Nintendo in Motion

My terse reaction to the 2DS on Wednesday:

It’s $129. I say they should just give in and start making iOS games. They’re not going to win this battle.

This prompted several thoughtful responses, many of them staunchly in opposition. As my subsequent update in that brief piece mentions, much of these responses were along the lines of “Isn’t this like telling Apple to give up on hardware and license Mac OS to other PC makers?”

One thing I should have made clearer from the get-go is what I meant by “just give in”. By that I meant only that Nintendo should start making iOS games, not that they should abandon their own hardware. There’s a big difference. Nintendo making iOS games might eventually lead to Nintendo abandoning their own hardware, or might not. No one knows. All I’m saying is that there is an opportunity for Nintendo here, and they’re missing it.

Lukas Mathis’s response begins:

For the longest time, Microsoft analysts had this unhealthy obsession with Apple. The logic went a bit like this: Apple is doing poorly because Microsoft won the PC war. If only Apple stopped making hardware and licensed their OS to other manufacturers, surely, it would do much better. Of course, Mac users thought this notion quite odd, for good reasons. They liked Macs precisely because the same company made both hardware and software, which resulted in a product that worked much better than your average Windows PC. Nowadays, Mac analysts have a similar obsession with Nintendo. The logic goes a bit like this: Nintendo is doing poorly because Apple and Samsung own the market for portable devices. If only Nintendo stopped making hardware and published their games for iOS instead, surely, it would do much better.

My nutshell take on Nintendo’s problems today is subtly different than what Mathis suggests. My take goes like this:

Nintendo is doing poorly because they seem incapable of producing best-of-breed hardware, both in console and handheld. The world has changed in the last five years, and hundreds of millions of people now carry powerful, well-made, touchscreen computers with them everywhere they go. Nintendo should expand to start making games optimized for these devices — in the short term as opportunity to sell more games, in the long term as a hedge for the possibility that the company will no longer be able to compete at all in hardware.

Also, Mathis’s analogy to 1990s Microsoft analysts seems inapt. He’s correct that it was common advice then for Apple to do what Microsoft was doing: license their operating system rather than make their own hardware. Microsoft is the most successful company in the industry, therefore Apple should do what Microsoft does and just license software to commodity hardware makers. But if we applied that line of thinking to Apple analysts giving advice to Nintendo today, would not the advice be for Nintendo to stay the course? Apple is the most successful company in the industry, therefore Nintendo should continue doing what Apple does by making its own hardware and software.

I’ll add too that I think it’s possible — and it would please me greatly — to see Nintendo pull out of its now years-long slump with its traditional platforms. But it looks to me they aren’t capable of doing it.

Mathis points to sales figures comparing the previous-generation DS to the current 3DS and argues the 3DS is doing just fine:

Because the two launches didn’t occur during the same time of the year, the holiday spikes don’t align, but I think the picture is clear: sales of the 3DS are not that far behind the second-most popular videogames console of all time. After 130 weeks on the market, the DS sold 43 million units, while the 3DS sold 33 million units. The hypothesis that Nintendo needs to abandon the hardware market because the iPhone destroyed the market for portable gaming just isn’t consistent with reality.

No one is arguing that 3DS sales haven’t been OK, but they’re certainly not great. They only look good compared to the Wii U, which appears to be a failed platform. (Woe to the Gruber household, which bought one last Christmas. More on this in a moment.) The problem for Nintendo is not so much with where the proverbial puck is right now, but rather with where it is heading. A drop from 43 to 33 million units after the same number of weeks on the market is a dangerous trendline. A 23 percent decline is significant. Nintendo itself has called 3DS sales “weaker than expected”. If their next-generation handheld drops by a similar percentage compared to the 3DS, they’re toast — and that platform isn’t even yet on the horizon.

When I say Nintendo seemingly can’t compete on hardware, here’s what I mean. Take touchscreens. The 3DS touchscreen stinks. It’s low resolution (400 × 240 pixels), and you need to use a stylus to get any sort of accuracy out of it. It pales in comparison not just to Apple’s iOS touchscreens but to those from any serious modern smartphone maker. Hell, even BlackBerrys have far superior touchscreens to Nintendo’s. And it’s not just the 3DS; the Wii U’s touchscreen gamepad is crummy too, and it’s supposed to be a flagship feature of the console. Resistive touchscreens in 2013 feel like relics from a museum — retro technology on brand-new devices.

They need to catch up to the state of the art, or they’re going to lose today’s kids. My generation has nostalgia for and loyalty to Nintendo; kids don’t. They just see a company that makes devices with low resolution and janky touchscreens — and really fun games with great characters.

Craig Grannell also wrote a thoughtful piece defending Nintendo’s stay-the-course strategy:

For some reason, Gruber either ignores or dismisses that Nintendo is the Apple of the gaming world — it has succeeded through controlling everything, not just through the games it creates. To say Nintendo should create games for iOS is little different from suggesting a less fortunate Apple should rapidly get iLife and iWork on to other platforms. Even testing the water would be an admission of failure, which would damage the brand.

This bit seems poorly considered, on several fronts.1 For one thing, Apple has released iWork for other platforms, albeit in the form of web apps rather than native ones. The only reason the iCloud web apps exist is to allow people using other platforms — Windows in particular — to use them. And this effort is from today’s Apple, operating from a position of strength, not weakness. Even Apple sometimes goes to where the users are, rather than demanding the users come to them.

But an even better comparison might be iTunes for Windows, which Apple made available not just to support Windows-using iPod owners, but to allow any Windows user who wanted to just download iTunes — free of charge — to organize their music. (Cue the classic clip of Steve Jobs talking to Walt Mossberg in 2007: “It’s like giving a glass of ice water to someone in hell.”)

There are cultural similarities between Apple and Nintendo, and one of them, indeed, is a desire to maximize control over everything. But Apple has shown the humility to cede control when necessary — to avoid isolation, and to capitalize on the massive size of the Windows PC market. None of these historical analogies are precise, but Windows was to iTunes a decade ago a lot like what iOS is to Nintendo today.

That said, of course, Nintendo completely ignored Windows and PC gaming, and that turned out just fine. I suppose that’s how Nintendo sees iOS (and Android) today: as the handheld equivalent of PC gaming. I see a significant difference though: PC gaming has always been the hardcore side, consoles the casual side. In handhelds, iOS and Android are the casual side. I can’t recall anyone clamoring for Nintendo to make PC games; I bet there are millions clamoring for Nintendo to make iOS games.

A better comparison than Apple might be Disney. That’s the company Nintendo has always seemed most like to me. Both companies are in the core business of entertaining, with a family-friendly lineup of iconic characters and franchises.

One thing that has long fascinated me about Walt Disney was that he was always looking for the next big thing, and never worried about protecting the last big thing. (In this way, I’ve always thought Disney’s mindset and leadership were strikingly similar to those of Steve Jobs.) They started by making animated short films, and conquered that. With Snow White, they ventured into features, at a time when the consensus was that no one wanted to see feature-length animated films. But the key decision was Disney’s embrace of television in the 1950’s. All other movie studios eschewed television. They saw it as a lesser medium — tiny screens, tinny sound, fuzzy picture quality. Of course, they also saw it as a threat. But not Walt Disney. He saw television as an opportunity. A way to expand his company’s reach.

That, to me, is how I wish Nintendo saw iOS gaming. It might not kill Nintendo’s own console platforms any more than The Mickey Mouse Club killed Disney’s feature film business. And if Nintendo’s hardware platforms are doomed, I think they’re doomed no matter what. Nintendo producing iOS games isn’t going to accelerate the demise of DS handhelds. Better to get a foothold in the new world as soon as possible, to do it before it’s too late.

Another common refrain I’ve heard this week is that Nintendo’s games are utterly dependent on hardware controls. No argument here that some games are better with real D-pads and physical buttons. (I can’t recall ever once truly enjoying a D-pad style game on the iPhone.) But there are other types of games that are better without D-pads and buttons. Some productivity tasks are better with physical keyboards too — that hasn’t halted the decline of QWERTY keyboard smartphones.

And that brings me to one final company to compare Nintendo to: RIM. The same arguments about physical buttons, the same loyal fan base, the same “sales aren’t yet in steep decline” charts and graphs. BlackBerry grew, significantly, its market share from 2007-2009. That’s what comforted RIM’s executives as they stuck their heads into the sand, reassuringly rubbing their thumbs over their beloved hardware keyboards. Again, the problem then for RIM was not with where the puck was at that moment, but rather with where it was going. I saw RIM as doomed in 2008 — again, while BlackBerry’s market share was still rising. Nintendo has already reached the point where their current-gen handheld platform isn’t selling as well as the previous one. I say that’s not because the 3DS, in isolation, is a poor successor to the DS, but rather because the 3DS debuted in the post-iPhone world, and compares unfavorably in numerous regards.

Here is what I’d like to see Nintendo do.

Make two great games for iOS (iPhone-only if necessary, but universal iPhone/iPad if it works with the concept). Not ports of existing 3DS or Wii games, but two brand new games designed from the ground up with iOS’s touchscreen, accelerometer, (cameras?), and lack of D-pad/action buttons in mind. (“Mario Kart Touch” would be my suggestion; I’d buy that sight unseen.) Put the same amount of effort into these games that Nintendo does for their Wii and 3DS games. When they’re ready, promote the hell out of them. Steal Steve Jobs’s angle and position them not as in any way giving up on their own platforms but as some much-needed ice water for people in hell. Sell them for $14.99 or maybe even $19.99.

iOS users as a whole may not be used to paying $20, $15, or even $10 for a single game. But Nintendo customers are used to paying more, and millions of them own iPhones. Maybe no one can upset the race-to-the-bottom pricing structure of iOS games, but if anyone can do it, it’s Nintendo. (And it’s for this reason that I would recommend Nintendo specifically target iOS, not Android. If the endeavor succeeds on iOS, consider Android later. But I think it’s possible, if not probable, that the iOS market could support $15–20 Nintendo games but the Android market could not.)

If it works out, keep making more iOS games. In a year, when the second round of Nintendo iOS games are ready, drop the price on the old ones to, say, $7.99–$9.99. Lather, rinse, repeat.

If it fails, chalk it up as a failed experiment, a la Safari for Windows.

In the meantime, get to work on a next-gen homegrown Nintendo handheld. (Or, I hope, keep working on the next-gen handheld that’s already underway.) Understand that it needs to compete, spec-wise and price-wise, not with the iPhones and Samsung Galaxys of today, but with those of 2014, 2015, and beyond. A dedicated handheld gaming platform in today’s world needs to offer a gaming experience not just on par with but far exceeding what’s possible on smartphones. It’s much like the problem facing point-and-shoot camera makers — you’re asking people to carry a second device.

It was one thing for the technically inferior (standard def!) Wii to hold its own against the Xbox and Playstation 3, which are niche devices for mid-to-serious gamers. 10-15 million units per year is a big niche, but a niche nonetheless. It’s another thing entirely for Nintendo’s handheld devices to lag so far behind, technically, the iOS and Android phones that hundreds of millions of their potential customers carry with them everywhere they go — and which children can and do obtain as two-year-old hand-me-downs when their parents upgrade to new ones.

It seems far more likely that Nintendo can produce amazing games for iOS than that they can produce technically competitive handheld hardware. I see no harm in trying both.