Editorial: Nintendo’s Gambit: Business Strategy for the Wii U

Saturday, February 2nd, 2013

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Throughout the lifespan of the Wii console, Nintendo of America President Reggie Fils-Amie continually espoused the low development cost of the console, saying at the 2007 Dow Jones Consumer Technology Innovations Conference that a Wii game costs $5-10 million USD to develop, as opposed to $20-50 million USD for the Xbox 360 and PS3. A very significant difference, indeed. In fact, game development costs have increased so dramatically from the last generation, that the business model of the so-called “Triple A” industry has become unsustainable, to the point where those companies spending an average of $30-40 million USD to develop their titles, tread a very dangerous path; where survival is by no means guaranteed. The recent bankruptcy and liquidation of THQ being my case-in-point.

By under-powering the CPU and over-powering the GPU, Nintendo is attempting to persuade developers to transfer many of the operations that they once tasked to the CPU over to the GPU. With modern graphics technology, the GPUs can now perform tasks that were once exclusively handled by the CPU in prior generations. Also, since the architecture behind a GPU is -literally- designed for graphics processing, the transfer of these tasks ends up saving not only CPU loads, but also saves tremendous amounts of employee hours and development time for games, thus greatly reducing development costs. Essentially, Nintendo is attempting to create a console that can run graphics at 1080 progressive vertical lines, while minimizing what it feels are out-of-control development costs.

The problem created though, is that the majority of developers still choose to cling to CPU-based programing. There are many reasons for this, not just the habitual, but also that most colleges rarely even teach programming for newer-generation graphic processors. Telling developers to start programing in a new fashion is almost like taking all their PCs away overnight, replacing them with Apple computers, and telling them that they are now simply working with Apple and they should get used to it. This helps explain why Metro: Last Light‘s developers are so at odds with the Wii U’s hardware, and why they feel it is inferior to the current generation.

Now, I hope you are beginning to see the “method in ‘t,” so to speak, behind Nintendo’s choices for the Wii U’s design. Nintendo realizes that the triple-A industry cannot continue as is, and this opinion is implied and reflected by the choices that they made for the Wii U’s hardware design. Coming from one of the few companies to survive the great video game crash of 1983, this is not an opinion to be taken lightly or dismissed out-of-hand.

In addition to all of this, Nintendo is actively supporting third-party Japanese developers in their efforts to localize their games for Western audiences. As our friend and fellow Operation Rainfall Campaign Hub member, “Bring Bravely Default: Flying Fairy to the West” reported, Nintendo President Satoru Iwata said “We are willing to flexibly assist [Japanese] third-party developers in distributing their valuable games overseas.” Meaning that Nintendo is betting on a resurgence of the Japanese games industry, especially middle-market titles that lack the localization funding of flagship Japanese games like Resident Evil, Metal Gear, and Final Fantasy. Essentially, they are hoping to make moderate returns on small-to-moderate investments in the localization of Japanese games to Western audiences, rather than flatly following the high-risk/high-reward business model that has largely dominated Microsoft and Sony in the current console generation.

Moreover, Nintendo is not just attempting to support Japanese developers. According to Mr. Mikael Haveri of independent developer Frozenbyte, Nintendo is reaching out to the booming indie games industry. “It is very close to what Apple and Steam are doing at the moment and very indie friendly.” More indie developers have chimed in to support Mr. Haveri’s statement. Mr. Collin van Ginkel of Two Tribes said, “It’s a lot like Steam’s setup, which has enabled us to keep reaching new players even years after we release our games. . .we’re completely on board with Nintendo’s new approach so far.”

Note the difference between the attitudes of the independent developers towards the Wii U and the developers of Metro: Last Light. Though, in defense of the Metro developers, at the time of their statement, THQ was entering the process of bankruptcy, and this may have been a source of stress for them that caused them to become frustrated and dismiss the Wii U unfairly.

Regardless, Nintendo’s business plan for the coming console generation is clear. There is a method to the madness, in as much as they are trying to expand certain sectors of the market and avoid other sectors that largely contain unsustainable business models. While on the surface Nintendo may seem crazy, they are actually executing a well-reasoned strategy for the coming generation, and rightfully showing that there are some serious and potentially catastrophic problems within triple-A development right now. This is not to say that their plan is fool-proof, with the coming of Valve-sponsored Linux-based consoles, they will have serious competition for indie sales on their digital platform, not to mention Sony’s recent achievements with smaller, high-quality titles like Journey. However, I do feel the need to applaud Nintendo for seeing many of the problems that face gaming today, and taking steps to correct them.

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