew a number of attendees and speakers from the major entertainment firms. It turned into a kind of a mobile meets entertainment event, and the results were interesting. Mostly, they underlined how far we still need to go in bridging the gaps between the tech industry, mobile, and entertainment.

There's a lot of information to cover, so I'm breaking this post into two parts: mobile video in this part, and in part two the status of mobile data in general and the relationship between Hollywood and the operators.


Is there a pony in the stable? If so, it's a very small pony.*

There was a lot of disagreement about whether mobile video will take off, which may be just as well because the economics of it are seriously dodgy. It's not certain that users really want it, no one knows whether the revenue will come from sponsors or from user fees, and even if video does take off, it's not at all clear that the mobile operators can deliver it without bankrupting themselves.

Other than that, the prospects look great.

One panelist compared the situation in mobile video to a company running a health club: they want to sell a lot of memberships, but they don't want anyone to actually use the facility.

The information below is drawn from a series of different sessions I attended. I've mashed them together so I could organize the information by topic. All quotes are as accurate as I could make them. They are definitely correct as to message, but I probably missed a few words here and there.


Who wants mobile video? A segment of the market.

There are plenty of people in the industry who are enthusiastic about mobile video. One presenter quoted Rob Hyatt, executive director of mobile content at Cingular, as saying, "Watching video on cell phones could eventually easily surpass [demand for games, ringtones, and wallpapers], to reach 100% of the population." That's pretty remarkable, since even SMS doesn't reach 100% of the mobile population yet. (You can find the original quote from BusinessWeek here).

Telephia, a mobile industry research firm, reported that revenue from mobile video is growing rapidly, from $35m in Q3 2006 to $146m in Q1 2007. In that same period, the number of mobile subscribers in the US using video services grew from 5.7 million to 8.4 million (for comparison, there are 77 million MMS users and 148 million SMS users). The Telephia numbers imply that revenue per video user has grown from $2 per month to $5.80. Unfortunately, they didn't give any details on which particular services are growing.

The base is still very small, so it's dangerous to extrapolate from those numbers. But they're definitely hopeful. A number of other speakers were much less optimistic, though.

At the conference, USC presented the results of the sixth annual Worldwide Mobile Data Services study. It showed that about 30% of 18-24 year olds and 20% of 25-34 year olds in the US felt that video downloads to mobiles were an important feature, about the same percentage as wanted games on their mobiles. That's nice, but not the universal usage that Cingular talked about.

Sanjay Pothen, CEO of Pliq (a mobile video production company), claimed that 44% of mobile users are interested in mobile video -- but only 4% are willing to pay for it. That's the typical pattern for mobile data features -- most people don't want them if they have to pay anything for them.

Frank Chindamo, CEO of Fun Little Movies, which produces short video for Sprint, asked the audience how many people in the audience had Sprint phones. About five people raised their hands. "If you all subscribe, that will double our revenue for next month," he joked. [For the record, Frank asked me to make clear that he was only joking; he says he's actually quite happy with the Sprint relationship.]

Is the glass half full or half empty? As I've said before, I think there's abundant evidence that the market for all mobile data products is highly segmented, and we need to learn to make money from products that appeal to ten or fifteen percent of the users. I heard nothing at the conference to change that view.

But overall demand for mobile video is just the beginning of the story...


What sort of video will people watch on mobiles?

This one is still very much undecided. The usual assumption is that because short video is popular on the Web, it'll also be popular on mobiles. For example, Funny Little Movies is creating original short animated films for mobiles. (The place is run by a USC film professor who has his students create a lot of the content.)

Pothen of Pliq said the ideal sort of video for mobile is neither short individual clips (like YouTube) or long-form video (like a TV show), but chunked content -- an engaging story told in two-minute segments. He said excerpts from reality shows can work well -- highlights from America Idol, for instance. But original content seems to be his main target: soap operas, telenovelas, and cooking for young women, comedies and dramas for young men. The goal is to get people hooked by an ongoing story so they'll keep coming back to watch every segment.

Derek Brose, SVP of business development for Paramount Digital, was also excited about short video. He said the company is cutting all its movies into clips of different lengths, for various mobile usages. Two second clips -- something like Harrison Ford saying, "trust me" -- are for embedding in an MMS message. Twenty second clips are for use in ringtones. Two minute clips are for streaming your favorite scene from a movie. Paramount's goal is to teach consumers a variety of different things that they can do with mobile video.

But some people were skeptical about the prospects for short video on mobiles. Bill Sanders, VP of mobile programming at Sony Pictures, said that in Japan people are watching broadcast TV shows on their mobiles rather than short video streamed over 3G. He said 3G in Japan is great for certain kinds of applications, such as e-wallet. But he said data is priced so high that streaming video barely exists on 3G at all.

"The only thing you find in 3G is porn, because it's the only form of video where people will pay $10 for three minutes of content." --Bill Sanders, Sony

USC's mobile survey also strongly implied that the biggest demand is for broadcast TV. More than 40% of users said they thought that was the most interesting type of video for a mobile, compared to about 20% for short video.

David Tilson of Case Western University supported that view. He said that in a UK test of DVB-H (a broadcast video standard for mobiles), users watched three hours a week of television on their mobiles, with viewing concentrated in the lunch break and commute hours. That's very intriguing, because it implies that mobile video might add new television viewers at times when people don't usually watch TV. Unfortunately, the users were not charged anything in the test, so it's very hard to tell how much usage mobile TV would get if operators started charging for it.

I have no clue what the answer is on this question. People may say they prefer broadcast television just because that's what they're used to. Their actual purchase behavior might be very different. I think price will make a huge difference in adoption, which brings us to the next subject...


Who will pay for mobile video?

You've got two choices -- users pay, or advertisers pay. There are good arguments on both sides.

Sanjay Pothen of Pliq made an interesting case for having the advertisers pay. Since his company is involved in that business, his argument was not a surprise, but it was still interesting.

Pothen claims that neither paid nor ad-supported video are taking off today in the mobile world. As I noted above, he said few users are willing to pay for video, which stops the user-funded scenario right there. But ad-supported video is also problematic on both PCs and mobiles because users are not very tolerant of watching even a short commercial in order to see a two minute video. So what Pliq does is build the sponsor into the video itself, through placement and other promotion within the video.

Pothen said advertisers are willing to pay significant sponsorship fees for these videos. He wouldn't go into details on his financials, but someone I talked to privately said the revenue can be dollars per viewer for a three-minute video. That's impressive, and far more than you could charge a viewer for a few minutes of video.

Unfortunately, Pothen said, the operators want to take 50% of the revenue from these videos. He said that's not acceptable, that the revenue split should be more like 20% of revenue to the operator. "If we work in collaboration and the walled garden is down, we're willing to create original content (for mobiles)....We can drive mass adoption." But he said that won't happen in the current revenue situation.

My take: I don't think it has to be one or the other. Apple's selling a lot of video downloads to iPods, and that won't just dry up. But I think it's going to be very hard to make paid downloads the leading mobile video product, because they'll be competing with free video from places like YouTube, and because ad-supported TV teaches people to expect their television for free. Besides, if advertisers really are willing to pay dollars per viewer, there's no need to make people pay.

The revenue split is an ongoing problem in every mobile data category. There's no immediate solution, at least in the US. I think we're stuck in a chicken and egg situation in which the revenue split discourages the kind of programming investment that might drive a lot of usage, thereby justifying a more generous split.

That may be just as well, though, because video might break the mobile networks if it did take off.


Can mobile video be delivered?

This was the most disturbing topic of all. Even if we can find the right users, the right product, and the right pricing scheme, most of today's 3G networks are not well suited to delivering video.

Tilson of Case Western quoted some very sobering statistics on the economics of mobile video. He said one megabyte of data delivered as SMS messages yields £268 of revenue to an operator in the UK. That same megabyte delivered as video yields 20 pence of revenue, roughly 1/1000 the revenue. Of course, a single user of video is much more likely to consume a meg of data than is an SMS user, so the billing per user might still be fairly good. But video quickly exceeds the capacity of a typical 3G data network. He said no more than six viewers per cell can watch video at one time, and if 40% of users on a typical 3G system watched six minutes of video a day, they would saturate the entire network.

Hardly the basis for achieving Cingular's dream of 100% viewership.

Some of the operators at the conference confirmed this perspective. Francois Thenoz, Director of Strategic Marketing at Orange, said it takes seven minutes to download a 60-90 second video clip on a standard 3G network. 3G "evolved" takes 90 seconds (so you can just about stream in real time). The CDMA 1X network I use to connect my notebook PC is a lot faster, but GSM is the standard for most of the world, so his point was that in most places the wireless network simply isn't ready for video.

Higher-capacity networks are in development, of course. But Tilson said that in the UK, spectrum for a DVB-H wireless video system won't be available until 2102 at the earliest. That implies that for the next five years, mobile video in the UK is more of a science experiment than a serious commercial project.

In the US, the functional equivalent of DVB-H is MediaFlo, which is already deployed in Verizon's VCast system. MediaFlo transmits video one way, using a separate wireless signal, so it gets around the network saturation problems you get in 3G. Similar systems are already being used in Japan and Korea, and reportedly account for most of the mobile video usage there.

A drawback of the broadcast technologies is that they're not streamed on demand. You watch whatever's been programmed at that time. It's like a cable television system, but with far fewer channels. Tilson said one driver of mobile video usage is the availability of a lot of different programming, so limits on the number of channels might eventually restrict usage.

The other challenge for broadcast systems like MediaFlo is that they compete with people using SlingBox or similar products to retransmit their home cable television signals to their mobile devices. "Why get HBO Mobile when you can already get HBO home slinged to your phone?" asked Sanders of Sony. He pointed out that the Three network in the UK is bundling Sling services with its flat-rate 3G service offering.

"Three is like an airline that just bought a bunch of 777s and now they're flying with a bunch of empty seats," replied Brose of Paramount. He claimed that Three has to be betting that video usage will grow slowly enough that faster data networks will be available before the usage of video saturates the network.


The "encoding nightmare"

Then there's the question of standards. Unlike the PC, there aren't one or two video standards for mobiles. Because of the huge array of different screen sizes and software environments, a company that wants to stream video to mobiles supposedly needs to encode it in up to 150 different formats (seriously, that's the figure I was given by a couple of people). An executive I talked to called this the "encoding nightmare." Some companies are starting to offer server appliances that encode the video in real-time from one or a few base formats. But this adds expense to the business model, and real-time encoding is not as high-quality as pre-encoded video, especially if you're trying to compress the video heavily -- which is exactly what operators need to do in order to conserve bandwidth.


What does it all mean?

I think there's a role for mobile video, but considering the limits on user interest, and the huge technical and business challenges, it's not going to be the great horizontal application that drives the mobile data market. At best, it'll be a nice add-on for entertainment-focused users who want video in addition to their MP3s and games.

_______________
*This is a reference to an old joke about a boy who desperately wanted a pony. One day he saw a stable stall full of manure, and began furiously shoveling it out. "What are you doing?" his parents asked. "Well," the boy replied, "with all this manure, I figure there has to be a pony in here somewhere."

How to really piss off a college basketball fan

One of the stranger rituals of American sports is the country's affection for the annual college basketball championship tournament. Why this country is so obsessive about college basketball and football, when every other college sport is completely ignored, is a mystery that the nation's greatest sociologists and standup comedians have never been able to explain.

But there it is. If your alma mater's basketball team is participating in "March Madness," as we call it, it's mandatory to watch the games on TV. Unless, of course, you have to take your son to a futsal game.

Futsal is a separate story in itself, basically the bastard spawn of soccer (what the rest of the world calls football) and basketball. In the US it's about a million times more obscure than college basketball, but my son likes it and his team had a game scheduled for the exact same time as my college was playing in the tournament. So I did the dad thing and drove him to the game.

But I also did the Silicon Valley dad thing and took my notebook computer with me. The high school where the game was played has a fully open WiFi network, and I had registered to receive a live streaming video feed of the basketball tournament from the CBS television network. Finally, a practical use for Web video!

So I sat down in the gymnasium, started up my notebook, logged into the network, went to the CBS website, and selected my team's game. Excitement building, I clicked on "Watch now," waited a few seconds for the feed to buffer, and...



In case you can't read it, the message said I was "prevented from accessing this game due to local blackout restrictions."

Bastards!

Here is the deal, CBS. If I had access to a TV, do you think I'd be trying to watch your crummy, pixelated, low-res, business card sized video feed? The only people interested in watching online video of a sports event are those who have no access to a television. There is absolutely zero chance of cannibalization of the TV station's audience.

Besides, think about it for a minute. Who are the people most likely to want to watch that feed? People in the school's home town who can't get to a TV. But that's exactly where the game is certain to be blacked out. So CBS has created an incredibly elaborate system to systematically tease and frustrate its most enthusiastic customers. You can't see the game you really care about, but you're welcome to watch the games that are meaningless to you.

The word for this, folks, is "perverse."

I know why CBS did the blackout. Its contracts with local broadcast stations prohibit it from streaming games they're airing. CBS had the same problem with last year's tournament -- meaning they have had more than a year to fix this thing, and failed to do so. Instead, CBS and its local stations are once again missing a great chance to build customer loyalty and develop a nice online business.

I did try out an interesting feature that CBS allowed me to access, called a "glog" (I guess that stands for game blog). It's basically written commentary on the game, streamed live. Unfortunately, if you look closely at the first and last comments below, you'll see that the commentary got caught in a loop and repeated endlessly. I was confused when the teams started running the same plays over and over.



This mess is typical of the foolishness that often happens when old line companies try to deal with the Internet. They spend millions setting up an elaborate technological tour de force but neglect to take care of the basics, like letting fans actually watch the games they want to see, and making sure all the features work.

The lesson: The product you deliver through a website isn't a bunch of HTML and Java code, it's a solution to the problem of a user. Unless all of the elements of that solution line up properly, your product is a failure.

I know CBS's online coverage isn't a total waste; some people do get to some games they want. But if you'd like a taste of what CBS is doing to a lot of fans, check out this message board where fans of Georgetown University tried to figure out how to access the online feed. It's pitiful.

As for me, I was reduced to watching the scoreboard thing you see below, and waiting for it to refresh every 15 seconds or so.



A hundred and sixty years of telecommunication progress, and I'm reduced to watching a basketball game by telegraph.

PS: My son's team lost, although he did score a booming goal from beyond halfcourt. He's always wanted to do that.

Mobile gaming in Japan: A different world

From time to time I like to drop in on What Japan Thinks, a website that translates into English an enormous number of market research studies conducted in Japan. That's where I recently came across an astonishing survey conducted earlier this year on mobile game use in Japan.

In the US, game-playing on mobile phones is seen as a fairly popular activity, and I think the view in Europe is similar. But neither place holds a candle to Japan, if you can believe the survey. Here are some highlights:


More than 90% of the people surveyed play video games. That seems like an incredibly high figure, but the survey was conducted by InfoPlant, a reputable Japanese market research firm. The survey base was supposedly users of DoCoMo mobile phones, which sounds a little unconventional but is a fairly representative sample of the overall Japanese population. It's better than surveying PC useres, which is what's typically done in the US. PC usage rates are a lot lower in Japan than in the US, so surveying via mobile phone actually reaches a greater share of the population.

It's surprisingly hard to find directly comparable game-playing statistics for other countries, but the reports I could find implied lower levels of activity:

--A report from the Entertainment Software Association , a trade group, claims that 69% of US "heads of households" play video games.

--Back when I was at Palm, we had access to Forrester Research's excellent consumer tracking surveys. At that time (a couple of years ago), they said 32% of US households had videogame consoles, and 24% had handheld game systems.

--At Palm we also did our own surveys of consumer interest in mobile gaming. We found that about 13% of the population in the US and Europe were mobile entertainment enthusiasts -- people who were willing to pay extra to have an entertainment device with them when they were on the go. We never ran the survey in Japan, and now I wish we had.

The InfoPlant survey figure appears to indicate that there's a much higher percentage of gaming enthusiasts in Japan than we have in the US and Europe. That fits the stereotype of gaming in Japan, but I always question stereotypes like that unless they've been tested objectively.


At least three-quarters of the people surveyed play games on mobile devices. Mobile phones are the devices most often used for game-playing, but about half of the respondents said they also own a dedicated mobile gaming device like a Gameboy (about double the ownership rate Forrester found in the US). Half of those users, a quarter of the Japanese population, said they use their game devices frequently.

Here's the breakdown of gaming device usage by sex (numbers total to more than 100 because many people play games on more than one type of device). Game usage on mobile phones and portables was a little more popular among women, while console gaming was more popular among men.

On what kind of machine do you usually play games?



Women prefer Nintendo. There are some interesting differences between men and women in what brand of mobile gaming device they use. The women were a bit more likely to use Nintendo products, while the men were more likley to have Sony PSPs.

Select all the portable game machines you own.


In case you're wondering what a Wonder Swan is, it's a mobile game system sold by Bandai in Japan.


Most people use mobile game devices at home, not in transit. This is a great example of why I distrust stereotypes. The stereotype of Japanese mobile gaming is that most people would do it on trains, while they slog through their commutes on those endless subways beneath Tokyo.

The survey confirmed that some people genuinely do use mobile games in transit, but the most common usage of a mobile game platform is at home. I guess the pattern would be to come home, stretch out on the futon, and play a little Pokemon:

Where do you usually play on your mobile device?


I wish we knew more about why people would use a mobile game system so heavily at home. Is the TV being used for other purposes? Or in a relatively small Japanese home, does the portable game system just fit in better?


Old folks dig the DS. The greatest surprise to me was a finding that Nintendo DS ownership is vastly higher among older people than young people. The chart below shows the percent of people in each age group who own Nintendo DS systems:

Percent of respondents in each age group who own a DS:


What Japan Thinks attributes this to Brain Age and other "brain training" games for the DS that are supposed to protect against mental decline as you age. Apparently this is driving vast usage of the DS by older Japanese people.

It's a fascinating difference from the US, where the DS is generally seen as a kids device, at least for now.


What it all means

As I noted earlier, without knowing more about the study's methodology, it's hard to say how much we should trust it. But even if some of the numbers are off by a bit, I think they teach a couple of good lessons:


Convergence doesn't necessarily destroy specialized products. Mobile gaming is heavily deployed on Japanese mobile phones, and yet standalone mobile game devices continue to sell well. Why? I think it's because the mobile consoles do things that the game-equipped phones can't. Convergence kills markets only when the converged product is a complete and affordable replacement for the dedicated one. That's very important to keep in mind when you read the forecasts saying things like, "cameraphones will destroy sales of digital cameras." That will happen only to the extent that cameraphones have all the same features as standalone digital cameras. If the camera vendors keep innovating, I think they can survive indefinitely.


Don't assume a market's boundaries are fixed. The standard assumption in the industry has been that mobile gaming is primarily a kids and young adults thing, with GameBoy + Pokemon being the prototypical example. Even the PSP, which shoots for a more mature audience than GameBoy, is still aimed at hardcore gamers. But Nintendo has been very up-front about aiming both the DS and the new Wii console at mainstream adults. That strategy has apparently been very successful for the DS in Japan, and you can read an update on Nintendo's Wii marketing plan, targeting soccer moms, here.

(I first started believing that Nintendo's Wii strategy might work when my wife abruptly told me she wanted one for this Christmas. She said it's a great way to get exercise if you don't want to go through the hassle of traveling to a tennis court. About half of her friends agree and also want Wiis. This from women who have never shown serious interest in a game console before, and who barely even know what an Xbox is. Remarkable.)

It's very common for tech companies to assume that the people who make up a market today will always be the core of the market in the future. But that's like driving a car by staring at the rear-view mirror; you can only see where you've been.

Looking ahead and growing a market is a lot harder to do, but it's one of the most effective ways to fight a larger competitor who's invading your turf. If the other guy has a volume or resource advantage, the worst thing you can do is stand still and let them spend you into the ground. Change the rules of the competition by innovating in unpredictable ways, or by growing the market in a new direction. That turns the biggest advantage of a large corporation, its scale, into a disadvantage. The larger a company is, the slower it reacts, and the more its internal politics will interfere. If you change the rules frequently enough, the big guys will never be able to get their cannons fully aimed at you.

That's what Nintendo is doing in its fight with Microsoft and Sony. There's no guarantee it'll work, but I admire Nintendo's vision and courage.

Hollywood's view of the Web: Through a glass, strangely

The LA Times is a wonderful place to watch the entertainment industry try to figure out the Internet. Some issues that aren't a big deal in Silicon Valley fascinate them endlessly, while other things that Silicon Valley thinks are important are completely ignored.

A great example of this process is the newspaper's recap of 2006 on the Web, "Ten moments the web shook the world."

"This was the year wishful thinking -- that this Internet phenomenon might just go away -- evaporated, and those media companies still standing began to seek anything that might see them through the deluge."

So what made up the deluge, according to the Times? Some highlights:

Snakes on a Plane is described as the first time that the Web took control of the production of a movie. Most folks in the blogosphere viewed Snakes as a cool example of participatory marketing, but if you view it through the eyes of a Hollywood producer, it's a threat to power.

LonelyGirl15. This mysterious personality on MySpace was the subject of endless coverage and speculation in the Times throughout the summer. They analyzed it with the same intensity that many websites reserved for Britney Spears' underwear. I think the idea of someone using the Web to launch an acting career blew their minds.

The rise of celebrity websites. The Times viewed this as the year in which celebrity-focused websites first started to drive (read: debase) the standards of what constitutes a celebrity. People like Paris Hilton (and our gal Britney) proved to be willing to do just about anything to get a little online attention.

The common theme in all of these cases is the loss of power by parts of the traditional entertainment industry: producers, agents, and journalists. For years the Web has been eating away at power structures in lots of industries, but this was apparently the year in which Hollywood first really felt the impact.

The Times asks: "As traditional media interact with new media and vice versa, whose values will infect whom? Will old media arrive like the cavalry on the scene, Good Book in hand, to lift up the Web rabble with the promise of Bedrock Standards and High Production Values? Or when the drawbridge is lowered just a little bit, will the masses simply storm the castle and repaint it electric blue and pink?"

That's easy to answer. I heard the same questions almost 20 years ago when desktop publishing started to challenge the printing industry. The answer is that you'll get both -- the high-standard material will coexist side by side with amateur hour. People will prove to be very accepting of poor production values if the material is compelling in some other way (YouTube already demonstrates this, where we cheerfully watch video of such poor quality that you'd call the cable company and complain if it came over your TV).

There will always be a market for the best productions, but in the future I think it'll be much harder to get away with charging high-quality production prices for shows or movies that aren't truly entertaining, because people will have a cheap alternative. The threat isn't to HBO, it's to the CW.