Nintendo: The Console Wars

**David Rosenthal** (0:00)
I feel like I got to warm up physically before acquired episodes these days. It's like a marathon.

**Ben Gilbert** (0:06)
My back does start to hurt by the end from just standing still the whole time.

**David Rosenthal** (0:09)
Oh, me too, me too.

**Ben Gilbert** (0:11)
I've actually stopped working out mornings before we record because I don't want to be too tired. Like I need my stamina.

**David Rosenthal** (0:17)
Yeah. We should figure out like recording on the Peloton or something.

**Ben Gilbert** (0:22)
That'd be a breathy.

**David Rosenthal** (0:27)
Is it you?

**Ben Gilbert** (0:40)
welcome to season 12, episode 4 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert.

**David Rosenthal** (0:49)
I'm David Rosenthal.

**Ben Gilbert** (0:50)
And we are your hosts. We last left our Nintendo Heroes in 1990, when they single-handedly revived the video game industry and captured 95% of the market share globally. We did our seven powers analysis and determined the company had a better competitive position than basically any company in history, and the game was theirs to lose. But somehow they did just that.

**David Rosenthal** (1:15)
Indeed, they did. And then they won, and then they lost, and then they won, and then they lost, and then they won again.

**Ben Gilbert** (1:23)
Exactly. Today's story will be about the fall and how Nintendo managed to blow a ten-run lead in the bottom of the ninth. But like all great heroes, when faced with foes like Sega, Sony, Microsoft, and eventually even Apple, Nintendo's creativity and cleverness has kept them a major player and certainly the most unique player in the video game landscape today. So David, as you mentioned, this is a weird story for us. Usually, the narrative on Acquired goes something like, revenues kept climbing every year and now they're making more money than they ever had before. But with Nintendo, it's been a very cyclical road and they actually lost money in long periods of time, like 2011 to 2018, and their greatest strengths and their greatest weaknesses all the way through. So on the eve of the release of the Chris Pratt movie, Super Mario Brothers, we tell Nintendo's part two story today from the console wars of the 90s forward.
Well, before we get into it, we want to let you know about the latest over at ACQ2, which you can search in any podcast player. It's got some great episodes. The next one to drop will be with the CEO of Retool, David Hsu. He's a super contrarian founder and really interesting to just hear his take on startup wisdom generally. We've also gotten lots of emails from folks saying, you really love the StatSig episode with Vijay Raji. So that is a great one to check out too. There's also the Slack. The Slack community has become a critical research tool for David and I since so many of you have insights and real work experience in the areas that we are covering. If you are not in the Slack yet, that is definitely where the best discussion is happening on top of what we were able to learn before we recorded an episode, kind of about it all afterwards. So that is acquired.fm slash Slack. And David, without further ado, please take us in. And listeners, as always, this is not investment advice. David and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes only.

**David Rosenthal** (3:17)
It'll be very fun at the end of the episode to talk about whether we think Nintendo is a good stock to own at this point in time or not here in 2023 But before we talk about all that, we first need to talk about one more giant success from Nintendo in the 1980s, a very small giant success that we intentionally left off in the last episode because it's going to be very, very important here in part two. And that is, of course, the Game Boy.

**Ben Gilbert** (3:49)
Yes.

**David Rosenthal** (3:51)
So we talked last time all about Gunpei Yukoi, Nintendo's effectively chief engineer and his genius behind building everything from the Ultra Hand to the light gun shooting range to mentoring Shigeru Miyamoto and everything he did for Nintendo. One of his first early successes that we kind of glossed over last time was the game and watch business. Now, these were portable, dedicated, handheld video game systems, meaning by dedicated, each piece of hardware only played one game. There was a Donkey Kong game and watch. There was a Mario game and watch. There was a Zelda game and watch, even, of course, a Mickey Mouse game and watch.