The secret to Nintendo's success (Encore)

Summary

The Indicator from Planet Money

Episode: The Secret to Nintendo's Success (Encore)

Date: December 26, 2025
Hosts: Adrian Ma, Mia Waylon Wong
Guests: Jost von Droinen (NYU professor), Jamal Michel (video game journalist)

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Episode Overview

This episode explores how Nintendo, once a small Japanese toy company, became a global powerhouse in gaming and entertainment—not by chasing the latest technology, but by deliberately taking a different approach from rivals. The hosts and their guests unpack Nintendo’s counterintuitive business strategies, its role in rescuing the video game industry from collapse, and the enduring culture that defines Nintendo’s brand.

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Key Discussion Points & Insights

1. Nintendo’s History: From Playing Cards to Consoles

• Origin Story:
  • Nintendo started in 1889 by making hanafuda (Japanese playing cards), and decades later, expanded into toys.
    • [03:18] Adrian Ma: “The story of Nintendo begins long before the invention of video games. In 1889… started making these things called hanafuda cards…”
• Transition to Video Games:
  • By the 1970s, Nintendo moved into electronic toys, just as the US gaming industry started to take off with the advent of arcade and then home consoles.

2. The Video Game Crash

• Market Saturation:
  • The early '80s saw a flood of home consoles, with many subpar games eroding consumer trust.
    • [04:31] Jost von Droinen: “You just have a host of manufacturers all creating their own version of what they think is a home console.”
• Collapse:
  • By 1983, the industry crashed. Spending dropped by 90%, dozens of companies exited, and video games were seen as a fad.
    • [05:20] Jost von Droinen: “...this collapse in consumer demand and revenue. And therefore, of course, it cascades throughout the ecosystem.”

3. Nintendo’s Risky Entry & Unique Strategy

• Entering a Burned Market:
  • In 1985, Nintendo entered the US with the NES when others avoided the industry.
    • [06:04] Jost von Droinen: “When Nintendo came to the US people thought they were nuts…Why would you run towards a burning building…?”
• Three-Pronged Approach:
  • Retailers paid only when consoles sold (reducing risk)
  • Strict quality control over games (“high bar” for what was sold)
  • Focused on fun and user-friendly experiences, with support infrastructure (magazines, clubs, hotlines)
    • [06:17] Mia Waylon Wong: “...Nintendo had a plan. It entered the US with a three pronged business strategy...”
    • [06:47] Jost von Droinen: “We're gonna have magazines around this, there's gonna be a Nintendo club around this. There's gonna be a hotline...”
• Product-Market Fit:
  • Unlike its collapsed competitors, Nintendo met actual consumer desires, reviving the industry.
    • [07:31] Adrian Ma: “Yost says Nintendo's NES found product market fit...If Nintendo hadn't succeeded like it did, some argue, the video game industry as we know it today might not exist.”

4. Nintendo’s Philosophy: Not Chasing the Cutting Edge

• Competing Differently:
  • Nintendo avoids competing directly on tech specs. Instead, it innovates using what designer Gunpei Yokoi called “lateral thinking with withered technology.”
    • [08:10] Jost von Droinen: “Nintendo has never been one to compete on technology...It's always really lean into limitations of technology.”
    • [08:22] Mia Waylon Wong: “Gompei Yokoi called this philosophy lateral thinking with withered technology...”
• Iconic Example – The Wii:
  • Released in 2006, the Wii used old infrared technology, yet became a massive hit by making gaming accessible and fun for all ages.
    • [09:13] Jost von Droinen: “I used to get my ass handed to me in Wii Tennis by my mother-in-law. But they managed to take a low tech approach and make it fun for a broad range of players.”
    • Lower costs meant a lower retail price and a broader audience.
      [09:27] Mia Waylon Wong: “...this lower tech approach meant Nintendo could manufacture consoles for less and sell them for a lower price.”

5. A Brand Beyond Hardware—Nintendo as Culture

• The ‘Cheap and Cheerful’ Ethos:
  • Nintendo distinguishes itself through approachability and charm, not specs.
    • [09:49] Jamal Michel: “Without saying it, Nintendo is selling a culture.”
• Aesthetic & Experience:
  • Nintendo is likened to the “Wes Anderson” of gaming: cozy, distinct, and not always about competition or high intensity.
    • [10:01] Jamal Michel: “The best sort of analog or comparison I could draw…for the Xbox. I think of Michael Bay… Nintendo. I think…the most appropriate is definitely Wes Anderson from the aesthetic and the softness.”
    • [10:24] Jamal Michel: “...the cozy vibe Nintendo leans into. I don't want to constantly have to be in a fight. And so Nintendo lets me just chill out.”
• Summary Insight:
  • [10:33] Mia Waylon Wong: “I think this whole episode could be summed up as like the business case for coziness.”
  • [10:37] Adrian Ma: “I love that. And you know what? I hope Chicken Dog is feeling real cozy.”

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Notable Quotes & Memorable Moments

• On Entering the US Market Post-Crash:
  • [06:04] Jost von Droinen: “Like this was the most counterintuitive thing to do from a business strategy perspective. Why would you run towards a burning building…?”
• On Community and Support:
  • [06:47] Jost von Droinen: “...There's gonna be a hotline that you can call if you're stuck so that you don't feel like you just spent 30, 40, 60 bucks of your money and you're off on your own...”
• On Product-Market Fit:
  • [07:31] Adrian Ma: “Yost says Nintendo's NES found product market fit...”
• On “Withered Technology”:
  • [08:22] Mia Waylon Wong: “...lateral thinking with withered technology. Which sounds a little funky, but a good example... is the Nintendo Wii.”

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Timestamps for Important Segments

• [03:18] – Nintendo’s origin and early years
• [04:20-05:27] – The video game industry crash, causes, and fallout
• [06:04] – Nintendo’s counterintuitive entry to the US market
• [06:17-06:47] – Detailing Nintendo’s three-pronged business strategy
• [07:14] – NES’s success and market impact
• [08:10-08:22] – Nintendo’s technology philosophy (“lateral thinking with withered technology”)
• [09:00-09:27] – The Wii example: family-friendliness and approachable design
• [09:49-10:24] – Nintendo sells a culture and aesthetic, like a “Wes Anderson” film

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Conclusion

Nintendo’s rise wasn’t about being the most technologically advanced, but about creating accessible, charming, and enjoyable experiences. Their steadfast commitment to fun, community, and affordability has allowed them to thrive for over a century—transforming not only their fortunes, but reshaping the global video game landscape.

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Memorable Episode Tagline:
[10:33] Mia Waylon Wong: “The business case for coziness.”
[10:37] Adrian Ma: “I love that. And you know what? I hope Chicken Dog is feeling real cozy.”

Transcript

[Adrian Ma]

Hey everyone, hope you're having a great holiday break. For the next week, we are running some of our favorite shows from this year. Today's episode is about how Nintendo became a gaming juggernaut.

[Jost von Droinen]

NPR.

[Mia Waylon Wong]

In the world of consumer electronics, being number one is is usually an advantage. Like if your product has the newest tech, the most features, the fastest processors, chances are people will line up to buy it.

[Adrian Ma]

Sometimes, though, it pays not to be number one. Take Nintendo. Earlier this month, it released its latest console, the Switch 2. Now, as a piece of video game machinery, the new Switch is nowhere near as powerful as its competitors like the Sony PlayStation or the Microsoft Xbox. And yet, when the Switch 2 was released a little over a week ago.

[Announcer]

3, 2, 1, go.

[Adrian Ma]

Gamers in New York camped out on the sidewalk outside a Nintendo store for hours just to snag one.

[Mia Waylon Wong]

She's been here since 12:30.

[Adrian Ma]

Oh my God, so much longer than I thought.

[Mia Waylon Wong]

I've been here for now 18 days and me and my buddy Chris and or Chicken Dog have been planning this for two years. Chicken Dog is such a great name. Anyway, despite the hype around this new product, today's episode is not about the Switch 2 because we think that the story of Nintendo itself is a lot more interesting. This is the indicator for Planet Money.

[Adrian Ma]

I'm Adrian Ma and it's a Mia Waylon Wong. Today on the show, the business strategy that transformed Nintendo from a tiny Japanese toy company to a global brand that includes games and movies and even theme parks.

[Mia Waylon Wong]

And how Nintendo reinvented the video game industry by not being number one.

[Sponsor Voice]

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[Adrian Ma]

Learn [e-mail] the story of Nintendo begins long before the invention of video games. In 1889, a guy in Kyoto, Japan named Fusajiro Yamauchi started making these things called hanafuda cards, basically playing cards that were often used for gambling.

[Mia Waylon Wong]

And for several decades, playing cards are Nintendo's whole business. Hanafuda cards, Western style playing cards, Disney themed cards. But by the 60s and 70s, the company also branches out into making kids toys.

[Adrian Ma]

Meanwhile, in the US a new form of entertainment begins to explode in popularity. Video games. At first, you have to go to an arcade to play video games because they're these bulky six foot tall machines. But by the mid-70s, the arcade experience starts to move into the home, with companies creating the first at home video game consoles. One console made by Atari was an especially big hit, selling hundreds of thousands of units in its first year.

[Mia Waylon Wong]

Jost von Droinen is a professor at NYU where he teaches a class on the business of video games. And he says Atari's success caught the attention of other companies who were like, hey, we can do that too.

[Jost von Droinen]

Companies like General Electric that come out with their own devices. You have Emerson Radio, Fairchild, you have Coleco with Colecovision, one of the more famous ones. Bandai comes out, Mattel comes out, RCA has its own device. So you just have a host of manufacturers all creating their own version of what they think is a home console.

[Adrian Ma]

Some of these names like Fairchild or Emerson Radio, you may have never heard of them. And that's because within just a few years, this booming industry would self destruct.

[Mia Waylon Wong]

Yeah, by 1983, the market had become saturated with new consoles and games, a lot of which, according to Yost, were just plain bad. I mean, janky and confusing or frustratingly difficult to play. And eventually consumers just got fed up.

[Jost von Droinen]

And they walk away from it, which leads to this collapse in consumer demand and revenue. And therefore, of course, it cascades throughout the ecosystem.

[Mia Waylon Wong]

In less than a year, consumer spending on video games fell by some 90%. Companies lost hundreds of millions of dollars and laid off employees. And by 1985, it seemed clear that this home video game console was just another passing fad.

[Adrian Ma]

Then came Nintendo. See, Nintendo had been off in Japan developing its own video game devices, which when you think about it, is sort of a natural extension of its toy business. And in October 1985, it brought its latest machine to The United States, a little gray box called the Nintendo Entertainment System, or nes.

[Jost von Droinen]

When Nintendo came to the us people thought they were nuts. Like this was the most counterintuitive thing to do from a business strategy perspective. Why would you run towards a burning building and you know. And that's exactly what they did.

[Mia Waylon Wong]

But Yost says Nintendo had a plan. It entered the US with a three pronged business strategy. One, they told retailers, listen, you don't have to pay us up front, just pay us when you sell a console. Two, they had a high bar for what games they would sell for nes, so only games they thought were really good would make the cut. And three, and this sounds pretty obvious, but they focused really hard on making games fun as opposed to frustrating for users.

[Jost von Droinen]

We're gonna have magazines around this, there's gonna be a Nintendo club around this. There's gonna be a hotline that you can call if you're stuck so that you don't feel like you just spent 30, 40, 60 bucks of your money and you're off on your own and whatever, go figure it out.

[Adrian Ma]

It never occurred to me to call the hotline when I got stuck in Double Dragon. My whole childhood could have been different.

[Mia Waylon Wong]

Just like banging your fist against the wall, throwing the controller at the TV screen.

[Adrian Ma]

Well, this strategy worked. Even if I did not call the hotline, the NES would go on to sell some 60 million units. With that success, Nintendo essentially hit reset on the whole industry.

[Jost von Droinen]

And everybody else was walking away. Nintendo was walking towards the games industry.

[Adrian Ma]

And rebuilt it, to use a business school term. Yost says Nintendo's NES found product market fit that sweet spot where the right product meets strong consumer demand. And eventually more companies like Sega and Sony would bring their own consoles to the US market. If Nintendo hadn't succeeded like it did, some argue, the video game industry as we know it today might not exist.

[Mia Waylon Wong]

In the decades since, Nintendo has released lots of different devices. Some were hits, some were flops. But one thing has been consistent, Yoast says, and it's that Nintendo has never been about making consoles with the best graphics or the most cutting edge technology.

[Jost von Droinen]

So Nintendo has never been one to compete on technology, even though the rest of the industry has for that reason to differentiate itself. It's always really lean into limitations of technology.

[Mia Waylon Wong]

One of the company's head game designers named Gompei Yokoi called this philosophy lateral thinking with withered technology. Which sounds a little funky, but a good example of this idea in action is the Nintendo Wii.

[Adrian Ma]

Oh, the Wii. We still have ours.

[Mia Waylon Wong]

We do I mean, you do.

[Adrian Ma]

Yeah, you should come over and play it sometime. Well, I don't know if it still works. We should plug it in and see. Released in 2006, the Wii was a console with simple childlike graphics. And its controller used very old technology, infrared beams like the kind that come out of your TV remote.

[Sponsor Voice]

It.

[Adrian Ma]

But the Wii designers repurposed this withered technology in a novel way, allowing users to play tennis or golf or boxing simply by moving their arm. And the result was a very family friendly gaming system.

[Jost von Droinen]

You could play with anybody else in your house. I used to get my ass handed to me in Wii Tennis by my mother in law. But they managed to take a low tech approach and make it fun for a broad range of players.

[Mia Waylon Wong]

Yost also says this lower tech approach meant Nintendo could manufacture consoles for less and sell them for a lower price. So theoretically more people will buy them.

[Adrian Ma]

For Nintendo fans, the sort of cheap and cheerful ethos is something that has always distinguished the brand from its competitors. That's true for Jamal Michelle, who writes about video games for publications like the New York Times.

[Jamal Michelle]

Without saying it, Nintendo is selling a culture.

[Mia Waylon Wong]

A culture that includes characters and merchandise and a whole community. But also, Jamal argues, a certain aesthetic experience.

[Jamal Michelle]

The best sort of analog or comparison I could draw up would be like video game consoles to film directors for the Xbox. I think of Michael Bay, huge explosions and special effects and stuff like that in Nintendo. I think the most appropriate is definitely Wes Anderson from the aesthetic and the softness.

[Mia Waylon Wong]

Yeah, there's like a coziness to a Wes Anderson film.

[Jamal Michelle]

Yeah, and I think the cozy vibe Nintendo leans into. I don't want to constantly have to be in a fight. And so Nintendo lets me just chill out.

[Mia Waylon Wong]

I think this whole episode could be summed up as like the business case for coziness.

[Adrian Ma]

I love that. And you know what? I hope Chicken Dog is feeling real cozy.

[Mia Waylon Wong]

This episode was produced by Corey Bridges and Ella Feldman. It was engineered by Kwesi Lee and fact checked by Sierra Juarez. Kate Concannon is our editor and the indicators of production of npr.

[Adrian Ma]

Hey, it's Waylon Wong. We're almost at the end of 2025. It's been a tough year for NPR and local stations. But despite the loss of federal funding for public media, despite attacks on the free press, we're still here for you. With your support, NPR will keep reporting the news. And here at the indicator, we'll keep explaining how the economy affects your life at home, at work, in your community and around the world. And of course, we'll do it in about 10 minutes every weekday. If you're already an NPR supporter, thank you so much. We see you and we're so grateful for you. If not, please join the community of public radio supporters right now before the end of the year at plus.NPR.org Signing up unlocks a bunch of perks like bonus episodes and more from across the across NPR's podcasts. Plus, you get to feel good about supporting public media while you listen. Visit plus.NPR.org today. Thanks.

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