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Nintendo Wii U: "we believe in making money on our hardware"

Reggie Fils-Aime on pricing, the five month launch window and why the industry thought Nintendo were "nuts"

At a press event in New York City to unveil the Wii U's launch plans Nintendo of America president and CEO Reggie Fils-Aime took the time to answer some of GamesIndustry International's many questions. While the announcements of price, launch date and more did much to alleviate some of the uncertainty surrounding the console and the company since E3, the bottom line is no one - not even Nintendo - can really predict just how well (or poorly) the Wii U will fare this holiday and the years ahead.

That said, it's Fils-Aime's job to steer the ship in North America, or as he says, "to galvanize the Nintendo of America resources to make this launch our best ever." That's no small feat, seeing as how the original Wii became a mainstream phenomenon. Reggie remains as confident as ever, however, that his team and the talented developers across Nintendo in Japan will deliver a Nintendo experience worth ponying up 300 bucks (at minimum) for.

In this exclusive interview, we speak at length with Reggie about the value proposition of the two Wii U bundles, dealing with consumer perception in a market affected by tablets, free-to-play and cheap apps, the future of gaming with two GamePads, relying too heavily on the same Nintendo IP and characters, and much more.

GamesIndustry.biz Let's get right into it. Big news today with the Wii U price points and release date. How did Nintendo arrive at $299 and $349 as the price points for Wii U? And will Wii U be profitable from day one?

"We don't believe in pricing a product and then having to reduce the price some short time later"

Reggie Fils-Aime

The way that we approach consumer value is we want to make sure we give the consumer a lot for what they pay, and when you look at that basic model you get the innovation in the GamePad (and all of the gaming options that presents), you get Miiverse in terms of a gaming community, you get Nintendo TVii, you get video chat... all of that is included in the base proposition. We think $299 is a really strong value, and it's a value that's going to be strong for a long time.

That gets into another one of our pricing philosophies; we don't believe in pricing a product and then having to reduce the price some short time later. When we had to do that for 3DS, it was a very painful proposition for us. And what we did with the Wii at $249 and leaving it there for, I think, about three and a half years is very much consistent with our pricing philosophy.

In terms of profitability, we don't comment on our internal byproduct P&L, but as a philosophy, we believe in making money on our hardware, even if it's small amounts of money at the start. We don't believe in losing a lot of money on hardware. I brought up 3DS - after the price cut, we were losing money on 3DS hardware and that's what led to our posting our first operating loss ever as a public company.

GamesIndustry.biz We did get some reaction from industry analysts, I'm not sure if you've had a chance to hear what's being said…
Reggie Fils-Aime

I haven't had a chance to read.

GamesIndustry.biz This should be fun. We have EEDAR's Jesse Divnich saying Wii U is unlikely to persuade core gamers with that $299 price point...
Reggie Fils-Aime

He needs to see Call of Duty that we have here, or Assassin's Creed.

"As we prepared to launch the Wii, the industry thought we were nuts. We were able to make history as the fastest selling home console ever"

GamesIndustry.biz He did mention Call of Duty specifically and he said that he doesn't think straight ports from Xbox 360 would be enough to entice core gamers. That was his point of view, and Michael Pachter said that while Nintendo is looking at a holiday sellout, $299 will seem high in March when we expect Microsoft and Sony to cut prices.
Reggie Fils-Aime

But those are a different generation than our product.

GamesIndustry.bizSure, but how do you respond to the general sense from some people that Nintendo could have been more aggressive with pricing?
Reggie Fils-Aime

In the end, the consumers are going to decide. So I'll share this data with you. We've announced the price and we have a number of retailers taking pre-orders and the feedback that I'm getting from retailers is extremely strong in terms of pre-sales and consumer excitement at the store. In the end, I care about those people. I care about the consumer who's putting money down on a pre-order and whether or not we're presenting a great value to them. Based on some of the reports I'm getting, the answer is yes.

GamesIndustry.biz Sticking with the pricing issue...
Reggie Fils-Aime

It's not really an issue...

GamesIndustry.biz The pricing topic... [Reggie laughs]... I think Kindle, for example, coming out with their low cost tablets, and Apple with their announcements yesterday… we're speaking of that value proposition, and it seems that while some consumers are okay going with higher hardware prices, they may expect a lower software cost - you see those dollar apps or $10 apps and things like that. How do you think Nintendo is shifting to perhaps get to that differing consumer philosophy on value?
Reggie Fils-Aime

We believe that when it comes to hardware, we want to pack a lot into the smallest price possible, so that's why we don't charge for additional services like some of our competitors do. That's why we include the capability of video chat with the GamePad's built-in cameras, for example. From that standpoint, we want to make sure the hardware is as strong a value as possible for as long as possible.

On the software front, what I would tell you is it's important that we offer a range of software experiences that have a range of prices. Here today, we're showing off three different digital experiences and we haven't announced what those price points will be, but certainly they will be less than full price games. So we have to make sure that the value equation for what you get and what you pay is as strong as possible, whether it's a smaller piece of digital content or whether it's when a consumer buys Wii Fit U.

GamesIndustry.bizPart of that value equation is the Deluxe bundle with Nintendo Land…
Reggie Fils-Aime

Nintendo Land plus the Deluxe Digital Program, which we think are two very strong elements that make the Deluxe bundle really attractive.

GamesIndustry.biz Looking at Nintendo Land as a pack-in title, and remembering the success of Wii Sports [as the Nintendo Wii pack-in] - which became a cultural milestone - why did you go with something like Nintendo Land, which uses the IP but is not universal with things like baseball, basketball, etc. Why did you go with something that seems to appeal more to traditional gamers?
Reggie Fils-Aime

Well, I'm smiling because when we showed Wii Sports six years ago, the reactions from the industry were things like, "What if I want to play single-player tennis? Why do I always have to play doubles?" Or the reaction was, "Where are the arms? Where are the legs?" It was a focus on things that had absolutely nothing to do with the experience.

GamesIndustry.biz Then is Nintendo Land a reaction to that?
Reggie Fils-Aime

Based on some of the things you mention, I think it could be. In our view, Nintendo Land, with the 12 attractions that leverage Nintendo IP but put your Mii into that IP, we think it's brilliant. Because of the full range of experiences - some are single-player, some are multiplayer - they make use of the GamePad in different ways. We chose to include Nintendo Land because in our view it's the most complete representation of all the different ways you can utilize the GamePad. Whether you're using it to throw ninja stars or using it as you fly a Metroid ship, the experiences really highlight all the different ways to utilize the GamePad. That's why we think it's the best title to pack in.

"The fact that our competitors are on a different time table, that's their issue, and that will be their issue to deal with"

Now having said that, are consumers super excited about New Super Mario Bros. U? Absolutely. Are consumers going to be super excited by ZombiU and Call of Duty and all of the great titles that are going to be available? Absolutely. But we think Nintendo Land serves a very strategic purpose.

GamesIndustry.biz Speaking of Mario, we've had three New Super Mario Bros. games in three years, and obviously Nintendo hears the call, it's becoming an annual thing at E3, "Where's Mario? Where's Zelda?" And then you start delivering but now you're hearing other questions...
Reggie Fils-Aime

Is it too much?

GamesIndustry.biz Yeah, are we getting too much Mario? Is there a danger in using Nintendo's IP too much?
Reggie Fils-Aime

I would say categorically, no. And that's because our developers, starting with Mr. Miyamoto and going through the entire EAD development organization, they understand the power of our franchises, and they understand that the only reason these franchises have the power that they do is that they have to make sure that each subsequent edition is unique, different and offers something new. They know that if they don't do that, we'll kill the golden goose that lays the golden egg. So it's something they are highly cognizant of, and even the executives on the business side, we hold that IP very dearly to make sure that every edition in the series is foundationally sound.

GamesIndustry.biz Nintendo hasn't been first out of the gate in a home console generation since the original Nintendo Entertainment System. So this is the first time in a while...
Reggie Fils-Aime

And with a Mario game...

GamesIndustry.biz And with a Mario game. How are you going to capitalize on the Wii U's head start?
Reggie Fils-Aime

Well, it's our responsibility to leverage all of the assets we have, whether hardware assets with the GamePad, new service assets like Miiverse and Nintendo TVii, the great software lineup... it's our responsibility to leverage that as strongly as we can to get the consumer excited to say, "I gotta get this hardware. I have to play this game." That's what we need to do. The fact that our competitors are on a different time table, that's their issue, and that will be their issue to deal with. For us, we've always known that the follow-on to Wii needed to be something substantial with a fantastic lineup of games and very strong third-party support and that's what we've focused on delivering.

GamesIndustry.biz When will we know about the actual launch titles? It does seem like this "launch window" is getting larger and larger. I think it's up to almost five months now...
Reggie Fils-Aime

Well, it's through the end of March, and from third-party perspective, you'll hear from third-party publishers on the specific launch dates for their titles. Part of what comes into play is if they're launching multi-platform titles, they like to launch them all on the same day, even if that's in advance of the actual hardware launch for Wii U. Part of the reason that we're actually able to surprise people with the launch date is we held it very close, but now that the launch date is public and now that the publishers are working through all of their final schedules, they'll be able to better communicate exactly what's launching.

GamesIndustry.biz With the holiday launch in November and a very competitive landscape with announcements from Apple, and Kindle, and others, are you worried that consumers won't be able to fit Wii U into their holiday schedule?
Reggie Fils-Aime

I'm not concerned about it because that's our responsibility. That's what Nintendo of America has to do, as a sales, marketing and distribution company. We have to own that top of mind awareness with consumers and get them to say, "Yes, I need to spend my hard earned money on this machine and on its games." I'm confident we're going to get that job done.

GamesIndustry.biz We haven't seen much about using two GamePads, and in the Japanese event last night, they had a price point for standalone GamePads.
Reggie Fils-Aime

The reason you don't see games with two GamePads [at this event] is the technical ability to make two GamePads work was delivered to publishers after they started this current round of development. So you'll see those two GamePad experiences at a later date; when those games are coming, that's when we'll make a separate GamePad available.

"The reason you don't see games with two GamePads is the technical ability to make two GamePads work was delivered to publishers after they started this current round of development"

Look at it this way: when we're preparing for launch, I need to make consoles and I need to make GamePads, and I need to put them together in a box to sell at retail. And if I'm using my inventory assembling GamePads that don't support any games in the marketplace, all I'm doing is reducing my available inventory to sell on launch day.

GamesIndustry.biz So we won't have individual GamePads at launch.
Reggie Fils-Aime

Not here at launch.

GamesIndustry.biz Free-to-play is an increasingly large market and it's something we cover quite a bit on GamesIndustry International. With Ghost Recon Online being on hold for Wii U, how is Nintendo looking at free-to-play and Wii U?
Reggie Fils-Aime

Free-to-play or any other business model really needs to be separated out into the business model itself and the content that delivers on that business model. In terms of business models, we love them all. Full priced games, smaller digital content, free-to-play, consumable content, subscription services... we love them all. The good news is that the system that will support Wii U will accommodate all of those business models. So at that point, it's up to the developer and publisher to figure out what it is that they want to do.

On the content side, we just believe it's important that the content match the business model. And some of the people who are having trouble today are, I think, examples where the content is not matching the business model by having something that's free-to-play but it's not hooking me and I'm not getting far enough into the game to actually spend money on future purchases, that's a bad business model.

GamesIndustry.biz Anyone in particular you're thinking of?
Reggie Fils-Aime

I'm not going to call out any competitors, but there are a number of people where [it's a problem]. Pick the business model, and I can find people where it's working and I can find people where it's not.

GamesIndustry.biz Do you feel a little relieved that Nintendo didn't go head first into social gaming?
Reggie Fils-Aime

You know, we are a very thoughtful company. We've been playing in this space for better than 30 years. We have very strong views on what consumers want in a gaming experience, and that's what drives our thinking.

GamesIndustry.biz The Wii U launch is a hugely important launch for Nintendo - every console launch is the most important launch up to that point, but this one takes on greater importance because the competitive landscape this time is heavier. Do you feel any pressure about this launch?
Reggie Fils-Aime

What's interesting is the competitive landscape is always tough. Roll things back to 2004, as we're preparing to launch the Nintendo DS. We had N-Gage - I don't know that they had flamed out quite yet - PSP was on the horizon, and DS went on to be the best selling gaming system of all time.

As we prepared to launch the Wii, go back and look at the stories; the industry thought we were nuts and that, in the end, Nintendo should become a software focused company. We were able to make history as the fastest selling home console ever - almost 100 million units sold coming up on six years.

So the competitive landscape is always tough and a new system launch is always challenging, but my job is to galvanize the Nintendo of America resources to make this launch our best ever.

GamesIndustry.biz You're not worried then?
Reggie Fils-Aime

I worry all the time, but it's not a question about worrying. But it's a question of making sure that we're as prepared as humanly possible to deliver on what is, again, a groundbreaking Nintendo innovation.

GamesIndustry.biz Thank you, I really appreciate the time.

John Benyamine