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Nintendo or: How I learned to stop worrying and love the internet

Tue 31 Jan 2012 4:57pm GMT / 11:57am EST / 8:57am PST
HardwareOnline

Satoru Iwata offers a glimpse at Nintendo's online future

Nintendo is a remarkable company for a number of reasons. It is one of the games industry's oldest companies, for example, as well as one of its largest, and certainly one of its most consistent innovators. It is also arguably the only major publisher in the entire industry that openly talks about downloadable "add-on" content as if it's a new idea.

While its competitors are refining their DLC strategies, making it a fluid part of the production pipeline and gaining a clearer understanding of the sort of post-launch content consumers respond to, Satoru Iwata still refers to it the concept like a biologist would some rare exotic bird.

In a recent call with investors, Nintendo's CEO discussed the potential new strategy of, "supplying new stages to Super Mario users who want to play the game more but have completed the game and lost interest in the existing stages."

"This will not only give us new profits but will lengthen the life of a product," he continues, "in that it will never be out of fashion and can keep attracting public attention as long as many people play it."

It is hard to know if this sort of talk will ease the minds of Nintendo's investors, who were keen to know more about the company's short-term strategy following the publication of its financial results for the nine-month period ending December 2011.

After all, a net loss of $623 million on sales of $7.1 billion is hardly cause for celebration, and while the appreciation of the Yen is a significant problem for all Japanese companies with strong international trade, Iwata has an enviable track record of facing up to Nintendo's shortcomings.

"I am not saying that we cannot help going into the red," he explained of the impact of the Yen. "Naturally, we have to find ways to gain profits even with such changes. It is clear that, however, in the next fiscal year, the sales of Nintendo 3DS hardware will not give us much profit even if we will be able to cease selling it below cost."

To the views that Nintendo is cautious, conservative, or even negative about business on a network, we will make a bold attempt when the time is ripe

Satoru Iwata

"It means that we need to make it with the software sales. There are two methods to gain profits from software: one is to sell as many units of a product as possible with fixed development and marketing costs; the other is to get as much money from a product as possible, or to increase the ARPU [Average revenue Per User] you mentioned."

In the first category, Nintendo already seems to be making progress, with Super Mario 3D Land and Mario Kart 7 pushing the much-maligned 3DS to lifetime sales of more than 15 million. The second category is more problematic, and directly relates to what many regard as the company's single biggest weakness: its apparent reluctance to engage with the internet as a venue for business.

When questioned about Nintendo's plans to implement a "unique payment system" to more effectively monetise its online services, Iwata offered the reassurance that, "Nintendo has been making its best efforts to raise the Internet-connection ratio for years." However, despite reinforcing the 3DS's current 60 per cent connection ratio with some pride, the details of its roadmap remain indistinct. Despite redefining the commercial games business with the Wii and DS, Nintendo is now preaching a doctrine of caution. "One of our reflections on why we could not bring our network business up to the level we had anticipated is that each step consumers had to take was not simple enough," Iwata obeserved. "It is said that with each extra step, the number of consumers drops by one-tenth. Our challenge is how to improve such steps one by one."

"To the views that Nintendo is cautious, conservative, or even negative about business on a network, our answer is, in short, that we will make a bold attempt when the time is ripe. Unless the timing is right, we will lose the consumers who do not have an Internet connection."

"We have not gone so far yet because our developers have a belief that our products should be available to as many people as possible. However, now that the network connection ratio for the Nintendo 3DS is much higher than the past handheld systems...we have a strong impression that the foundation for business on a network for us to take on various challenges on it has been steadily put into place today."

The notion that Nintendo would "lose" non-connected consumers outright simply by having a robust online service for those that are is open to question, but Iwata made no bones about one detail: Nintendo already has the infrastructure to distribute digital versions of its packaged games, and on exactly the same scale. "We can start it as soon as we decide to do so." he added.

And the requirements of third parties will not be ignored, either. Iwata was quizzed several times on Nintendo's view of micro-transactions as a viable revenue stream for its platforms, and while first-party enthusiasm is somewhat tempered on the grounds of brand identity, third-party developers will not be prevented from implementing new business models.

"It would be better to present third-party developers with as much freedom as possible... We plan to ensure a relative level of flexibility for the Nintendo 3DS and the Wii U software compatible with the Nintendo Network as long as the developer has built a trusting relationship with consumers, except for the cases that consumers will be too disadvantaged."

"If third-party developers would like to adopt this form of micro-transaction, and if this kind of business relationship between the developers and consumers is commonly accepted in Japan, we have no intention to decline it."

11 Comments

Josh Meier

40 15 0.4
This is quite the turn around from what Reggie was saying last year. I recall their policy being that they didn't want to provide DLC for first party games because they felt that people should be paying for the full game out of the box.

It's oddly refreshing to see them change their mind on this, because DLC doesn't have to be something to "finish" a game, it can also be something to "expand" a game.

Posted:2 years ago

#1

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
Josh, what Reggie was talking about was micro-transactions, not just DLC in general. Nintendo will never charge for their first party DLC just like they'll never charge for the Network itself. But they are keeping the door open for 3rd parties to charge for their DLC if they wish.

Posted:2 years ago

#2

Ste Hickman
Writer

17 9 0.5
"...except for the cases that consumers will be too disadvantaged."

Mmmm, Are Nintendo reserving the right to say no to 3rd parties if, for example, an Oblivion like Horse Armour appears or a games userbase get's fragmented with multiple add ons?

I'm glad to hear that either Valve or EA are meant to be partnering with Nintendo next time out as, whether they like it or not, MS are over the hill and far away already in terms of online infrastructure and paid DLC models.

Still, EA have stated that they are delighted with the flexibility of Wii U's networking solution so all is not lost. We'll see in time, I guess.

Edited 2 times. Last edit by Ste Hickman on 1st February 2012 6:59pm

Posted:2 years ago

#3
@Jimmy Webb

I'm not saying you're necessarily wrong Jimmy, but the example chosen in the article was new levels for Mario and he went on to talk about larger profits which would suggest charging for the extra content. In the click-through he also discussed expansions to Wii Fit. It's hard to imagine that Nintendo would opt to give away Wii Fit 'Plus' when they are publishing large operating losses but stranger things have happened I suppose.

@Ste Hickman

My guess on that was more a restriction on gambling but it will be interesting to see just what kind of content makes it through.

Posted:2 years ago

#4

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
Dan, the selection below taken from the article above seems to suggest that Nintendo themselves are adverse to micro-transactions but are letting 3rd parties consider their use independently.

Iwata was quizzed several times on Nintendo's view of micro-transactions as a viable revenue stream for its platforms, and while first-party enthusiasm is somewhat tempered on the grounds of brand identity, third-party developers will not be prevented from implementing new business models.

"If third-party developers would like to adopt this form of micro-transaction, and if this kind of business relationship between the developers and consumers is commonly accepted in Japan, we have no intention to decline it.


I understand they utilized new levels in a Mario game as an example but I feel that was merely for that stated effect...an example. As stated in the passage I quoted, internally, they aren't all that excited about doing it themselves but don't want to limit 3rd parties from engaging in it.

Of course, either one of us could be wrong given the two passages are somewhat contradictory so we may have to wait until after the launch of the Wii U to truly know for certain.

Posted:2 years ago

#5

Ste Hickman
Writer

17 9 0.5
I feel that Nintendo's apparent reluctance to embrace the paid DLC model actually stems from Miyamoto who has (as Jimmy alluded) stated many times in the past that he would prefer an entire product to ship, day 1, with no hidden charges to the player.

I think, however, that the advent of Console networks like XBL and PSN, Coupled with Investor pressure no doubt, have forced Nintendo's hand here somewhat and they are torn between their old values and embracing the modern way of doing things.

Balance is key, from a consumer perspective.

Personally, I'm not a fan of the paid DLC model but it's the way it is now. If Nintendo can implement it in a way that doesn't fragment the userbase and adds value to a title then I'll accept it.

Interesting times ahead.

Edited 1 times. Last edit by Ste Hickman on 2nd February 2012 5:42pm

Posted:2 years ago

#6

Dave Wolfe
Game Developer

64 30 0.5
@Jimmy Webb
Paid DLC isn't the same as micro transactions. I can see Nintendo charging $10 for a Zelda expansion pack, but never charging $0.25 for a heart piece or potion.

Posted:2 years ago

#7

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
Dave, that's a fair assessment.

Posted:2 years ago

#8

Tony Johns

520 12 0.0
"You are not a Champion unless if you are consistent. You may have good days and you may have bad days. But a true champion is out there 9 times out of 10 at their best." - Ron Barassi (Australian Football player and Coach)

That is what I think of Nintendo when I hear the words of Ron Barassi of what makes a champion. Most of the games Nintendo makes are amazing. Yes they still have made duds out there, but 9 times out of 10 their games have been awesome as well as the consoles and handhelds that they have made.

Nintendo are a champion company, even though they are not always at their best all the time.

Posted:2 years ago

#9

Richard Pygott
Level Designer

40 13 0.3
One thing I have learned over the years is to never discount Nintendo. They have always been innovative and have always surprised me!

They are a bit stuck in their ways, this was evidenced by their lack of a solid or fathomable online presence with the Wii, but knowing Nintendo they will have a Shock & Awe style campaign for the Wii-U

Posted:2 years ago

#10

Andreia Quinta
Creative & People Photographer

200 476 2.4
Testing post

Posted:A year ago

#11

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