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Nintendo outlines plans for long-term growth

Nintendo outlines plans for long-term growth

Thu 30 Jan 2014 10:31am GMT / 5:31am EST / 2:31am PST
HardwarePublishingDevelopment

Satoru Iwata on flexible pricing, smartphone apps and the company's future focus on "Health"

Nintendo has issued a detailed and far-reaching response to the pervasive concerns about its future as a business.

In a meeting with investors, Nintendo president Satoru Iwata outlined the company's strategy in both the short-term and as far ahead as 2016. From changing the fortunes of the Wii U to evolving the way we think about game consoles as a concept, Nintendo displayed striking candour in its attempt to allay the criticisms it has received since it drastically reduced its sales forecasts earlier this month.

However, Iwata was clear about one thing from the outset: regardless of what followed, there are certain aspects of Nintendo's business that will not change, namely the frequently proposed idea that it should take its IP stable to new platforms.

"Dedicated video game platforms which integrate hardware and software will remain our core business," he said. "Naturally, we are moving ahead with research and development efforts for future hardware as we have done before, and we are not planning to give up our own hardware systems and shift our axis toward other platforms.

"Dedicated video game platforms which integrate hardware and software will remain our core business... We are not planning to give up our own hardware systems and shift our axis toward other platforms"

"From a medium- to long-term standpoint...we don't believe that following trends will lead to a positive outcome for Nintendo as an entertainment company. Instead, we should continue to make our best efforts to seek a blue ocean with no rivals and create a new market with innovative offerings."

Here are the key points from Iwata's presentation

The Wii U is Nintendo's top priority

It is no secret that Nintendo has struggled to repeat the success of the Wii with the Wii U, but Iwata reassured investors that it has no intention of abandoning its ailing console. The possibility of a further reduction in price was ruled out immediately, with Iwata instead emphasising the company's ongoing failure to adequately demonstrate the value of the GamePad controller, and to distinguish the console from its hugely popular predecessor.

"By looking at the current sales situation, I am aware that this is due to our lack of effort," he said. "Our top priority task this year is to offer software titles that are made possible because of the GamePad... We have managed to offer several of such software titles for occasions when many people gather in one place to play, but we have not been able to offer a decisive software title that enriches the user's gameplay experience when playing alone with the GamePad. This will be one of the top priorities of Mr. Miyamoto's software development department this year."

Iwata offered a strong first-step by setting an official May release date for the release of Mario Kart 8, but he also indicated that Nintendo's development teams would focus on the GamePad's near-field communication (NFC) function - the same basic technology as that used in lucrative franchises like Skylanders and Disney Infinity. Iwata promised more details of its plans for NFC at E3 in June.

1

The end of "device-based relationships"

While many have cited the Wii U as evidence of Nintendo's failure to respond to the changes in the games industry since the launch of the Wii, Iwata stated that the company has already laid the foundations for a fundamental shift in the way it thinks about its products.

Before now, Nintendo had "device-based relationships" with its customers. This was mitigated somewhat by the strength of its software IP, but fundamentally the link with any given consumer followed the lifecycle of each piece of hardware. "We became disconnected with our consumers with the launch of each new device as we could only form device-based relationships," he said.

However, the Wii U saw the introduction of "Nintendo Network IDs," an attempt to create "account-based" customer relationships that could continue across different hardware platforms and generations. In the future, Iwata said, "connecting with our consumers through NNIDs will precisely be our new definition of a Nintendo platform."

With this in mind, Iwata was able to put an end to the speculation around Nintendo's strategy for smartphones and tablets. He made it quite clear that Nintendo has no plans to release its games on smart devices, but it does intend to use them as a way to communicate and build relationships with new audiences. Iwata offered few details of how the company intends to accomplish that goal, but he indicated that it would include a mobile app that leveraged Nintendo's existing IP to raise awareness of its hardware and software.

"I have not given any restrictions to the development team, even not ruling out the possibility of making games or using our game characters. However, if you report that we will release Mario on smart devices, it would be a completely misleading statement. It is our intention to release some application on smart devices this year that is capable of attracting consumer attention and communicating the value of our entertainment offerings."

2

Flexible pricing for existing and emerging markets

The existence of NNIDs and account-based relationships will also give Nintendo the ability to alter the way its products are sold. Iwata highlighted the company's role in establishing the model of selling a console for several hundred dollars and individual games for fifty or sixty dollars, but Nintendo now recognises that this model is no longer viable in the long-term.

The first aspect of this that Nintendo intends to challenge is the fixed price-point of software. Iwata suggested a system where the price of a games could be tailored to individual customers based on their NNIDs: someone who purchased five games in a year might pay less and less for each one, for example, or there might be incentives tied to recommending a game to a friend.

"If we can achieve such a sales mechanism, we can expect to increase the number of players per title, and the players will play our games with more friends. This can help maintain the high usage ratio of a platform... Nintendo aims to work on this brand-new sales mechanism in the medium term, but we would like to start experimenting with Wii U at an early stage."

"While we will continue to devote our energy to dedicated video game platforms, our first step into a new business area is the theme of 'Health'"

This flexibility will also extend to emerging markets for gaming across the world. Nintendo is a globally recognised brand, but Iwata conceded that the price of its products has put them beyond the reach of people in certain countries. While Iwata didn't mention any specific regions, he is likely referring to countries like Brazil and India, where the interest in gaming has increased in concert with the disposable income available to the population.

"To leverage Nintendo's strength as an integrated hardware-software business, we will not rule out the idea of offering our own hardware for new markets. But for dramatic expansion of the consumer base there, we require a product family of hardware and software with an entirely different price structure from that of the developed markets.

"We aim to connect with consumers who do not own Nintendo's video game systems yet, which will play an important role in cultivating new markets. Once we can establish such a connection with consumers in these nations, we will be able to use smart devices to share our information as well as important content distribution infrastructure. We plan to take significant steps toward such a new market approach in the year 2015.

Going beyond games

There may be no chance of playing Super Mario World on an iPad anytime soon, Iwata did state Nintendo's interest in making money from its IP outside of first-party video games. Nintendo has always been very cautious of damaging its iconic characters through excessive merchandising and licensing, but one need only look at Rovio's Angry Birds to see how much profitable such deals can be. Indeed, Iwata attributed the strength of Nintendo's IP stable to that very reluctance, but, he said, "we are going to change our policy going forward."

"To be more precise, we will actively expand our character licensing business, including proactively finding appropriate partners. In fact, we have been actively selling character merchandise for about a year in the U.S. Also, we will be flexible about forming licensing relationships in areas we did not license in the past, such as digital fields, provided we are not in direct competition and we can form win-win relationships.

"By moving forward with such activities globally, we aim to increase consumer exposure to Nintendo characters by making them appear in places other than on video game platforms."

3

Nintendo's new business idea: Health

Iwata closed the presentation with Nintendo's planned entry into an entirely new area of business, one that will provide the "blue ocean" the company so desperately needs.

"While we will continue to devote our energy to dedicated video game platforms, what I see as our first step into a new business area in our endeavour to improve [quality of life] is the theme of "Health." Of course, defining a new entertainment business that seeks to improve [quality of life] creates various possibilities for the future such as "learning" and "lifestyle," but it is our intention to take "health" as our first step."

Again, exact details of what this focus on health will entail were not provided, but Iwata described the concept as "an integrated hardware-software platform business" that will use the company's experience making products like Wii Fit, Brain Age and the Touch Generations series as a springboard for a more pervasive and persistent initiative.

"We will be able to provide feedback to our consumers on a continual basis, and our approach will be to redefine the notion of health-consciousness, and eventually increase the fit population... I feel that not only can this [quality of life]-improving platform utilise our know-how and experience about video game platforms, but also we can expect it to interact with games and create a synergistic effect.

"While we feel that this is going to take two to three years after its launch, we expect the [quality of life]-improving platform to provide us with new themes which we can then turn into games that operate on our future video game platforms, too. Once we have established such a cycle, we will see continuous positive interactions between the two platforms that enable us to make unique propositions."

Iwata promised to announce more details this year, and confirmed that the new business will officially launch during the fiscal year ending March 2016.

20 Comments

This sounds pretty much spot on to me. A mobile app that used Nintendo Network IDs (outside of Miiverse) would be a great first step.

And this sounds very similar to the "Games as a service" concept I talked about in other articles. For instance, the WiiU always felt incomplete to me without WiiFit. They have to make sure these "services" will always be available to all future platforms they create.

And digital licensing also sounds interesting. We might finally see more Nintendo based digital content (movies, TV) from other companies. And maybe some crossover games not from Nintendo...?

Posted:7 months ago

#1

Christian Keichel
Journalist

640 876 1.4
And maybe some crossover games not from Nintendo...?
They already announced the first crossover game, Tecmo is developing Hyrule Warriors, a Dynasty Warriors game set in the Zelda universe.

Posted:7 months ago

#2

Rolf Moren
Freelance Marketing Consultant

36 22 0.6
Soooo....the vitality sensor is back on?

Posted:7 months ago

#3
@Rolf - Yeah, that was my first thought. I doubt we'll see it in the same form, but there's some common ground there. At the very least, it indicates that Nintendo has been thinking about this new direction for several years.

Posted:7 months ago

#4

Jed Ashforth
Senior Game Designer, Immersive Technology Group

106 178 1.7
The customer loyalty bonuses sound like a brave step - Nintendo have been generous with loyalty programs in the past (Buy 2 get 1 free on last years big 3DS titles, Stars catalogue etc) so here's hoping it's an attractive, worthwhile program and not the equivalent of pennies like the Xbox Live Loyalty Program turned out to be.

Edited 1 times. Last edit by Jed Ashforth on 30th January 2014 1:37pm

Posted:7 months ago

#5

Nicholas Pantazis
Senior Editor

1,017 1,463 1.4
@ Christian They have done a lot of crossovers actually. Pokemon Conquest, Pokemon Mystery Dungeon, Shin Megami Tensei X Fire Emblem, Sonic & Mario at the Olympics, etc.

Posted:7 months ago

#6

Christian Keichel
Journalist

640 876 1.4
@ Nicholas

True, but these games were all published by Nintendo (with the exception of Mario & Sonic outside Japan) and I was under the impression Hyrule Warriors would be published by Tecmo, but after doing some research, it seems, this one will be published by Nintendo too. So, you are right, this one is no different to the other games.

Posted:7 months ago

#7

Jim Webb
Executive Editor/Community Director

2,246 2,233 1.0
Popular Comment
The more games you buy, the less you pay for them. Interesting. That's an ingenious way to boost the tie ratio. I hope that extends to 3rd party software as well.

Posted:7 months ago

#8

Christian Keichel
Journalist

640 876 1.4
I hope that extends to 3rd party software as well.
It already does, Nintendo just launched a promotion, where you get 60% discounts on various indie games on the eShop. The only requirement is that you already have to own one of the games in the promotion (you can also buy one of these games for full price in the coming 2 weeks).

Posted:7 months ago

#9

Richard Browne
EVP Gaming and Interactive

98 113 1.2
Sorry but sticking with an expensive gamepad, and thus a vastly overpriced machine is just plain dumb Iwata-san. Ditch it while you can, get the machine on the shelves at $199 with four controllers for Mario and start selling to your core demographic. Nobody who buys a Nintendo machine gives a rats ass about Indie games.

Posted:7 months ago

#10

Ralph Tricoche
IT Professional

31 64 2.1
Bold, to say the least. This is Nintendo we are talking about here and they keep their cards pretty close to their chest. I wont rule them out and these folks are not idiots, just a little short sighted it seems at times. However, they know they need reform, so lets see what they can do, they seem committed.

Posted:7 months ago

#11

Christopher Ingram
Editor-at-Large

52 45 0.9
These new changes in strategy all seem promising, if properly implemented - especially the deeper integration of the Nintendo Network ID. Nintendo has to ensure that it creates stable online environments that are properly launched from this point forward, unlike its past offerings.

If Nintendo keeps the price of its future consoles at a comfortable level for the mainstream consumers and continues to develop top quality games like it always has, I don't see how this company wouldn't have a bright future ahead of it. It was always going to have to adjust to a post-Wii industry, where Nintendo doesn't hold a "lighting in a bottle" hit of a console. We've seen Nintendo not adjust well, with unrealistic console predictions, but it's definitely acknowledged it needs to change and it will be exciting to see what new innovations the company will come up with next out of this.

Posted:7 months ago

#12

Adam Campbell
Associate Producer

1,154 939 0.8
The 'Nintendo Vitality' is a surprising but clever move, especially in a world of increasingly excessive lifestyles and the looming health crises everyone talks about. After the success of Wii Fit this could be interesting.

As for the WiiU, I still think it can be a successful games platform. Increase the software offering and condense both the unit and the price, it could find itself with a decent market, eager to play great games. Nintendo have the muscle but they still need to use it.

Posted:7 months ago

#13

Jerry Momoda
Game Consulting

1 1 1.0




Using their IP, Nintendo can create new mobile specific games with touchscreen controls. No one argues that touchscreen controls bite. I see no reason why Nintendo can't maintain the integrity of their IP so long as they're the developer.





Tick tock, tick tock.

Posted:7 months ago

#14

Paul Jace
Merchandiser

900 1,330 1.5
with Iwata instead emphasising the company's ongoing failure to adequately demonstrate the value of the GamePad controller, and to distinguish the console from its hugely popular predecessor.
I always thought Zombi U was going to do that for them, show consumers why you can only get that kind of experience on the Wii U. But looking at the reviews it didn't quite pan out that way. I know Nintendo already realizes this but they really need to get a Wii Sports-like game on the Wii U ASAP. It would help alleviate customer confusion between the Wii and Wii U, give gamers a reason for why the Gamepad was included in the first place and also give third party publishers something to shoot for instead of doing straight ports.

Edited 2 times. Last edit by Paul Jace on 31st January 2014 2:32am

Posted:7 months ago

#15

Rick Lopez
Illustrator, Graphic Designer

1,269 941 0.7
Nintendo's strength has always been in knowing when to hold back. Not like these companies that grow to big and then cant stand on there own feet. Not growing too big and keeping a sustainable business model. It can take a few hits, re-stratagize and come back even stronger. They know how to give themselves legroom and can withstand a few failures and come up with a resolution.

Posted:7 months ago

#16

Christian Slater
DevilBliss Games Consultancy

24 45 1.9
"Instead, we should continue to make our best efforts to seek a blue ocean with no rivals...."

I'll hazard that they might well be better off building a hydrofoil that skims over the tops of the waves at impressive speeds.

Posted:7 months ago

#17

Mohammed Alsadoon
Staff Writer

21 12 0.6
Nintendo character licensing?

Pikmin+Pixar.

Come on Iwata-san....make it happen.

Posted:7 months ago

#18
Well, what about allowing Nintendo characters in Infinity? And only on the WiiU? Or getting them into Kingdom Hearts, and a WiiU release?

@Paul - ZombieU partially succeeded. But that wasn't even a Nintendo title. I can't believe Pikmin3 didn't have the touch controls Pikmin did in Nintendoland. Give us a Mario Kart with track design, drawing of logos, a "game master" that can drop things on the tracks and control races. Adjustable rear vision mirror on the GamePad, etc.

Posted:7 months ago

#19

Craig Page
Programmer

382 218 0.6
You'd think it would be easy for them to offer a price reduction on the Wii U, since the parts were weak to begin with, and now they're a year older, so THEIR prices have to be lower.

A $199 bundle with a Mario or Zelda game would be irresistible, but I think a $249 bundle like that would make more sense for them. Since around Christmas that's exactly what stores were selling them for, and a week after Christmas they were all sold out.

Posted:7 months ago

#20

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