Nintendo’s Game Boy Turns 25 -- A Look Back at the Business of 'Withered Technology'

Nintendo Co Ltd.'s (NTDOY -1.16%) iconic Game Boy, which redefined portable gaming, turns 25 this week. Over the years, the original black-and-white console was upgraded with smaller form factors and color screens before finally evolving into the modern 3DS console.

The birth of the Game Boy teaches us why Nintendo insists on using older technology in its consoles. The longevity of the Game Boy also speaks volumes about the persistent appeal of portable full-length titles in a market dominated by bite-sized mobile games like King Digital Entertainment's (NYSE: KING) Candy Crush Saga.

Nintendo's Game Boy and Super Mario Land. Source: Wikimedia Commons.

Lateral thinking with withered technology
Gunpei Yokoi, the creator of the Game Boy, was best known for his design philosophy of "lateral thinking with withered technology." Yokoi's idea was simple -- to use older and cheaper technology to create a fun product without expensive cutting-edge tech. Nintendo recited this mantra throughout the 8-bit and 16-bit generations, with great success:

Sources: Game Pilgrimage, Wikipedia.

Although the original NES had less horsepower than Sega's Master System, it sold six times as many units. Its successor, the Super NES, had a much slower processor than the older Genesis but boasted a richer color palette and twice as much memory. As a result, games looked sharper despite being slower, helping the Super NES eventually top the Genesis in one of the most heated console battles in video game history.

The persistent philosophy that old tech is 'good enough'
Yokoi applied that philosophy to the Game Boy, using "withered" technology to create an affordable handheld console that launched at $90 in 1989 ($167 in 2013 dollars).

Although the display was a blurry green and black, stellar games like Tetris and Super Mario Land caused console sales to skyrocket. Surging sales of NES titles like Castlevania, Mega Man, and Ninja Gaiden also fueled sales of their Game Boy counterparts.

Atari and Sega tried to challenge the Game Boy with two handheld color consoles, the Lynx and Game Gear.

Atari's Lynx (L) and Sega's Game Gear (R). Source: Wikimedia Commons.

Atari's Lynx was a technological powerhouse with a much larger color screen. Unfortunately, it also cost a whopping $180 ($333 in 2013 dollars), which led to mediocre sales of less than 7 million units. Sega's Game Gear, another color console, which cost $150 ($263 today), sold 11 million units, but neither console could keep pace with the original Game Boy, which sold a whopping 119 million units (including color versions) by the time it was discontinued in 2003.

The Game Boy's longevity convinced Nintendo that old tech could be good enough, but it overlooked a crucial lesson -- that the success of the NES and Game Boy were actually attributed to impressive third-party support from major publishers such as Capcom, Konami, and Square.

Nintendo lost that crucial third-party support when it alienated top developers by sticking with cartridges (a prime example of "withered technology") with the N64 -- a major misstep that caused its allies to leave in a mass exodus for Sony's (SONY -0.71%) PlayStation.

The evolution of the Game Boy into the 3DS
When the original Game Boy was discontinued in 2003, Nintendo followed it up with the Game Boy Advance (GBA) -- a 32-bit handheld system that sold 81.5 million units between 2001 and 2008. It replaced the GBA with the DS, kicking off the era of dual-screen handheld gaming for Nintendo.

Source: Vgchartz.

Nintendo's sales of 44 million 3DS units towers over Sony's sales of 8 million PS Vitas. It also dwarfs the 6 million Wii U's that Nintendo has sold since November 2012. As a result, the 3DS receives much stronger first-party and third-party support than the Wii U.

Surprisingly, the 3DS is flourishing while investors are convinced that free-to-play mobile games will eventually crush the market for full-featured 3DS titles, which cost $30 to $40 each. Yet that hasn't happened yet -- sales of 3DS software actually soared 45% year-over-year in 2013 to 16 million units worldwide.

The reason is that playing a game on the 3DS' stereoscopic 3D screen and second touch screen is a completely different experience from playing a tap and swipe game on a mobile phone. 3DS titles are also usually full-length adventures comparable to console games instead of bite-sized titles that require constant energy refills and microtransactions.

Nintendo's 3DS. Source: Nintendo.

As I discussed earlier with Minecraft maker Mojang, there is still a healthy market for "buy once and own forever" titles -- which means that gamers will be willing to pay $40 for a new Zelda game for a very long time.

The next level
In conclusion, Yokoi's Game Boy left an indelible mark in gaming and altered Nintendo's business forever.

Sticking with "withered technology" contributed to Nintendo's success in the 1980s and 1990s, but became a liability by the time Sony's PlayStation arrived in 1994. Just like the way Sony's Walkman changed how people listen to music, the Game Boy forever changed how people play games. Yet unlike Sony, which eventually lost the market for portable music to Apple's (NASDAQ: AAPL) iPod, Nintendo still retains a firm grip on the handheld gaming market it created.

So happy birthday, Game Boy -- here's to 25 more years of great handheld gaming!