Where Nintendo is going…

This is about the long term direction of where Nintendo is going. We’ll go into the more specifics about the consoles later.

Let me ask you a question. What is the business of McDonald’s? While they do sell hamburgers, that is not why they are in business. The actual business of McDonald’s is real estate. The fast food hamburger front allows McDonald’s to purchase and control prime real estate at the busiest street corners in America. McDonald’s can then sell that property at outrageous costs. This isn’t some wild interpretation from Malstrom. The founder of McDonald’s has said this directly, and it is well known among the business class.

This is also the true business of Wal-Mart. You see how big those stores and their lots are? By taking vast control of land, Wal-Mart will be able to sell the real estate for tons of money.

Their practice is sound. Since America is a nation that has population growth, more and more unsettled areas are becoming settled. Real estate prices soar around these areas. Note how consistently McDonald’s or Wal-Mart gets to these rural areas as they transform into cities. Through this practice, McDonald’s came in control of more land than the Church and controls the property on the busiest streetcorners of America.

Now let’s make believe in a term called ‘digital real-estate’. Instead of a hamburger seller owning physical property on streetcorners, it is “roads” on the Internet.  Apple’s recent rise wasn’t because they made a better computer. Apple owned the ‘digital real-estate’ of things such as i-Tunes which is digital downloads for music… then movies… then games… and so on. Apple then got into phones where they now own ‘roads’ of communication.

The rise of Microsoft is a clearer example. DOS and Windows are not the best operating systems… by far. But Microsoft did own and control a sort of ‘digital realestate’ and rode the trend of the computer revolution. Everyone had to buy a license from Microsoft. When people were doing computer business, they were doing it on Microsoft’s property (so to say). Microsoft also had a sort of ‘digital real estate’ with business computing. Microsoft owned that property and businesses paid licenses to do their business on Microsoft’s ‘digital real-estate’.

Atari was not just a video game company. Atari was also a computer company, and it became a competitor to Apple (note that Steve Jobs was a former Atari employee). Many game-centric personal computers were made in order to use games to seize control of the ‘digital real estate’ of personal computers (think Commodore 64). And they might have been successful had it not been for a game console from an unheard of Japanese company called Nintendo that disrupted them in the latter 1980s.

The NES sent panic throughout the computer industry. When the, then, Apple president was asked which company he feared most, he answered “Nintendo.” In a very brief amount of time, Nintendo had the NES installed within a third of all American homes. Unlike a VCR or music player, only one company made the NES, and it controlled who could or could not put software on it. Nintendo also put out their own games for the system. You never have VCR companies also double as a movie maker, or a boombox manufacturer double as making songs. This made Nintendo very unique and extremely scary to the American and Japanese computer industries. Kutaragi watched the Famicom in awe and knew he wanted to make something like that. Sony watched how the Gameboy sold everywhere and seemed to surpass their Walkman.

David Sheff’s book, “Game Over”, is written in the context of Nintendo using their game console to control this new budding ‘digital real estate’.

While Nintendo began fighting with Sega, Sony made a game console whose aim was to disrupt personal computers. The first time I recall reading about disruption was a paper written about what Sony was doing to Microsoft. Kutaragi said his target all along was Microsoft. PlayStation was poaching more and more PC games as well as becoming a generalized entertainment machine that could also play movies and music. Microsoft understood what was happening and created the Xbox as a defensive measure. This is why Microsoft was willing to destroy billions of dollars on a game console. When looked at in this context, it is hard to determine whether or not Xbox was a ‘failure’ or even ‘money not well spent’. Not making the Xbox could have cost Microsoft much more as Sony could have gained a foothold into Microsoft’s ‘digital real-estate’.

As the Seventh Generation began, remember how the focus was entirely on Microsoft and Sony and their ‘war over the living room’? Investors outside of gaming were watching because the victor would control everything digital within the living room. HD was just a means to do that. This is why Sony and Microsoft competed in ways that are laughable today such as Blu-Ray versus HD-DVD. The victor didn’t matter at the end of the day.

Something like Xbox Live does not exist for gamers. Microsoft is attempting to establish a sort of ‘digital real-estate’ in order to control and profit from other mediums including gaming. Sony, of course, keeps adventuring to the next piece of potential ‘digital real-estate’.

Despite accusations of the 80s of Nintendo trying to conquer the world, Nintendo hasn’t been playing the game of ‘digital real-estate’. This might be due to Nintendo focusing on competing with other game companies such as Sega and trying to beat Sony and Microsoft on gaming.

Lately, Nintendo is now playing this ‘digital real-estate’ game. Instead of HD or online, it is choosing to wage war over ‘3d output’.

Why? Well, Nintendo developers have always been obsessed and fascinated with it. Nintendo is betting the future of all entertainment will be 3d output. This is why Nintendo proudly boasts that the 3DS is the first ‘mass market 3d machine’.

Now, Sony is pushing 3d output as well. But it uses goggles. Nintendo sees its ‘no glasses’ form of 3d output as disrupting Sony in control of this digital real-estate. (But unlike the Wii, this is not a disruption on the plane of gaming but on the plane of visual output which is a different category altogether.)

Should Nintendo control 3d output, and assuming 3d output becomes the norm, this would place Nintendo as the platform for 3d output games, 3d output movies, television, cameras, and home movie recording. Nintendo could even become the makers of movies (a wish by Hiroshi Yamauchi is for Nintendo to get into the movie business). This is really what is behind everything going on with the 3DS.

So what is with the Wii U? It’s not 3d. It is a stopgap measure to the 9th Generation Console from Nintendo. Iwata has already announced the 9th Generation Home Console will have 3d output. This is quite amazing to announce even before the launch of the 3DS. The Wii U is recycling ideas that were rejected for the Wii.

The ultimate purpose of the Wii U is to get third parties on board so Nintendo can transition them to the 9th Generation Console which will have 3d output. In order for Nintendo to become in control of the 3d output digital real-estate, it needs third party companies there.

So this is the long term plan of Nintendo. Of course, it will not work for the same reasons why Microsoft and Sony’s Seventh Generation plans for controlling the living room imploded. I wonder if Metroid: Other M was an experiment by Nintendo to begin to transition Metroid into a movie franchise (where Yamauchi is pushing Nintendo to go). If any series would fit best as a movie, it would not be Mario or Zelda but Metroid.

Note how Nintendo doesn’t seem concerned at all with the Wii audience. When they think about that audience, they do so in very superficial terms. They think a tablet controller is the same as the Wii Sports phenomenon. Actually, Nintendo is not really interested in these consumers. Nintendo has their roadmap to 3d output all planned.

There is a different argument. It is the Malstrom argument. It is that none of these ‘digital real-estates’ will form. Everyone, including Nintendo, doesn’t understand that the video game revolution gave birth to the computer revolution, not the other way around. Video games can never create a digital real-estate. It would be like asking the ocean to be solid enough to construct a skyscraper.

Video games are the New World. They are the Unexplored Country, the Dark Continent. After thirty to forty years, we still know very little about the medium we call ‘video games’. One consistency is that every console company who thinks they have it figured out is sent shipwrecked. Only financially healthy companies are able to keep sending more ships.

The Wii excited people because it felt like a further exploration of this New World. Thus, the Wii was seen as unlimited potential. The original game consoles, since they were the original ones, also had similar excitement because gamers felt like they were exploring a new land. These explorations into this uncharted territory known as ‘gaming’ ripple their innovations throughout the computer industry (as well as other industries). The reason why we have programmers today is because of video games (why else would anyone bother learning to program a computer?). The reason why many personal computers were bought was due to gamers trying to play the latest and greatest games. Gamers were playing games on the Internet long before the masses came to it.

Computers may be the continent, but video games are the spice.