More on Nintendo and Handheld Gaming

A fine return volley from Lukas Mathis:

The criticisms levelled against the DS and the Wii were exactly the same ones Gruber now levels against the current Nintendo consoles. But Nintendo is at its best when it doesn’t try to compete with other devices on the market, and often at its worst when it does. Nintendo is not competing on hardware. It’s competing on entertainment value. Put differently, Nintendo doesn’t sell technology. Nintendo sells toys.

I’m well aware that throughout Nintendo’s history as a game console maker, it has seldom competed on technical specs — and in fact, has done best when its consoles were cheaper and based on older technology. (Mathis has another follow-up just on this Nintendo philosophy, “Lateral Thinking With Withered Technology”.)

So, yes, the original Gameboy, equipped with a monochrome display, destroyed its color-screen competition. The standard-definition Wii outsold the PS3 and Xbox 360. The 3DS is outselling the far more capable PlayStation Vita.

What’s different about the post-iPhone world of mobile computing is that the buying decision is no longer about or, it’s about and. Pre-iPhone, someone interested in a handheld game device would choose between Nintendo’s offering or someone else’s. Nintendo did well in that world, selling more than enough devices to succeed. Today, though, someone deciding to buy a dedicated handheld game device is, more likely than not, deciding whether to buy something to carry in addition to the mobile device they already carry everywhere.

This is an entirely new scenario for Nintendo, and as I see it, they are on course to head right over a cliff. It’s like the Hemingway line on going bankrupt:

“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.”

The irony, perhaps, is that in a way, the iPhone and iPad are pulling a “lateral thinking” move on dedicated gaming devices like Nintendo’s DS lineup. As stated before, Nintendo has succeeded not just despite the fact that its hardware has traditionally lagged that of its competition technically, but because of it. “Lateral thinking with withered technology” allowed their hardware to be cheaper and thus accessible to more people.

iPhones and iPads are not inferior technically, but they are inferior in terms of their lack of dedicated game controls — D-pads and buttons. And the best games for these devices are not as good as the best games for the DSes. But there are thousands more games for iOS, and they’re way cheaper. The App Store is, practically speaking, an infinite source of new games.

The key factor is that these devices are already in our pockets. You can take better photographs with a dedicated camera, but, more and more as time goes on, we are choosing to use our mobile devices as our primary cameras. A BlackBerry was a better messaging device than an iPhone, but that was not enough, because the iPhone was better at so many other things, and people do not want to carry another device when their first one is good enough.

Mathis, regarding my comparing Nintendo to RIM, writes:

If you buy an iPhone, you’re not going to also buy a Blackberry. The same doesn’t apply to videogame consoles.

Here then, I can put my finger precisely on where Mathis and I disagree. Because I think this is nearly as applicable to video game consoles — portable ones in particular — as it is for BlackBerrys. People do not want to carry extra devices. It’s that simple.

Post-PC mobile devices are eating the world. Music players, dumb phones, cameras, audio recorders, portable movie players — even Mac and Windows PCs. All these things still exist as dedicated devices, but they’re all selling in dwindling numbers.

The trend is clearly toward carrying fewer and fewer devices. The first, a touchscreen smartphone. The second, more and more, a tablet. This desire to carry fewer gadgets is fueling the big-screen phone segment — Why carry a phone and a tablet when you can just carry one device that falls somewhere in-between? the thinking goes.

Point-and-shoot cameras hold their own, technically, against smartphones as well as any of the devices I’ve listed here. They shoot higher quality images and videos. But even there, the market is collapsing. Here’s a Wall Street Journal report from a month ago that suggests point-and-shoot camera sales declined 42 percent in the first five months of this year. That’s the same cliff where DS-style gaming handhelds are heading.

Sony has the right idea. They make great cameras, but they also make camera components for smartphones. It’s a Sony sensor that powers the excellent iPhone 5 camera. If you can’t beat ’em, join ’em.

If I was wrong about anything in my previous piece on Nintendo, it was my recommending that they start by merely dipping their toes in the iOS game market. In the long run, if Nintendo wants to remain a player in the portable gaming market, if they want to maintain their place in pop culture, they need to dive in. The best they can do with their current strategy — the best — is maintain a position in an ever-shrinking niche, selling devices to nostalgic adults. Via MG Siegler’s pessimistic take on Nintendo’s future, here’s a telling line from a Dean Takahashi report on VentureBeat:

Mitch Lasky, general partner at Benchmark Capital and a longtime video game industry follower, said, “To quote my six year old daughter, barely looking up from her iPad: ‘What’s a Nintendo?’”

The future of portable gaming is clearly on post-PC computing platforms. (The future of living room gaming may well rest on these platforms, too.) A dedicated camera takes better photographs. A Mac or Windows laptop is far more powerful for numerous computing tasks. A simple dumb phone will last for a month on a single charge. An iPod makes for a lighter weight, more durable music player. Yet all these things are losing sales to iOS and Android post-PC devices. DS-style handheld gaming platforms are no different, and perhaps in a worse situation than the others. Priced for the low-end (like the upcoming 2DS) and they pale in terms of graphics. Compete on graphics and they pale in terms of price compared to carrier-subsidized phones.

A kid asking “What’s a Nintendo?” may sound preposterous to the ears of an adult weaned on Mario and Zelda, but trust me, put an iPad Mini and a 3DS on a table next to each other, and most kids today will reach, if not jump, for the iPad. If you don’t see that as an existential threat for Nintendo, there’s nothing I can say that will change your mind. A Nintendo that doesn’t make games for iOS is a Nintendo that doesn’t reach today’s kids; a Nintendo that doesn’t reach today’s kids is a Nintendo with no future.

It’s a choice for Nintendo between playing the actual hand they’ve been dealt, crummy though it may be, or playing the hand they wish they held.1