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Nintendo evaluating new business, "studying" smart devices

Nintendo evaluating new business, "studying" smart devices

Fri 17 Jan 2014 5:56pm GMT / 12:56pm EST / 9:56am PST
MobileBusiness

Nintendo is feeling the pressure of its latest poor fiscal report

Nintendo CEO Satoru Iwata has been reacting today to the company's poorer than expected financial results in which Wii U forecasts were slashed significantly. It appears that Nintendo is going to have a third consecutive annual operating loss and the company is aware that it needs to act.

"We are thinking about a new business structure," Iwata said at a press conference today in Osaka, Japan, according to Bloomberg. "Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. It's not as simple as enabling Mario to move on a smartphone."

Putting Nintendo games on smartphones is something that many analysts have been pushing for in recent months. "The video-game market has moved into smartphones and tablets," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. "Nintendo needs to expand from their current hardware business model. It's a structural problem."

Nintendo, however, has always said that its games will only be playable on its own hardware. While it's certainly possible to program some Nintendo games to work on a smartphone's touchscreen, Nintendo's philosophy is that the quality of its first-party titles would be compromised if not on Nintendo hardware. It'll be interesting to see what conclusion Nintendo's study yields.

Regardless, something must be done to stop the bleeding. "We cannot continue a business without winning," Iwata added. "We must take a skeptical approach whether we can still simply make game players, offer them in the same way as in the past for 20,000 yen or 30,000 yen, and sell titles for a couple of thousand yen each."

27 Comments

Daniel Hughes
Studying PhD Literary Modernism

436 496 1.1
I can't see Nintendo games coming to smart devices, but evidence for a network orientated platform that operates across devices is building, at least from my perspective. Companion apps on smartphones and tablets, a subscription based, cross platform Virtual Console (essentially Nintendoflix, if you like), properly unified accounts, proprietary hardware that shares software and services linked to the same network--I expect all of that will be being studied, and most of it should be implemented while Wii U and 3DS are on shelves, even if it's only fully unified and integrated in Nintendo's next generation of devices, they need to begin building the platform that device or those devices will access.

Interesting that last year Iwata suggested Nintendo may launch a greater range of hardware once their R&D consolidation was complete, which it soon will be. I'd have thought that Nintendo would rather go for a single hybrid option, as you suggested James, but perhaps a range of hardware options, ranging from a microconsole with a basic controller, to a portable that can be used in conjunction with the tv, or something along those lines? I certainly think we'll see games from Nintendo that use free to play, subscriptions and peripherals to raise revenue in the future, as they are currently experimenting with through Wii Karaoke, Wii U Fit and Wii Sports Club. Ultimately Nintendo's focus must be on providing the platform that will best allow them to sell and profit from their IP, and their conclusion appears to be that existing "game players" like Wii U and 3DS aren't the answer. This is why I don't think third party publishing or iOS/Android make much sense for Nintendo: they still need to retain control of the distribution channel and platform of their IP, and neither of those options allow them to do that. Interesting times ahead, that's for sure.

Posted:8 months ago

#1

Jim Webb
Executive Editor/Community Director

2,266 2,404 1.1
Seems like that converged device idea may be the direction they are moving into. Now that their home and portable R&D departments have been converged, they have familiarity with MiraCast and streaming, have unified their home and portable networks and now we have the above statements directly from Iwata...the plausibility factor is certainly increasing.

Posted:8 months ago

#2

Rick Lopez
Illustrator, Graphic Designer

1,269 942 0.7
@Jim... I agree

-------------------

Its interesting to see what they are going to do. I really want my Nintendo consoles. However they need to remain relevant with current technology. And they should improve their image to be more than just a toy company, they should try projecting themselves as a bit edgy-er. Like I go shop on the eSHOP, and really looks something catered to 5 year olds or pre school kids. It doesnt bother me, but my reaction is like.... seriously?

But I agree that simply putting their games on portable devices isnt the way to go. It will sink Nintendo further into obscurity. I mean how many people now a days are familiar with Mickey Mouse and Bugs Bunny... Not as many as there used to be. I suppose putting Mario on cel. phones isnt the answer either.

This my friends is people working to be truly creative and Nintendo has been known to upset the market many times. They created the crosspad, shoulder buttons and analog sticks and dual screen gaming. So I wouldnt count Nintendo out anytime soon.

Posted:8 months ago

#3

Pier Castonguay
Programmer

189 106 0.6
I can't argue that mobile device market is getting bigger and bigger, but I think they are moving the wrong way around. Nintendo poor fiscal report from my point of view is because they turned to lower-end hardware and reusing IP/assets too much. Nintendo rise to power was when they had the highest high-tech consoles (NES, SNES) and when they innovated new IPs and new gameplay idea. Now, they just rely too much on previous success and public knowledge of brands for their new products.

Edited 2 times. Last edit by Pier Castonguay on 17th January 2014 9:15pm

Posted:8 months ago

#4
@Pier Castonguay
I'm not sure that NES and SNES were the highest hich - tech consoles in their era.

As far as Nintendo is concerned, on mobile devices I see a potential in transmedia projects related to their products (interactive casual apps with Mario/Zelda theme; not real games, but something in vein of McDonalds series of Sonic "games" on little cheap portable devices packed in Happy Meal - anyone still remembers these?, only much better and more appropriate to nowadays gamers) and maaaaaybe in launching a cross platform VC.

Posted:8 months ago

#5

Jeff Kleist
Writer, Marketing, Licensing

328 185 0.6
Somoretty much exactly what I've been saying for years.

Nintendois working on an Android tablet as the successor to 3DS. The 2DS is a sniff on a form factor to see if people will go for it. They'll do that well before they do a phone.

The problem is that Nintendomwill make all the same mistakes they aleays do. They will make a product for Japan, whose immediate habits are increasingly divergent from the rest of the world. They'll continue to make the same old stuff they are now, and the. They'll wonder why people aren't buying their underpowered pricey tablet with the locked down App Store.

Emulators work just fine on virtually any smartphone from the last fee years, at least up to n64, and most of them should, be able to cover that just fine. I realy don't see Nintendo giving up enough control to make it successful. They need to launch a mother app for ios/Android, and start selling the back catalog. A bluetooth SNES style pad that can flip onopoly the phone would do nicely.

Posted:8 months ago

#6

Bruce Everiss
Marketing Consultant

1,692 594 0.4
Nintendo have been left behind by the technology.
Games are now played on multi purpose devices.
Nintendo are stuck on burning platforms. It will take radical surgery to get off.

All Nintendo have is a catalogue of outstanding properties.
They have to work out a business model that monetises them in the new hardware reality.
If Angry Birds can get billions of downloads then so can Mario.

Posted:8 months ago

#7

Greg Wilcox
Creator, Destroy All Fanboys!

2,175 1,124 0.5
QUALITY. Period. Nintendo likes and wants its grip on its franchises, not to see them ruined with cheap and ineffective port jobs that open them up to "why did they do that?" criticism from the more loyal fans who may buy everything, but are actually nothing but another large niche of devotees (who may be wearing rose-colored blinders). They tried that on the CD-i and we got a few notorious games that may have been well-intentioned, but not up to the company's standards.

I don't think that as much money as they'd make shifting "billions" of mobile Marios a second is worth it to them if those games don't have that "Nintendo" feeling to them. Unless there's some actual Mario fatigue happening (I think so), which may also be one case for new mobile IP made BY the company or farmed out to capable third party devs they trust 110%.

That said, it's going to be tough to see Nintendo just tossing themselves to the wind and hoping people notice and open their wallets appropriately, but it seems as this will happen in some form or another. The other thing is I think they also want to protect their younger audience from the pitfalls of social and mobile together with microtransactions gone wild (see Apple's recent $32M court loss). They have a LOT to think about over the next few months, that's for sure...

Posted:8 months ago

#8

Carlos Bordeu
Game Designer / Studio Co-Founder

61 82 1.3

Posted:8 months ago

#9

Michael Schiciano
Musician/Composer

7 10 1.4
@Pier
"Nintendo rise to power was when they had the highest high-tech consoles (NES, SNES) and when they innovated new IPs and new gameplay idea."

It also was in a timeframe when they had the strongest third party support (by way of some of their business practices), and were flourishing under probably more 'traditional' Japanese game developmental practices that relied more on developers making their own engines as opposed to having a lot of sharing of toolsets/engines (which was more common in the PC market over the years, IIRC).

This model hasn't changed significantly over the years, and I would argue that Nintendo's biggest fault with both the Wii and Wii U has been a weakness in developing/providing development toolsets that allows outside developers to (somewhat easily) match the developmental/production quality of their own games on their systems.

I mean, look how much better Super Mario Galaxy (for example) looked when compared to a large stretch of the Wii's library.

They really should have been setting up the Wii U in a way that companies other than Nintendo could really exploit the hardware and make stuff look/play great, despite its lower power compared to the XONE/PS4.

Edited 1 times. Last edit by Michael Schiciano on 18th January 2014 5:03pm

Posted:8 months ago

#10

Jeff Kleist
Writer, Marketing, Licensing

328 185 0.6
@Greg

Pirates have already proven how good emulation is for Nintendos games. Their continued refusal gas nothing to do with anything other than their own pigheadedness

The CD-I was the SNES CD that never happened. Nintendo also did not develop those games. I don't see how their own teams doing what they're already doing is going to hurt quality

Nintendos biggest problem us that they are viewed as a console for children, and that they attributed the temporary success of the Wii to the product, and not the fad. That they still think their stuff doesn't stink, and that they still think that it's 1989 when they could just say "deal with it"

Nintendo Is list at see, in a world it made but has been run over by like Wile E Coyote on a train track. It's time to learn to like birdseed, and stop shipping a me technology

Posted:8 months ago

#11

Greg Wilcox
Creator, Destroy All Fanboys!

2,175 1,124 0.5
@Jeff: You missed my point, but I assumed everyone here knows Nintendo didn't make those CD-i games. Anyway, It doesn't matter if games come from first, internal or third party studios at all as long as there's that certain "Nintendo feel" to a game. Those CD-i games were more like attempts to embrace CD technology and go for a more western-style of game (probably thanks to that Zelda cartoon show being somewhat popular) that didn't work very well.

As for pirates... in some cases, they don't pay a dime for the new or old games they take for granted as "free", so I usually discount them out of any equation. THAT said, I'll say the folks who preserve games from death by tracking them down and getting them in their personal collections because certain publishers seem just not interested in their old IP are doing better at archiving than most game companies, period.

And yes, people for the most part see Nintendo as a family or kid's company. They'll never shake that and I think they actually make that a point of pride, good or bad as it seems.

Posted:8 months ago

#12

Jeff Kleist
Writer, Marketing, Licensing

328 185 0.6
WdGreg, my point was that the emulator crowd has proven that emulating the games on phones just like they played originally is fully feasible, and has in fact already been done

Posted:8 months ago

#13

Nick Parker
Consultant

283 150 0.5
I joined Nintendo in 1992, 4 weeks before the launch of SNES in Europe (my first industry bash was the launch party). Our only competitor was Sega, a more irreverent brand; in terms of cartoon licences and style, we were Disney, they were Warner Brothers. That image has not changed even when the Internet loomed to evolve the way we game forever; Nintendo remained a pure play, family brand. As such, it worked with Wii, a console which was easy to grasp, in the reach of all families due to its simplicity and sensible price. The Wii U enjoys neither of these attributes and Nintendo has failed to educate its target market; maybe it never can as the Wii U will never be intuitive enough for the mass market. More big gun titles such as Kart may improve sales but from a low base, will never drive the console into a meaningful installed base to court 3rd parties - Mario 3D World failed in that attempt.

I'm afraid that next fiscal year is likely to be worse for Nintendo so when will patience run out? Somebody needs to take off the rose tinted specs, lose the sentimentalism and grasp the hard realities of a business which has great IP but not the right proprietary hardware to support it. Maybe Nintendo looks back at how it stumbled on with N64 and Gamecube but that is not the way to run a company; diversify, license or die.

Edited 1 times. Last edit by Nick Parker on 19th January 2014 2:22pm

Posted:8 months ago

#14
There is a lot I could write on this topic, so I'm going to try and distil it to the core.

Firstly - what defines "Nintendo"?
- High quality, fun gaming, that (generally) anyone can play.

I believe this alone rules Nintendo out of ever releasing software on hardware they don't control in some form - as this compromises the quality of the gaming, and hence they cease to be.

Secondly - how did the WiiU forecasts end up like this?
- numbers were way off initially, probably based on optimism and previous sales figures
- marketing is only now starting to catch up
- Nintendo had to fight the "promise" (not reality) of next-gen consoles from two competitors
- they have lost too many third-party publishers, including EA
- many of their previous partners no longer exist (i.e. THQ)
- they released the wrong titles at the wrong time in the year. Cramming WiiSports / WiiFit / WiiParty all together was a disaster (WiiFit should have been ready for launch!). And Super Mario World was the wrong title for Xmas, especially in light of the big title last Xmas ... Super Mario.
- by releasing specs on the WiiU which are lower than the competiton - they have failed to pick up the hardcore audience (which was *always* the initial plan). They then panicked, and then switched back to trying to pick up the casual/family market.
- the WiiU is "too complicated". Simplicity rules, and the WiiU is as complicated as it gets. I currently have a WiiU base, power adapter, hard disk, cable for that, charger for that, sensor bar, cradle for the controller, charger for the controller, Pro controller, Wiimotes + balance board. And Nunchucks, shells, driving wheels, ... compare this to carrying around a 3DS, a PS4 + controller, or an iPad. Its also complicated to develop for (in the "design my game idea"), complicated to use (which screen do I look at).

The corollary of this "complication", is that its my favourite console easily. But that's because I'm a techie/developer, and I love the challenge of putting these bits together and getting a good outcome from it. And I love off-screen play - more of that please.

So what can Nintendo do?

Apple/Samsung approach:
- very radical, and unlikely. They companies barely care about software, and are all about hardware design and production. Apple make 90% (or more) of their profit from hardware sales. Nintendo could trial a crazy "Sell this uber-console for $1000, and give away our software on it for $5 approach" - but this has complications. Retail wouldn't stock it. Third-parties would have nothing in it for them. And this approach relies on selling the hardware to as many people as possible, which means heaps and heaps of software. Unlikely.

- other sales models:
Like the new WiiUSports, I can see more rental sales models. Make it $10/month to play a title. Bring in a NintendoGamer product for $50/month, that gives you "premium" access (they could do various things here), and gives gamers access to 3 full games in that month.
Expand this out to cover Demo (free) for any game for a certain period of time (say 1hr). Then charge $1/hr for follow-up hours, until the gamer pays.
Launch a "Virtual Console Arcade" - which has all the old "arcade" style (MAME?) games. And charge a "quarter" to play any of the games.

- games as a "service" (not cloud!!):
This is the one I think is most likely, and links into both of the above. Look at Mario Kart. Ever since the launch of Mario Kart 3D - every iteration has been essentially the same (albeit much improved). How much longer can they continue doing this?
There needs to be a "Mario Kart World", which is initially a free download and available to everyone who had a WiiU. First week of gaming is free - follow up is $10/month. Obviously needs a net connection. Retail version preloads the game (or contains the core assets on a disc), and provides a 6 month play license.

They can do this for so many, if not all of their games: Animal Crossing, Metroid, WiiSports, WiiFit, Super Mario, etc. For games that can be "finished", its essentially an episodic release - or becomes more open world, like some form of MMO structure.

The key thing, is that this must become independent of their current hardware: they must be free to iterate the hardware, and their "games as a service" continues to run. Once they do this, they can release a lot more hardware models, with a lot more variants.

For this to happen, they need to do a few things:
- continue working on their network infrastructure
- abstract their hardware/software interfaces: this is the biggest thing for them, as in some ways this defines a true "console". You need to link and run against an OS (i.e. like Android), rather than a fixed memory space, peeking & poking memory. They might even consider dumping C++, and switch to a purely managed environment (C#, Java, etc).

- Join Android (or Apple!):
Possibly the most radical (and the hardest) - develop a real, competitive Android tablet - that also plays WiiU quality titles. Lots of problems here - it interrupts the 3DS platform, which is fine - and doesn't help the WiiU at all.

- Go the tech route:
Decide that they didn't go hard enough. Dump the WiiU, and develop a new, truly innovative console - something akin to a holodeck/3D gaming. Or just try releasing a super-speced WiiU this Xmas (supports all WiiU games, plus new ones) - and try and get third-parties back on board. Very, very unlikely - even more competition, doesn't solve anything in the long run.

- Consolidate devices:
Release a hybrid 3DS/WiiU as next "console" - no. Handhelds are doing fine, don't mess with them. However, if there is a games-as-service running, next handheld should support it.

- Iterate WiiU:
What they could do, is release a new WiiU that has all the tech built into the controller - and is truly portable. And can then also connect to a local TV (Chromecast or something). Effectively a souped up Vita - play digital games only. But it doesn't solve things in the long run.

Regardless, I have a feeling this year is going to be much better for the WiiU than the last one. As always, time will tell...

Posted:8 months ago

#15

Barrie Tingle
Live Producer

374 148 0.4
I'd buy Pokemon on iPad for certain. Last ones I played on DS were fun games but I wouldn't/didn't buy a 3DS as my mobile gaming time doesn't support buying dedicated hardware to do it anymore.

Posted:8 months ago

#16

Christian Keichel
Journalist

676 923 1.4
@ Michael
- games as a "service" (not cloud!!)
That was one thing I thought about too. I think it would be a smart move to offer a subscription for the Virtual Console games (while drastically expanding the VC catalog at the same time).

Posted:8 months ago

#17

Jeff Kleist
Writer, Marketing, Licensing

328 185 0.6
[/quote]@Christian. It'll never be that cheap. They'll charge at least $9.99, and the selection will be very limited. Much more likely you'll see one of those situations like Verizon used to have. A monthly rental price on the game, and another to buy outright.

@michael

"I believe this alone rules Nintendo out of ever releasing software on hardware they don't control in some form - as this compromises the quality of the gaming, and hence they cease to be."

This is a pervasive myth that won't die

There is zero compromise in the quality of gaming when you switch to more powerful platforms. You can even bring along their peripherals. They have nothing but gain releasing on their competitors superior hardware and online infrastructure. They'll never go with Microsoft exclusively. I don't think they'd sell out to them if they dropped $50 billion in their lap.

This is not Sega, where the emotional attachment is more to the company than its properties.

I've been saying they need to merge with Apple for years. It's the only foreigncompany, and that includes Korea or China, that they can merge with while gaining, not losing face. Nintendo is a very traditional Japanese company, saving face is behind everything they say or do. The fact that they're talking about change should tell you exactly how scared they are.

Edited 1 times. Last edit by Jeff Kleist on 20th January 2014 9:57am

Posted:8 months ago

#18

Christian Keichel
Journalist

676 923 1.4
@ Jeff

Posted:8 months ago

#19

Neil Young
Programmer

296 372 1.3
One option - wiiu based tablet. Move internals into gamepad, use miracast or similar to drive tv. Unlikely to be cheap, though.

Move to android in full seems unlikely, as google's uncurated store doesn't square with nintendo's quality focus. Could base something on android to ease porting, though.

Posted:8 months ago

#20
@Jeff: Gaming quality has little to do with the power of hardware specs. It has a lot more to do with input devices, latency and so on.
Where Sony / Microsoft are obsessed with graphics - Nintendo are obsessed with control/input styles. Its incredibly important to them.

Nintendo could definitely make great games for the PS4 - but why would they want to? Help their competitors sell more hardware, and pay a license fee for every copy sold? No thanks.

Sega has been a disaster ever since they got out of hardware. They had to merge, and they still make poor software and regular losses. Where is the attraction in that for Nintendo?

Say Nintendo sold 10m units of Mario Kart on the PS4. They would be charging retailers around $30/copy - and Sony would be taking around $10 (if not more). So Nintendo would make $200m revenue (- dev costs + marketing). And Sony would make $100m (- disc costs). Factor in digital sales, and other revenue - Nintendo would need to sell a faction of that on the WiiU to make the same profit. Not to mention the profit from extra consoles sold.

And why would Apple be interested? And where does that leave Nintendo? Making games for touch-only devices?

@Neil:
It would be a massive undertaking, but I'd love to see a cross between a WiiU GamePad (which plays games without the base station), and a tablet that ran Android. Nintendo would make lots on selling the hardware, and suddenly their devices would be "cool" again. And they would have a real competitive advantage in the Android space - only a "Nintendo" Android tablet could do all the Android stuff AND play Nintendo games.

@Christian: Apple use cheap software as a "lure" to buy their hardware (as do Google/Android now). Maybe they could afford to give away total VC access - if you owned a WiiU. Even if its free for a month, and then its some token amount.

If Wargaming or LOL can bring in $1bn revenue - then Nintendo should be able to leverage several of their properties to bring in the same amount annually as a service. The question still remains - whose hardware?

...

There was another option I forgot about in the analysis above: Spend/Acquire

If Nintendo bought Capcom and/or SquareEnix (or at least signed them to extended exclusivity periods, and brought all games to the WiiU first) - you have to wonder how that would change things.

Posted:8 months ago

#21




I think it's much more likely their next handheld will be a 7 inch tablet with roughly the same power as the Wii U that runs a version of Android with the ability to play on the big TV and they will do away with their console line (although porting Wii U games will be trivial).

Edited 1 times. Last edit by John Owens on 20th January 2014 7:14pm

Posted:8 months ago

#22

John Arnold
Partner

28 44 1.6
No one messed around with Nintendo in the 80s and 90s, they succeeded where every single company failed. They took the very little that 8 bit gaming had to offer and turned it into a fully fledged entertainment system. Technology was the very word that described Nintendo at that time. They had the power. Nintendo Power! It was no hyped marketing slogan. It meant everything it promised. Quality and innovation. Nintendo was like God in the sense they caused massive events in the games industry to happen, the games industry would never see the light again if the NES had never happened.

Their competitors like Atari, SEGA and Panasonic all failed miserably to copy Nintendo's sheer skill and brilliance. Nowadays Nintendo is just a relic of it's former self, it doesn't come close to what they were once capable of. The N64 and GameCube were the graphic powerhouses yet they both lacked one gimmick. Discs.

My point is that of all companies by now, Nintendo should know this. Graphics and gameplay experience aren't what drives a games console. It will and will always be the same case with every electronic device released, it is the same strategy at heart but yet Nintendo relies on their past strategies rather than focussing on where the market is at. Ultimately Nintendo needs to cause a completely new innovation/revolution that adapts to the current day.

People are on social networking, people are on tablets/phones, that's where the market is at. Nintendo needs to go to that market and not copy what everyone else is doing but create something completely original that relates to those markets. Only then will Nintendo have a repeat of the DS, Wii, NES, GAMEBOY and SNES. Innovation doesn't just come from greatly changing a controller and making graphical/gameplay improvements, (that's where the N64 and Gamecube failed). I would argue this is the same case with Sony and Microsoft, comparing Angry Birds to Halo is a much better comparison than just pointing all the triggers at Nintendo.

The Wii U and 3ds contain the same names as their predecessors, both consoles took a very long time for most people to realise they were next gen systems. The order people have taken in gaming history is: ATARI, NES, Gameboy, SNES, Playstation, Playstation 2, Wii, DS, XBOX, Smartphones. Ask the majority of people the order of the systems they bought over the past 30 years and it'll be in that order. Nintendo need to get back onto that timeline to effect that the next system people go to is Nintendo.

It may all sound complex and theoretical, but in order for Nintendo's chemistry to work again it needs to take heed of the paths technology takes otherwise they cannot fully succeed.

Posted:8 months ago

#23

Jeff Kleist
Writer, Marketing, Licensing

328 185 0.6
@Lucija. The Genesis and Master system were both more powerful, but the SNES had better color palette, sound chip, and assist iver stuff like mode 7

Posted:8 months ago

#24

Shane Sweeney
Academic

365 292 0.8
Jeff I think she means things like 3DO, Snk platforms etc that were more technically powerful but had no influence (or inverse) on sales.

Posted:7 months ago

#25

Jeff Kleist
Writer, Marketing, Licensing

328 185 0.6
Shane I'd agree, but Neo Geo was never a player at retail. $150'a game took care of that. Add that to $400 hardware, which was more like $700 at the time, and there you go. Neo George was always supposed to be for the hardcore and for arcade operators to buy new games cheaply

Posted:7 months ago

#26

Jeff Kleist
Writer, Marketing, Licensing

328 185 0.6
@ Neil. The a kindle afore is exactly the kind of thing they'd be looking at. Which runs a customized android in a walled farden

Posted:7 months ago

#27

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