The Razor and Blade Business Model in Gaming

The Model

Strange things happen when you start studying marketing in, say, 2003 and continue to toil in academia until, say, 2009. The entire world can soon be broken into a series of models, acronyms, buzzwords, and lingo (which is incidentally a really fun game show). Business school and the MBA experience has only kicked this into high gear and prompted the realization that video game console peripherals are a perfect example of the famous "razor and blade" business model. This model is based on any business that sells a relatively inexpensive host item (the razor) which requires additional, continually revenue-generating items (the blades).


I have isolated the following peripherals according to their success in proposing an innovative marketing message and their ability to deliver on this proposition. Some have been revolutionary while some have been unmitigated disasters. The peripheral industry now generates over $600 million and would never have been possible without these successes and failures.

The Worst

Robotic Operating Buddy (R.O.B.)

One of the original pack-in accessories, R.O.B. has been widely recognized as a "Trojan Horse" allowing Nintendo to capture consumers' imaginations and driving purchase of their first console, the Nintendo Entertainment System (NES). However, supported by only two games (Gyromite and Stack-Up), R.O.B. was a complete functional failure. This Buddy only moves its arms left to right, up and down, and can be completely neglected in favor of the much simpler NES controller. This example specifically illustrates the importance of message and delivery in tandem--and the failure that can result from either component's absence.



Power Glove
Many industry observers credit Nintendo and the NES with saving the video gaming industry from total collapse in the early 1980's--deservedly so--but I would propose that the Power Glove had nothing to do with its success. Nintendo again garnered a great deal of attention thanks to an early example of product placement in The Wizard (available on Laserdisc) but could not deliver on overextended promises. As with R.O.B., the peripheral was more frustrating than useful and users commonly resorted to removing the glove and using the buttons in regular controller configuration. Some suspect this set the stage for the Wiimote--which I sincerely doubt--but it was nevertheless a failure in its own time.


Sega Activator

The Sega Activator is a train-wreck. This peripheral was again ahead of its time in attempting to implement motion control--keyword: attempting. Sega failed to deliver a clear value added message for the consumer or for its game developers, who only delivered three supported titles: Eternal Champions, Mortal Kombat, and Comix Zone.

Each of these "worst" examples have issues in common: poor marketing communication and almost nonexistent business-to-business promotion. As evidenced by the following examples, proper development and delivery of peripherals can lead to greater revenues, stronger brand loyalty, and better developed barriers to competitive entry.

The Best

Rumble Pak

Successful peripherals drive long-term revenue in a variety of ways--a feat the Rumble Pak accomplished by differentiating the Nintendo 64 (N64) in a crowded, competitive console environment. Released in 1997, this bulky accessory allowed games to send force feedback through the N64 controller and add a new sensation to intense gameplay events. The concept was so well received that it became an industry standard in only one hardware generation.

The Guitar Hero Guitars

Originally developed by Red Octane, a specialty controller design company, Guitar Hero has become a phenomenon. Without any capability for a massive initial marketing push, Red Octane and developer partner Harmonix pulled consumers in with word-of-mouth and favorable publicity and reviews. Major retailers began to have trouble keeping the item in stock and Red Octane was soon acquired by gaming powerhouse Activision. Since its inception, the Guitar Hero franchise has generated well over $1.6 billion with Guitar Hero III: Legends of Rock setting a record as the first title to generate over $1 billion in sales.

Wii Balance Board

The Wii Balance Board is an example of Nintendo's continued dominance of the modern console generation. This non-gaming peripheral is included as a pack-in with Wii Fit, a fitness "game" that includes exercise routines for aerobics, yoga, strength training, and cardiovascular health. Nintendo has also communicated its value to game developers which resulted in Wii Ski and the hilarious Rayman Raving Rabbids TV Party in which one game can be played while sitting on the Balance Board. The Wii Fit-Balance Board package also retails for a cash-cow $90 and has generated over $1 billion with over 2 million in unit sales. This package has also defied the industry sales model in that its sales have accelerated since its release.

The Wrap-up

Nintendo and Sega have been on both sides of the peripheral gamble and have experienced successes and failures in balance. Sega no longer competes in the console-accessory (see: razor-blade) market and has left the mantle to Nintendo. The Wii has been a runaway success but has also had its own questionable peripherals (see: Wii Zapper). The Balance Board is an incredible example of using accessories to generate demand in entirely untapped consumer segments while expanding the total consumer base.

Third party manufacturers now also see increasing value and have begun to create innovative solutions such as the Nerf-N-Strike blaster, a traditional Nerf gun that can also hold a Wiimote and comes packaged with a simple video game. The future for Nintendo and its partners is in radical peripheral innovation. In order to achieve the highest level of success and adoption, Nintendo, Sony, and Microsoft must develop new peripheral experiences and effectively communicate the value of these new tools.