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Turning the Tanker

It's not just the 3DS that Satoru Iwata needs to turn around - it's Nintendo's whole business strategy

It's not been a good week to be Satoru Iwata. Ever since the launch of the Wii, he's been the CEO who can do no wrong - from his company's soaring sales and borderline ridiculous market capitalisation, through to his personal performances as consistently one of the most interesting, insightful and passionate speakers at GDC each year. Yet in the wake of the 3DS price cut, the shine has definitely worn off the Nintendo boss.

In recent years, certainly, he's been Teflon-coated - accusations of abandoning core gamers were easily rebuffed by pointing to sales figures (and the reality of the company's line-up, at that), while regular claims that the Wii market had collapsed were met with the hard reality that for a long time, "collapsed" Wii sales were still higher than rival consoles at their peak. However, I'd argue that Iwata started to lose his lustre significantly before the failure of the 3DS.

For Iwata to grasp the nettle and bear the pain of this U-turn is a demonstration of strength, not weakness

I'd peg the start of the real concern about Iwata's leadership to his GDC keynote last March. As ever, it was a fascinating speech - but where previous years had seen Iwata deliver extended love letters to game development creativity, this year's talk revolved around a stark warning regarding iOS gaming, and more specifically, the very low price points of iOS software compared with traditional handheld games.

There were two ways you could look at what Iwata said at GDC. The charitable interpretation, which most Nintendo fans chose to follow, was that Iwata was recognising the threat of iOS-style markets and encouraging developers to focus on developing high quality games for high price points, in confidence that consumers would recognise the difference and be willing to pay.

The less charitable interpretation, which was rather more widespread within the games industry itself, was that Iwata was doing a credible turn as King Canute - standing on the beach and commanding the tide not to come in. Up to this point, Nintendo hadn't shown the slightest interest in selling anything other than retro titles at price points lower than the traditional full-price level for its handhelds, which had made quite a few people a little nervous in the face of the enormous changes taking place in handheld devices. Now it seemed like people's worst fears were confirmed - Nintendo's strategy wasn't going to be to change, adapt and embrace, it was going to be to shout (very politely) at people for ruining the market with their cheap games. Cathartic, perhaps. Constructive, perhaps not.

In the wake of last week's painful and humiliating admission of the company's disastrous missteps with the 3DS, you might expect Iwata's tune to have changed. I say painful and humiliating here in the most positive light possible; I fully believe that the Nintendo of old would have borne the 3DS' sales figures in stoic silence, stuck to their guns, kept their chin in the air and calmly walked into another decade of near-irrelevance. For Iwata to grasp the nettle and bear the pain of this U-turn is a demonstration of strength, not weakness.

The tune, however, is eerily familiar. In the briefing accompanying the company's financials - the same financials which precipitated the 3DS U-turn itself - Iwata turns briefly to the matter of smartphone gaming, but only to deny that it's got much to do with Nintendo. The company's research apparently shows "no causal correlation" between the fact that increasing numbers of consumers are carrying around game-capable phones with vast libraries of cheap or free software, and the fact that consumers don't seem to want to buy Nintendo's new, expensive, dedicated handheld device, whose software is all very expensive.

Okay, it's a cheap shot, but it's easy to be snarky about market research and polling like this - my experience of it in most countries, but especially in Japan, has been that it's primarily aimed not at finding the right answers, but rather at finding the right questions which will deliver the answers that your bosses want to hear. However, while the substance of Iwata's short statement might look like exactly the same party line which was being peddled at GDC, the phrasing and context has changed my mind, at least a little.

Bluntly, after GDC, I thought Iwata had lost sight of reality. His company is an enormous oil-tanker, and he had blanched at the idea of turning it around from the decades-old model of producing expensive, monolithic software onto a new course which would be more competitive with the market emerging around him. Easier to be blind to the dangers ahead than to try to make a huge, conservative Japanese company act like a small, nimble one - so by accident or design, Iwata just didn't get it.

Rob Fahey avatar
Rob Fahey: Rob Fahey is a former editor of who spent several years living in Japan and probably still has a mint condition Dreamcast Samba de Amigo set.
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