The key word was stubborn.

In 1981, a young Shigeru Miyamoto was looking for a name for his new, revolutionary videogame character. It was a gorilla, and he had decided that it would be an unusually stubborn ape. So he turned to the Japanese word for "stubborn" in a translation dictionary and picked out one of the English equivalents. Donkey Kong was born.

The character would star in the first project that the 29-year-old Miyamoto was overseeing personally at Nintendo. He had come to the company straight out of art school, and had no grasp of the intricacies of the Zilog Z80 microprocessor that powered Nintendo’s arcade machines. He just wanted to make a game in which a villainous, and stubborn, ape tossed obstacles at a character controlled by the player while it glared and grinned and pounded its chest arrogantly.

Miyamoto already knew what Nintendo’s engineers, who actually knew how the hardware worked, would say about his creation: No. A character with shifting facial expressions and flailing arms would use up the limited memory that was required to run the rest of the game. Donkey Kong was impossible.

But Miyamoto was stubborn too. He anticipated the engineers' objections to his elaborate game idea. Drawing a series of pixelated images on graph paper, he laid out how the big gorilla could be broken up into sections, each with its own simple animation. “The parts were moving separately, even though it looks like they were all moving together,” he later recalled. “The engineers sometimes said ‘no’ to me, but in this case they said ‘OK, that’s going to work.’”

Today, Miyamoto's stubbornness is woven into Nintendo's DNA. As the console maker gears up to launch its new Wii U on Sunday, it is thumbing its nose at all of the prevailing trends in the game industry. Pundits say Nintendo should do everything differently: Dump hardware and put its popular games out on smartphones; ditch the disc and embrace a digital-only business model; pursue free-to-play games with in-app purchases. But its president, a former game designer, says he believes 99-cent apps are killing the game business like a virus. And Shigeru Miyamoto, the company's game design genius, who went on to create Super Mario and countless other legendary titles, is unwavering in his belief that the real future of home gaming is a crazy idea Nintendo tried 10 years ago and failed at.

A Reputation For Being Loud —————————

Miyamoto told me the Donkey Kong story in 2003 at Nintendo’s headquarters in Kyoto, Japan. After the worldwide success of Donkey Kong, he designed many more arcade hits. As the business model of the games industry shifted from arcades to home consoles, he had overseen the development of hundreds of games that have sold over 4 billion copies. In the process, Miyamoto had risen to become the head of all of Nintendo's game development efforts and the manager of the company’s Entertainment Analysis and Development division. By the time I first spoke to him, Nintendo had begun marketing Miyamoto as a sort of Willy Wonka of game design, complete with a big goofy grin and a childlike sense of wonder.

That, he said at the time, was not the way he was perceived within his company. “I think that I have a reputation for being loud, being hard on everybody, sticking to minute detailed points,” he told me. “Many would maybe agree that I am a person who even at midnight fights for his own opinions.”

Nintendo was built on Miyamoto's convictions. Everyone said the American game industry was dead after Atari's bust; Nintendo refused to believe it and single-handedly resurrected the industry through its tenacity. Rivals introduced portable game systems with color screens; Nintendo dug in its heels with the cheap black-and-white Game Boy for nearly a decade and made a killing.

But its refusal to follow trends sometimes hurt, big time. When the rest of the gaming industry moved to the CD-ROM, Nintendo felt it best to stick with cartridges. What resulted was nothing less than a mass exodus of nearly all of its publishing partners, which moved to the far less risky disc medium and away from Nintendo.

When I sat down with Miyamoto in 2003, there was a growing sense that the stubbornness that had served it well was now destroying Nintendo. The videogame industry had changed drastically, and Nintendo refused to go with the flow. Everyone, including Wired, had advice for the company as it prepared to release its next console: Ditch the cartoony aesthetic for a gritty cinematic game that could appeal to 18- to 25-year-old men, refocus the console around online connectivity, or simply get out of the hardware business entirely and sell software that runs on Microsoft's and Sony's machines.

Nintendo rejected all of this advice, pursuing its own vision of simple, immediately gratifying gameplay experiences for all ages. And over the next few years, it experienced a level of success that the game industry had never seen before. The Wii outsold its more technologically sophisticated rivals, the PlayStation 3 and Xbox 360, by tens of millions of units. The Nintendo DS handheld became the best-selling gaming device ever, moving 150 million units. Twelve of the top 20 best-selling games of all time were made by Nintendo for the Wii or the DS. By 2007, the company had a market cap of $73 billion, making it the second biggest company in Japan, well ahead of Sony and just behind Toyota.

It was one of the most dramatic corporate turnarounds of the last decade. But now, Nintendo needs to reinvent itself all over again. Wii peaked early and sales crashed. Smartphones and tablets are eating the lunch of the formerly lucrative gaming handheld business; U.S. sales of the new Nintendo 3DS were lower in the same period of 2012 than they were when it launched in 2011, even after a price drop. Earlier this year, the company posted its first loss since it went public in the 1960s, and recently cut its forecasts for the current fiscal year.

Satoru Iwata. Photo: Ariel Zambelich/Wired

On March 1, 2011, Satoru Iwata delivered a gloomy rant at the annual Game Developers Conference in San Francisco. “Game development is drowning,” Iwata said. “Our business is dividing in a way that threatens the continued employment of many of us who create games for a living.”

Who he was talking about was obvious. Across the street, at the exact same moment, Steve Jobs was delivering one of his final keynote speeches, proclaiming 2011 the "Year of the iPad 2." Apple's phones and tablets were proving to be gaming juggernauts, not only because of the intuitive touch-and-tilt interface but because games could be made and sold much more cheaply – a few dollars, 99 cents, even free. Meanwhile, Nintendo was about to introduce its Nintendo 3DS with its $40 game cartridges.

Iwata's message to game developers was that Apple was selling them short. Games, he said, were worth more than 99 cents. “Is maintaining high-value games a top priority, or not?” he asked the assembled crowd. An answer was not forthcoming. Nintendo launched 3DS a few weeks later to sluggish sales. Within months, Nintendo slashed the price of the unit by up to 40 percent globally.

If Satoru Iwata's concern for game creators seems genuine, it's because he is one. Since Nintendo's establishment as a maker of playing cards in 1889, the company has only had four presidents: three members of the founding Yamauchi family, and Satoru Iwata. Though he has considerable business acumen, Iwata is a passionate game designer who bootstrapped himself into the industry.

"I used to have a very limited programmable calculator in my school days," he told me at the Electronic Entertainment Expo earlier this year, "and I was fighting to make my own game at the time."

If that young man was around today struggling to get into the business, he'd be making smartphone games, Iwata said.

"I think it's a wonderful thing that amateur videogame players are now given the opportunity to create their own work and sell it at one dollar," he said. "If I had this kind of opportunity like today at that time, I would be more than happy and more than willing to make my own game and offer it in that kind of environment."

We really want to sustain the monetary value of game software. Otherwise, we cannot make game creation a rewarding business.But he doesn't believe that's the path for Nintendo. "If you ask me, don't you think Nintendo should sell Mario on a smartphone for 99 cents, I do not think the answer is yes," he said. "We really want to sustain the monetary value of game software at a higher level. Otherwise, we cannot make game creation a rewarding business."

Smartphone makers, Iwata says, don't care about the gaming business, just about sustaining the value of the platform itself. He compares it to what companies like Apple have done with music: "They have changed the mindset of the people from first purchasing the music CD to purchasing single [tracks] at the cost of just 99 cents. They've made people think that that's a smarter activity. And now what's happening is that music artists can no more get enough resources of money out of the making and selling of CD music, but rather they have to monetize in other ways, like live concerts."

I raise the point: Didn't the 99-cent song save the music industry? As soon as internet speeds made it possible, people started pirating music. By making it legally available at an impulse price without restrictive DRM, could it not be argued that the new distribution model injected more money into the business than would have been there before?

"I have to disagree with you about that, Chris, 180 degrees," Iwata said. A great deal of the money that used to be going into the music industry, he said, was now being funneled in new directions – the companies that sell music downloads and MP3 players. "They have done so so smartly that they were able to establish the image that they are the saviors of the music industry," he said. "However, the fact of the matter is they have simply transferred these resources of music and monetary value into somewhere else. And the same thing is happening in the game industry."

And how. Game publishers used to pour titles onto the Nintendo DS by the bucketful, but now those games are moving to iOS and Android. Nintendo was caught flat-footed by the rise of digital distribution; the original Wii had almost no storage space and the online shopping experience was awful, so few publishers bothered to make digital games. It has belatedly overhauled this system for Nintendo 3DS and Wii U, finally allowing publishers to put games out both on discs and as downloads.

But Iwata insists that Nintendo cannot simply let gamemakers do whatever they want with these digital delivery services. "We should have some control, because 100 percent freedom in that regard, especially in digital distribution, can simply [result in] everything drops to free," he said. So Nintendo does not plan to give developers carte blanche to set their own prices on the Wii U online store, although he says that "under certain circumstances" a free-to-play business model might be acceptable on Wii U.

Handheld games have been hit hardest by the shift to alternative platforms, but now consoles are threatened as well. As it did with Wii, Nintendo wants Wii U to be more than just another game machine. If it succeeds this time, it will be half because of Iwata's business acumen and half because the next big thing in gaming was called yet again by Miyamoto – and about 10 years ahead of its time.

Shigeru Miyamoto. Photo: Ariel Zambelich/Wired

The 2003 Electronic Entertainment Expo is generally considered to have been Nintendo's low point. The big games of the show were the shooters Half-Life 2 and Halo 2. The game industry was moving in lockstep in a more realistic, adult-oriented direction. Nintendo's fans were at least expecting some big new game announcements, but what the company showed at its press briefing was downright inscrutable.

Shigeru Miyamoto took the stage to show off a game called Pac-Man Vs., based on the classic arcade game. Players would connect their Game Boy to their GameCube with a special cable. One player would look at the Game Boy and see a traditional board full of dots, but the other players would look at the TV and play as the multicolored ghosts, chasing after Pac-Man without being able to see the whole game field.

It was an incredibly clever and unique game that was utterly wrong for its time and left the E3 audience unimpressed. This was what Nintendo thought was the next big thing? Freakin' Pac-Man? The press left the theater and lined up to play Halo.

I spoke with Shigeru Miyamoto, as I did with Satoru Iwata, at this year's E3 in a meeting room inside Nintendo's booth on the show floor. Outside were dozens of Wii U demo kiosks, most of which were devoted to playing NintendoLand, a collection of games that used the Wii U's dual-screen setup in various unique ways. One of them was exactly like Pac-Man Vs.; one player played as a ghost and the other four ran around a mansion maze trying not to get captured. This time, people crowded around the booth to play.

"When you think about bad ideas, there are certainly ideas whose time has not yet come, or ideas whose technology is not quite there to realize," Miyamoto said when I asked him about his legendary tenacity, his refusal to give up on ideas even when they fail.

"There are lots of ideas that I gave up on because they're not really good ideas. But when I see something that really is a good idea, but its time maybe just hasn't come yet I realize that's something I need to hold on to. I don't know if stubborn is the right word, but there's a Japanese word, nebari – persistent – that is maybe a little better match."

The problem with Pac-Man, he said, was that it was far too much of a burden on players to ask that they buy two separate game hardware systems plus a proprietary cable to connect them, then set the whole Rube Goldberg contraption up every time they wanted to play. "This is our chance," he says, to introduce the decade-old idea of two-screen gaming on the couch without it being a burden on the users. Nintendo doesn't care that what it called "connectivity" was a huge flop 10 years ago; it still believes that players will like it if Nintendo can perfect the formula.

Nintendo unveiled Wii U at E3 last year. At this year's show, Microsoft showed off a similar concept called SmartGlass, by which users could interact with their Xbox 360 using a tablet or phone. Miyamoto took the announcement as the sincerest form of flattery. "We're seeing the emulation [of our ideas] occur very quickly, which if anything tells us they know this is a good idea," he said. But Miyamoto was quick to stress that SmartGlass wouldn't be as good as Wii U.

"What's really important for people to understand is that we've had 10 years of experience and lots of trials and hardship in trying to work with the connectivity between two devices, or the kind of interface that would use two screens," he said. "And so for other people to jump into this area without the benefit of that history and those experiences, it makes me think that they don't necessarily know everything that we have learned about working with this kind of device."

This week, the man who put Nintendo on the map turned 60 years old. Miyamoto has been at the head of the company's game design efforts for decades, leading a team that has introduced innovation after innovation. Although he says he has taken a big step back from being directly involved in the production of huge games, leaving it to younger team members, he is still the Jobs-like brilliant mind that steers Nintendo's future. He thinks outside of the box, or in this case, outside of the television set.

"When it came to the Wii U, this was really the first time in our console history that we took that focus away from the television even for a moment," he said. "I have to say that the responsibility for that decision was mine."

For Wii U's launch, Nintendo has put forth a wide variety of examples of how two screens can be used. Multiple players might have totally different views of the same situation, as in the ghost-hunting game. Or a single player might have to juggle two screens' worth of data, making a basic experience much more challenging. But the secret appeal of the GamePad might be simpler than all that. New Super Mario Bros. U lets you play the whole thing on the GamePad without using your television screen at all. Since the pad is wireless, you can take it 25 feet away from the console. Want to go to bed, but don't want to stop playing? Need to run and get a soda while a movie is on Netflix? Or does someone else in the house just want to use the TV?

Nintendo's best-case scenario is for Wii U to turn out like, well, the iPad – something that seemed pointless and indulgent at first, until the moment that people started using it and discovered that they could not live without it. Worst case, players get bored of the novelty and it's GameCube all over again.

Another potential hurdle for Wii U is its low processing power. Yes, it is roughly equivalent to the power of the Xbox 360 and PlayStation 3, as illustrated by the fact that major publishers are porting over their big games for the Wii U launch: Assassin's Creed III, Call of Duty Black Ops II, Mass Effect 3. Problem is, next-generation consoles are on the way, probably in a year from now. If triple-A game publishers move all of their efforts to those consoles, who'll make Wii U games anymore?

Nintendo's gamble in this case would seem to be that the transition into the next generation of game machines will be a rocky one. Already we are seeing the signs: Epic Games, maker of the Unreal Engine, thinks that the costs of making games will "only" double at the beginning of the next generation; Ubisoft is hedging its bets and developing "cross-generation" games. This may contribute to a lack of big exclusive next-gen games, which might cause consumers and publishers to not pull out of the current generation so quickly. And if that's the case, it'll make financial sense for publishers to create Wii U versions of those games, too.

But like other game consoles, Wii U is still saddled with selling $60 games when those same games can increasingly be purchased much more cheaply on PCs through services like Steam. And that could hurt Wii more than its low-powered hardware. The paradox of Wii U is that it's a daring new form factor for videogames that's married to an increasingly obsolete packaged-goods business model.

The life or death of Nintendo does not hang in the balance. The company has about $10 billion in cash reserves and no debt. It could use that to pay its employees for decades. If Wii U and 3DS can't get it going, Nintendo can regroup and re-strategize. But at 60, how much longer can Shigeru Miyamoto stay up until midnight fighting for his point of view in a meeting room? He's spent years training an army of successors how to think like him, and he dangles the specter of "retirement" over the heads of the younger workers, to let them know he won't always be around to fix everything.

But for the time being, it's still the team of Miyamoto and Iwata, two game designers, primarily tasked with keeping Nintendo relevant.

"I have a huge respect for Mr. Miyamoto," Iwata says. "He knows what he's good at and what he's bad at. And then somewhat, in the category of what he's not so good at, I happen to be the person who is able to deal with these issues better than he does," he says. "He is kindly trusting and following my decisions, and when it comes to the more creative arena I give him 100 percent trust."

One man puts complete trust in the other's creative instincts, just as one puts complete trust in the other's business acumen. Each believes the other has Nintendo on the right track.

Soon enough, we'll see if their stubbornness pays off again.