Nintendo and Their 3DS Dilemma: Part One

Part One: A New, Smarter Competitor
Part Two: Convenience, Casual Gaming, and Domination

Synopsis: The rush by Nintendo to position their new 3DS portable game console as a “hardcore gaming device” was a desperation move by the company to confront the smartphone revolution and the cheap mobile phone games created for the devices. It is an attempt to brand the Nintendo 3DS as a game device that can maintain a consumer perception that portable games are still worth paying thirty and forty dollars for. If that price point were to collapse, Nintendo’s portable business model would be dead. The problem is, Apple has now forced Nintendo’s hand. In going the premium route, Nintendo defies the history of their Game Boy and embraces a strategy that led to the failure of the Atari Lynx, Game Gear, and lousy software sales for the Sony PSP. Scaled-down versions of console video games tend to sell poorly for portable gaming devices, as those games appeal to people who will just buy the console version, anyway. The best-selling games for portable devices traditionally occupy “casual” demographics, the demographic that Apple has indirectly taken control of. Nintendo now struggles to deal with that reality.

Part One: A New, Smarter Competitor

We have new video game devices on the horizon. It’s time to make a big deal out of them. That’s what gamers do. The Nintendo 3DS is one nice piece of hardware. There’s no new video game consoles to hold over audiences, so a portable Nintendo Wii with “glasses-free stereoscopic imaging” sounds pretty cool. But enough talk about whether children under the age of six should be using a device with three-dimensional output. Have you looked at the announced game library? Nintendo always brings their development moxy to Nintendo hardware. It’s those third-party developers that always disappoint. They ain’t disappointing. There’s some serious star power going into this device. Street Fighter, Resident Evil, Star Fox, The Legend of Zelda, Splinter Cell, Dead or Alive. This is all announced and confirmed. There’s been a massive market for portable video games over the last two decades. This may be the first time that major developers appeared confident and willing to peddle their wares in that portable gaming market.

Immediately, two thoughts clawed into my mind. The first? “Man, that’s an impressive list of franchises to stash on a portable video game device. Nintendo must have done an incredible job assuring these companies that the anti-piracy measures in the Nintendo 3DS can take a punch right in the jaw. None of these companies want to hitch a ride on the development debacles that plagued the Nintendo DS and the Sony PSP.” Then there was a second thought. “Woah, woah, woah. Hold on here. Since when did Nintendo decide that the hardcore gamer was so important?”

“What u mean Mikey Lowell? Nintendo always makes great products!” Nintendo is the most intensely and fiercely stubborn of all successful companies in the short history of the video game industry. It’s not even debatable. Even post-eighties Activision is looking for new ways to fuck over consumers. Look at the consumer perception of Nintendo home hardware. The Nintendo Entertainment System is a beloved part of eighties culture, so beloved that awful graphics design teams can dress their “indie games” in low-quality pixel art and market the product as “retro”. The Super Nintendo wages bloodsport with the PlayStation 2 in the battle for “Best System Ever”. The Nintendo 64 would be fondly remembered if Sony didn’t bludgeon Nintendo in a back alley for most of the late nineties. The Nintendo GameCube is considered to be “kiddie crap”. And then the Nintendo Wii won a massive audience by appealing to a new generation of children and their parents. Every single Nintendo device played off of the same marketing tropes: “Your kids will love it!”, “Look at our revolutionary input device!”, and “Don’t worry about the lack of developer support! All you need is Mario and Link!” Nintendo’s highs and lows have all been created by pressing the same red button. Nintendo’s products don’t change; only the culture and cultural climate that responds to their products.

So why now? Why does Nintendo change their strategy? Why does Nintendo use a portable gaming device to court the hardcore gamer? Why does Nintendo tout third-party brand recognition as the cornerstone of a glasses-free stereoscopic portable gaming device? I mean, damn. Stereoscopic televisions still cost thousands of dollars. The Nintendo 3DS is an introduction to that world. And it doesn’t require glasses! I’m not big on this whole “three dimensions” thing, but doesn’t that technology come with its own checkbook?  Well apparently, I’m that guy who descends from the mountain to share impending horror stories of the game industry. I got one for you: Nintendo is staring face-to-face with a cold-blooded axe murderer. His name is Steve Jobs. Nintendo is changing their soiled pants by the hour and Nintendo is terrified of what Apple has brought to the market.

Weren’t expecting that one, were you? Go back about twenty years. Go back to 1991 and tell people that Nintendo and their Game Boy will face their greatest threat from Apple Computers. Just make sure you have medical support on hand so people don’t die from laughter. The company that engineered the Bandai Pippin and spent most of the nineties failing the basics of competent mouse design is now in position to usurp the Nintendo portable game market. They didn’t even need to create a dedicated video game device to do it.

This story is a little bit complicated, so bear with me here. The traditional narrative for competing with Nintendo was a matter of marketing and age demographics. Sega and Sony are the two companies that figured it out. Those companies indirectly competed with Nintendo. Sega and Sony targeted adult audiences. Sega and Sony peddled “more mature” video games. While Nintendo was lauding the kid-friendly world of Mario, Sonic was “TEH BLAST PROCESSINGS” and “RADICAL SPEED” and “GENESIS DOES WHAT NINTENDON’T”. While Nintendo was scrubbing the blood from their home version of Mortal Kombat, Sega Genesis developers were giving Congress more excuses to crack down on the video game industry. While Nintendo was convincing moms to buy their children a Nintendo GameCube, Sony was creating the video game controller equivalent of the Rosetta Stone. And with that DualShock 2 controller, its seven analog sticks and its fourteen shoulder buttons, the Sony PlayStation courted an audience looking to graduate towards more complex gaming experiences.

Sega and Sony understood what was the only rule for going to war with Nintendo: You do not go to war with Nintendo. You are not going to out-kid Nintendo. It’s not doable. Well, technology has been transforming pretty rapidly over the last couple of years. You remember that scene from Metal Gear Solid 4 where Liquid Snake incapacitates soldiers by interfering with the nanomachines in their bodies, where people are frothing at the mouth and throwing up? That’s what would happen to society if the internet went down for a day. Industrial society has demonstrated they cannot live without the internet. During this time, Apple got pretty good at this “take existing concepts and polish the hell out of them” thing. One of those devices is called the iPhone. Thanks to the internet, this cellular phone can do everything except make a decent phone call. You can play portable video games on this thing. The consumer only needs to slide through a couple of windows to browse and purchase from tens of thousands of games. Thanks to the iPhone and the now-gigantic market for smartphones, a second rule has emerged: Be more convenient than Nintendo. Be more “pick-up-and-play” than Nintendo. Apple has done it.

The iPhone has sold 50 million units so far, a number that is growing exponentially. Android phones are selling even faster. Yes, the 3DS can do gaming better–the graphics appeared to be roughly on par with the Wii. But as the famous saying goes, there is a limit to the number of electronic devices a person wants to carry in their pocket, and that limit is one.

– “Cracked” Senior Editor David Wong, More Proof the Video Game Industry is Out of Ideas (E3 2010); June 16, 2010*

“But Mikey, Nintendo will always have an audience!” You’re right. Market share isn’t the biggest issue. Just like the Nintendo Wii does not “compete” with the PlayStation 3 or the Xbox 360, the Nintendo DS does not “compete” with the iPhone. Nintendo’s problem goes beyond market share: Apple allows anybody to make a video game for their iPhone. Anyone. The game that knocked Angry Birds off the top of the iOS sales charts was created by a fourteen-year-old.* It’s a game where you roll a red rubber ball through a series of non-descript, physics-based levels. Fuck that kid. When fourteen-year-olds are making the best-selling games on your device, you have a quality control issue. Sure, Apple has a content enforcement policy. It has been so effective that a number of programmers have outright stolen content from other games on the Apple Store to package with their own.* In other words, there is no such thing as quality control in the mobile gaming market. The free market acts as the quality control method. That is, “I am not paying for your game unless you meet a pricing threshold.” For thousands of games on the IPhone store, that pricing threshold stands at one dollar.

The consumer will now have to make a decision. Parents have already purchased a cell phone for their children. Adults have already purchased a cell phone. Modern society has declared the cell phone a necessity. The “Game Boy” is now secondary. So which scenario is somebody more likely to take up? “I’ll pay a couple of dollars to buy some games for the phone I already own?” Or “Let’s go spend two-hundred-and-fifty dollars on a Nintendo 3DS and then pay forty dollars for each game?” Which of those scenarios is more convenient to the casual consumer? When consumers overwhelmingly choose the cheap and disposable games for their mobile phone, they will (if they have not already done so) destroy the price threshold for casual consumers and their portable video games. And destroying that price threshold will then destroy the ability for Nintendo portable game devices to hold any dominance of the market.

“I actually think one of the biggest risks today in our gaming industry are these inexpensive games that are, candidly, disposable from a consumer standpoint,” Nintendo of America [President] Reggie Fils-Aime told Game Trailer TV host Geoff Keighley in the Spike TV series’ latest episode. File-Aime was on the show to promote the Nintendo 3DS, Nintendo’s next portable gaming machine, which launches next month in America.

Fils-Aime wouldn’t call $1 iPhone staple Angry Birds disposable. He called that one “under-priced.” But, he said, these cheap games create a “mentality for the consumer that a piece of gaming content should only be $2.” He said that 3DS launch-window submarine game Steel Diver, on the other hand, is a “full-fledged” game that will be worth its $40 or so asking price.*

Kotaku, Nintendo Frowns on (Most) Cheap iPhone Games, February 4, 2010*

So maybe the iPhone doesn’t directly compete with the Nintendo DS. But the games are targeted towards similar audiences. Remove Mario and Pokémon from the top-selling games on the Nintendo DS, and you’re left with a world of brain trainers and language-training software and fashion designers and pet shops.* And all of those casual consumers are asking: “Why should I pay thirty dollars for Nintendogs when somebody on the Apple store can give me the same game (albeit lower-quality) for a fraction of that price?” It’s the exact same situation that caused the Video Game Crash of 1983. Atari failed to fathom that they would need a way to “lock people out” of their Atari VCS. When everybody with a budget decided they wanted to make a video game, there was nothing Atari could do about it. Those developers and their terrible games devalued the market for the products that Atari and Activision were publishing. Nintendo is very, very familiar with the lessons of the 1983 crash. They designed the Nintendo Entertainment System to prevent it from happening again. That’s what the lockout technology was for. That’s what their draconian third-party development agreements were for. Nintendo was playing dictator to make sure the quality of Nintendo products could justify a fixed price point, where every game hit the shelf for forty or fifty dollars and consumers wouldn’t question it. And thus, Nintendo and other companies could sustain their business model.

Ad published in the Pennsylvania newspaper “Altoona Mirror”, May 16, 1984.

Now don’t you dare claim I’m protecting Nintendo’s bottom line. Fixed price points have their own issues and they don’t always favor the consumer. The growing world of used video games is an adverse reaction to the current sixty-dollar fixed price point for software on video game consoles, itself an adverse reaction to the monster budgets currently used in console game development. That particular price point exists so megapublishers can masturbate to their explod-a-thons. And obviously, the portable video game market is not going to “crash” like the American video game market did in 1983, where the market shrunk by 95 percent from 1982 to 1985. When video games crashed in 1983, that “reassured people” that video games were simply a fad or a novelty. In 2011, too many people play video games way too passionately. People are not going to wake up, decide that Angry Birds is not worthy of their palate, and stop playing video games. It’s different now. The rapid saturation of the portable video game market would simply devalue the “price point” of a portable video game and send the portable gaming market into an indefinite period of mediocrity. “Why bother spending money to develop good portable video games if it’s not worth the money? Why spend the money when we can make more money and assume less risk by going cheaper?” That’s a scenario with tons of precedent in the entertainment medium.

Prior to the rise of television, animated cartoon shorts were packaged as part of a day at the movies. It was the only distribution method for those cartoons. As television made its move during the late fifties, those beautifully-animated, incredibly-well-written six-minute long cartoons couldn’t fill the programming schedules. Television networks needed programming to full schedules. The result was a series of animators that were perfectly willing to create cheap cartoons and television networks that were willing to broadcast them. The animation in these shows proved so piss-poor (even the well-written ones such as Rocky and Bullwinkle) that they were derided as “illustrated radio”. Didn’t matter. Networks needed programming. William Hanna and Joseph Barbera managed to Zynga the operation, building and dominating the next three decades of American animation by cutting costs and making as many disposable cartoons as possible. In response, Disney and Warner Brothers stopped investing money in their animation departments. (Let’s not forget that Disney animator Don Bluth became so frustrated with the state of the Disney animation department that he jettisoned for the video game market and directed the animation for Dragon’s Lair.) Why bother? Why make a good product and split hairs when Hanna-Barbera has a stranglehold on the market with a cheap product? (Yeah, I’m calling out your love for Scooby-Doo. Deal with it.) Disney and Warner Brothers only began re-investing in animation during the late eighties and early nineties when they discovered their cartoons could be licensed with toy lines, cereals, video games, and flame throwers. That is, the companies once again had the financial incentive to create well-animated and well-written cartoons. (Then fittingly, Nintendo’s own Pokémon television show ruined that, but that’s another story for another day.)

You can find this scenario repeated ad nauseum throughout this last decade. The continued dissemination of satellite and cable television has diminished the ability or the incentive for major television networks to fund traditional programming. Actors cost too much money, writers cost too much money. We now have a television market where networks lock a dozen ordinary people in a room or stuff them on an island and tell them to eat bugs or take shit from Donald Trump. Look at the internet. The idea that anybody can supply their opinion on a topic has destroyed print journalism. Audiences are being left with a dangerously unfiltered internet where political polar opposites find creative ways to invoke Hitler and self-proclaimed cynics write their own narrative explaining how an entertainment medium works.

That saturation is now going to impact the portable video game market. That distribution model does not favor Nintendo. Apple and the other various smartphone creators now control the first move. And the longer mothers are buying their kid a cell phone at the age of eight and nine, the more control that Apple and company earn with that first move. Nintendo spent years neglecting the internet. Nintendo spent all this time chugging along and telling the public that “they just make really good video games”. They will lose their monopoly on the portable video game market because of it and the company knows they can do nothing to change that.

In order to win, Nintendo needs to find a way to keep the portable gaming price point stable. They are going to try and do it with brute force. That is why your Nintendo 3DS features what gamers would call an “A-list lineup”. The chief goal of the Nintendo 3DS is to remind the public why you pay money for a Nintendo handheld gaming device. It’s not about great video games. It’s about psychology. They are going to fight the public perception of what a video game should be worth with “premium portable video games”. It’s going to sound like this: “Hey there, mobile gamers. This is Nintendo. Your smartphone may be able to play video games. That’s nice. But can it play Resident Evil? Metal Gear Solid? Dead or Alive? We’re not talking about those watered-down point-and-touch rail shooters. We’re not talking half-functional versions of established console games. We’re talking about the real thing. We’re talking about a portable video game device with the same graphics output as a current-generation video game console. So if you ever decide that you’re bored with Ninja Farm or Zombie Birds, we have something much, much better for you.”

Slight problem with that: The entire history of portable video games, the market that Nintendo crafted and littered with the bodies of its competitors, says that cannot work. The only thing that Nintendo has going for them is “B-b-b-b-b-but we’re Nintendo!” I’ll have more on that soon.

Continue to Part Two: Convenience, Casual Gaming, and Domination

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