Posted by: seanmalstrom | March 18, 2015

Nintendo DeNA Alliance

This is easily the biggest Nintendo announcement in the last decade.

Everyone should read what Iwata actually says instead of allowing someone else’s filter to tell you what is going on. I don’t have to read The Internet to know how this is going to be filtered.

Let us go back a decade ago. It is the year 2005. After a poor showing in Generation Six, Nintendo’s DS was beginning to escalate in sales with games like Nintendogs. The Seventh Generation console, codenamed Revolution (later known as the Wii), was still in development. The general consensus was that Nintendo was saying anything in its business announcements, should be completely ignored, and that even if the DS beat the PSP, it doesn’t matter because they are handhelds, and that the ‘Revolution’ was poised to be the ‘second console’ to Microsoft and Sony, who Nintendo simply would never ever ever ever compete. But when you saw the business plan of ‘disruption’ and ‘Blue Ocean’, and you could see what the DS is doing, a different view of the future took hold. This is why this site exists in the first place was to put to trumpet that business logic which was the chicken that laid the egg of the Wii. It takes many, many years for a business plan to grow its fruit. When the fruit grows ripe and falls from the tree, it is then when it falls on the analysts’ faces. It is then when it sees expression in the sales charts. But a business leader’s job is to see the future. This is why Iwata is the CEO and why journalists are journalists.

After I read what Iwata said about it, my reaction was ‘audacious!’ ‘Wow!’ I haven’t had this type of reaction since Iwata and Fils-Aime talked about Blue Ocean Strategy and disruption. This truly is ambitious of them.

The reader is confused. This is why Malstrom is here.

But I have two questions I wish to poise to the reader before continuing.

Why is i-tunes on Windows?

Apple is an integrated hardware and software maker. Why is their software on this…. icky… PCs? Did Apple go third party and start putting their software on Microsoft’s platforms?

To the contrary, Apple was extending a new type of platform onto the PC. i-tunes led PC users to the ipod and Macs. Even if it didn’t, it made Apple more money had i-tunes been exclusive to Apple hardware.

“Nintendo has gone third party and is making mobile games.” Nintendo may be making mobile games, but it has not gone third party from Nintendo’s point of view. Back with the NES/ Famicom, Yamauchi said, “We believe in a market. Our market!” The platform was the hardware. A third party game meant paying license to Nintendo for their game to use their hardware. With NES/Famicoms connected to TVs everywhere, this was a lucrative market for game makers at the time. It has also largely grown competitive with all sorts of hardware manufacturers even outside Sony and Microsoft.

Nintendo is changing its definition of platform to not mean ‘hardware’. When we have argued for an account system instead of downloads being connected to the hardware, this is what we were asking. Nintendo is actually doing it. A true account system.

What place does the TV have in the game console?

Incorrectly, people will think this announcement is Nintendo is abandoning dedicated hardware (such a laugh). What it is actually doing is that Nintendo is abandoning the television in terms of a platform.

Game consoles have always used various TVs throughout the decades. This is because TVs were what everyone used. Today, people do not use TVs anymore. They use smartphones, tablets, and all other sorts of devices. Ten years ago, Sony and Microsoft tried to fight for control over the living room because that was where the TV was at. But to the surprise of everyone, the TV became decentralized. We have TVs in our phones, in our laptops, and soon in our watches. We don’t need the living room anymore.

With Generation 8, Nintendo tried to cut the TV out with the Wii U. “The TV is like a parasite,” Nintendo would say. The Wii U is a home console that can play without a television set. Clearly, the role of the TV has been foremost in Nintendo’s minds for quite some time.

Nintendo’s Generation Nine Strategy

Nintendo is redefining the platform from being a hardware box you place in your home to being the massive servers in DeMA. Where does Nintendo’s platform want to go? It wants to go everywhere it can. The NES went everywhere it could. If there was a TV somewhere, Nintendo wanted its console attached to it. This new platform also wants to go everywhere it can. Iwata said:

This is why Nintendo has decided to utilize smart devices aggressively.
Very simply put, it is structurally the same as when Nintendo, which was founded 125 years ago when there were no TVs, started to aggressively take advantage of TV as a communication channel. Now that smart devices have grown to become the window for so many people to personally connect with society, it would be a waste not to use these devices.

Nintendo isn’t seeing smart devices as a platform like a PlayStation. Nintendo is seeing smart devices as TVs. Nintendo does not make TVs. Nintendo has never made TVs. Yet, Nintendo games could not be played without a TV. Aside from handhelds and the Wii U, the TV was never integrated into consoles.

Listen:

Although this is something we intend to discuss more concretely in other opportunities, we are making progress in our efforts to maximize the value of Nintendo IP for our consumers via a variety of different communication methods, including licensing our IP to visual content and a range of other character merchandising products.

He says communication methods. He is not saying hardware methods. Yet, everyone reporting this story will be thinking in the context of hardware methods and not communication methods. We never thought of the TV as part of the game console because the TV was the communicative device (the output).

Therefore, it is natural that the best way to communicate our IP to each consumer also differs. We choose the most appropriate method to try to maximize the number of people who encounter Nintendo IP and, as a result, we will further expand the gaming population. This is our basic strategy.
Among the variety of different communication media, smart devices show outstanding strength when it comes to global use rate, contact frequency and total contact time even though each contact period is short.

Let’s go back a few decades. Nintendo did not just put out the NES. Nintendo also did…

Cartoons were made… using Nintendo’s IP.

Print was used to communicate the IPs.

Toys were made to communicate the IP.

The Third Generation of consoles is as misunderstood as the Seventh. It is incorrect to interpret this as all ‘marketing’. A billboard is marketing. Much of this is interacting with the IP which only made people larger fans of that IP. An analyst in his sixties would look at the above and see ‘marketing’, but ask a thirty year old who grew up in this era who will have a different answer.

Mario was huge. It was Mario Mania. People would buy the consoles to get to Mario. As Yamauchi said, “The console is just a box people buy to get to Mario.” This fine statement of Yamauchi’s places Mario as the value and the console was… just a box.

What I think Nintendo is doing is creating an account system with DeMA that will allow it to utilize all sorts of different ‘communication’ devices to Nintendo’s benefit. It’s not just about a Nintendo game on a phone. It is about a Nintendo game on the PC. PC gaming with Nintendo? That’s where I’d be.

I think it is an error to say, “All of this is to lead consumers to Nintendo’s dedicated console.” All this is to leads to profit that goes to Nintendo. But this is far more than just a money grab; it is a fundamental reshaping of the definition of platform.

This also means Nintendo has new competitors. Blizzard’s Battle.net is now a direct competitor to this Nintendo/DeMA platform.

Please also note that, even if we use the same IP on our dedicated video game systems and smart devices, we will not port the titles for the former to the latter just as they are. There are significant differences in the controls, strengths and weaknesses between the controllers for dedicated game systems and the touchscreens of smart devices. We have no intention at all to port existing game titles for dedicated game platforms to smart devices because if we cannot provide our consumers with the best possible play experiences, it would just ruin the value of Nintendo’s IP.

Nintendo has no intention of porting existing games onto other devices. However, these existing games are ported via the Virtual Console on the consoles.

Nintendo has decided to deploy its video game business on smart devices but it is not because we have lost passion or vision for the business of dedicated video game systems. On the contrary, now that we have decided how we will make use of smart devices, we have come to hold an even stronger passion and vision for the dedicated video game system business than ever before. Nintendo has made this decision because we have concluded that the approach of making use of smart devices is a rational way for us to encourage even more people around the world to recognize the great value of the wonderful game software available on our dedicated game systems.

What is really going to be interesting is when they are both used together.

As proof that Nintendo maintains strong enthusiasm for the dedicated game system business, let me confirm that Nintendo is currently developing a dedicated game platform with a brand-new concept under the development codename “NX.” It is too early to elaborate on the details of this project, but we hope to share more information with you next year.

Next year!? Pshht. I want news now.

The keyword here is ‘platform’. Note that he did NOT say hardware. He also didn’t specify if this was handheld or home platform. The answer is because it is a type of online system which will utilize both Nintendo and non-Nintendo hardware (like smartphones). This is similar to i-tunes.

I have many questions about NX. I do think that while games will be designed around the hardware, the hardware will not be so strict in stone. Look at New 3DS as precedent. This wasn’t just old hardware gussed up to sell more. It was actually beefed up hardware. This points that Nintendo plans an online account type system to unify everything. Hardware could be updated every two years or so. Why should game consoles be stuck in a prison of hardware for half a decade?

For the consumers who are connected with Nintendo through smart devices and interested in Nintendo’s IP, we would like to provide even more premium gameplay experiences on Nintendo’s dedicated game platforms. By taking this approach, we firmly believe that doing business on smart devices will not shrink our dedicated video game system business and will instead create new demand as this broader reach will enable us to provide consumers around the world with more opportunities to experience the appeal of Nintendo IP, and instead of trying to seize the other’s demand, dedicated video game systems and smart devices will benefit from the synergies created between them.

If we go back to the third generation, the NES did not directly compete with the TV. When kids watched TV, they still did so except they saw TV with Nintendo IPs like the Super Mario Super Show or Captain N. Both fed into each other.

Nintendo, together with DeNA, will jointly develop a new membership service which encompasses the existing Nintendo 3DS and Wii U systems, the new hardware system with a brand-new concept, NX, and smart devices and PCs, and Nintendo will be the primary party to operate this new membership service. Unlike the Club Nintendo membership service that Nintendo has been operating, the new membership service will include multiple devices and create a connection between Nintendo and each individual consumer regardless of the device the consumer uses. This membership will form one of the core elements of the new Nintendo platform that I just mentioned.

Whoa! Beep! Beep! Back up the truck! So much is said in this paragraph that we must separate.

Nintendo, together with DeNA, will jointly develop a new membership service which encompasses the existing Nintendo 3DS and Wii U systems, the new hardware system with a brand-new concept, NX, and smart devices and PCs, and Nintendo will be the primary party to operate this new membership service.

This is the account system. When you buy a smartphone Nintendo game, you are actually buying into their account system.

The phrasing of this is confusing. Is NX being referred here as the new hardware system with a brand new concept or is NX seen as separate? Being an English minded person strictly, NX is expressed here as a separate entity from the upcoming hardware system. The is how the language is written. Translators need to re-examine this sentence.

Unlike the Club Nintendo membership service that Nintendo has been operating, the new membership service will include multiple devices and create a connection between Nintendo and each individual consumer regardless of the device the consumer uses.

This is the Account System.

This membership will form one of the core elements of the new Nintendo platform that I just mentioned.

Now this is a nebulous sentence. The Account System forms a ‘core element’ of the new Nintendo platform. Well now. The Account System isn’t hardware so Iwata is saying the new Nintendo platform will not be bound by hardware.

What are the other core elements? Iwata does not tell us. We’ll have to wait.

From what I’m hearing so far, I’m completely stoked for Generation 9 now. Nintendo seems to be making something for me. We still don’t know details so anything can change. This is not going to be Wii U 2 or Gamecube Part 3.

This will be very exciting to see.


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