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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  • Sega Genesis had better graphics than the NES but Nintendo beat them out simply by having a bigger and better library. That guy can say “YOUR SYSTEM CAN’T SUPPORT MY DIME A DOZEN GARBAGE FPS GAME!” but we all know what happened with Xenoblade and The Last Story running and looking the way they do on Wii. Now we can also look at “X” it’s being called right now and wounder… How can a game with areas as massive as that run fine and these people say it can’t handle a FPS? Put the blame on your lack of programming and skill and not on Nintendo.

    • I agree with you, but I’ll just say that Metro: Last Light wasn’t just another shooter. It’s a shame that it probably won’t be coming to the Wii U. But, yes, they aren’t the best programmers in the world (the numerous bugs in the terrifically atmospheric but flawed Metro 2033 can tell you that).

    • Guest

      Yeah, so far the only problems third-party developers seem to have involve PORTS. So far, very few developers are making Wii U exclusive or specific versions of the games, they are just enhanced ports – none of which take advantage of the Wii U’s strength (the GPU – not even talking about using the GamePad).

      Every single game designed specifically for the Wii U looks fantastic (save for Zombi U, which was obviously very much rushed to meet launch day – I mean considering just one year ago it was still called Killer Freaks from Outer Space and a very different game, Zombi U was essentially thrown together in six months or less…)

      The second and third wave of games should be much smoother. The same thing happened with 360 and PS3 launch games (in essence, all launches are like this, so is every new console launch doomed to fail?

  • Amazing article well done.So many things I had no idea.It seems so unfair that people are attacking N so much and lose hope so fast.And at the same time I think that N is over reacting,I mean 3 million in 2 months with not so much software is not that bad.

  • Guest

    Nintendo is never going anywhere as long as they own and develop Mario, Pokemon, Metroid, Zelda, Kirby, Star Fox, Donkey Kong, Pikmin, F-Zero, Animal Crossing, Fire Emblem, Yoshi, all the Mario Sports/Mario Kart/Super Smash Bros. games, and own companies like Monolith Soft creating stuff like Xenoblade, and that’s not even mentioning Wii Fit U, Wii U Party, and the inevitable Wii U Sports, all of which will be guaranteed to sell tons.

    Sure, they may not sell Call of Duty numbers, but when you add it all up, Nintendo’s only losses come during hardware development. Everything after that is pure profit, and seeing that Nintendo has only had a quarterly loss a handful of times in their 30+ years of console game development, versus the yearly losses suffered by Sony and Microsoft during the first 3 years on the market, I’d say Nintendo isn’t going anywhere.

    Even if the Wii U ends up a failure of GameCube proportions, at least we know it will have awesome first-party games and Nintendo will end up digging into their pockets for whatever the next “revolution” is.

    • 2 things:
      1) We don’t know that the casual stuff will be able to sell this generation like it did during the Wii, but I hope it does, as they could put new developers on those games, thereby teaching said devs to create a powerfully engaging gameplay experience first and foremost.
      2) I don’t think the GameCube was the financial failure that some people portray it as. Metroid Prime 2 “a relative bomb”, sold 2 million units. That’s huge, especially for a game that probably had a break even point of 500,000 units. I’m guessing that with the Wii U, Nintendo will only need to sell 1.5 to 2 million units a game to break even. there’s already 3 million consoles on the market, and most of those people really like Nintendo games. And I think they now know how to stay relevant with hardcore gamers this generation: make sure that if you want to play Japanese games, you’re playing on Nintendo.

    • Guest

      I only compared Wii U to the GameCube because that is historically the Nintendo console with the lowest install base.

      We can’t count the Virtual Boy because in the three months since launch, the Wii U has already sold nearly four times the entire production run of the Virtual Boy sold (3 Million Wii U units shipped-to-date versus 770,000 total Virtual Boy units sold worldwide)

      So yeah, even if the Wii U is a “flop” compared to the Wii, it will still ultimately be profitable, and may even encourage more thinking outside the box. I think it is common consensus that the relatively poor sales of the GameCube resulted in Nintendo trying out some of their most experimental and diverse games in recent memory, and the GameCube also had the highest level of third-party support on a Nintendo console since the SNES.

      No matter what, Nintendo can’t “fail”. Sure, it may be last place in the console wars, resulting in overall lower profitability, but it will most definitely result in some high quality games from Nintendo and encourage Nintendo to keep progressing with their next console.

  • michika

    I think you make a very good argument for Nintendo’s response to the problem of budget sustainability. Great article.

  • I always liked Nintendo for their game diversity. With this tech and graphic improvement, I can only see myself appreciating them more. Keep up the good work.

  • Guest

    The Wii U has already sold 3.06 M (not shipped) units in three months.
    The Dreamcast sold a total of 10.6 M units over its entire lifespan worldwide.

  • Anonymous

    Something everyone is forgetting (or skimming over because they only read headlines), is that Nintendo reported a PROFIT this year.

    From the New York Times:

    Nintendo’s profit for the April-to-December [2012] period came to 14.55 billion yen, or $160 million, compared with a loss of 48.35 billion yen a year earlier, the company said in an earnings announcement that painted a mixed picture of its prospects.

    In January 2012, what did the headlines say about Nintendo?

    “Nintendo posts 48.35 billion yen LOSS”

    In January 2013, when Nintendo is profitable again, what do the headlines say?

    They certainly don’t say “Nintendo posts 14.55 billion yen PROFIT”, do they?

    Nope, instead you see the simple, yet alarming (to investors and forum trolls):

    “Nintendo Lowers Forecast for Wii U Sales”

    So, Nintendo makes a profit of 160 MILLION DOLLARS, adjusts their forecast for Wii U sales in the Spring to keep their budget within margin, and the “GAMING MEDIA” twists that into a negative.

    No one wants to report that Nintendo is doing just fine and does what any fiscally responsible company would do by adjusting their forecast. Instead, it’s just the typical Kotaku bottom-feeder rubbish that Nintendo is doomed to fail and a rainy cloud is always over head.

    It makes for good clicks, but ultimately is misleading trash.

  • fjurbanski

    Nice article. It’s always really funny that kids with no business sense think that a 100+ year old company is just running around with their head cut off.

    I really can’t wait to see what comes of Nintendo’s more indie friendly approach. And what comes of them partnering with and supporting 3rd parties. 3rd party multiplats are nice, but you know what’s better? 3rd party exclusives. Which is the direction they seem to be heading in.

  • multibottler0cket

    Great article! I’ve had a similar opinion for quite a while now.

    The market has reached a standard, particularly in the west, that is unsustainable. The extremely high development costs to reach this standard have made it very difficult for developers to keep up, and it will after a certain point only harm developers who can no longer keep up.

    Moreover, the creative minds behind these games are being forced to work on projects which their superiors have chosen for them in order to play it safe and maximize profit, where the creative minds want to move on. Due to this conflict, many creative minds responsible for some of the most popular franchises are leaving the companies in order to have more control over their work.

    This, which is a product of the high development costs, results in a market which cannot be sustained.

    This is why for the last six years, Nintendo has been creating their own market which, while having its limitations, allows for a more sustainable, accessible, and affordable market for the industry.

    • Cinnamon267

      “This is why for the last six years, Nintendo has been creating their own market which, while having its limitations, allows for a more sustainable, accessible, and affordable market for the industry.” Limitation being very, very few interesting games 🙁 Which is a key aspect for the system.

    • multibottler0cket

      That’s subjective, though, and is part of why it is its own market. The Wii has about fifteen games that I really care about, whereas the 360 has about three and the PS3 has about five.

    • Cinnamon267

      Subjective to an extent. Wii software sales, kind of, crapped all over itself. Which was my original point. And they were so few and far between. I should have been more clear.

  • All these numbers don’t make any sense to me. I just play games. I do get the gist of what you’re saying, though. Nintendo is shying away from the popular business and hardware model for a cheaper and more reliable option. I just hope that it pays off and they manage to get games on the system.

  • Aiddon

    The thing that interests me the most about the West is that people go on and on about how it’s making Japan irrelevant, but no one ever mentions the giant, neon elephant in the room: why aren’t more Japanese publishers and developers folding? Seriously, two of the biggest news stories of the past year have been THQ’s liquidation and the closure of 38 Studios. IGN actually published an article detailing all the studios that had closed in 2012 and only ONE was Japanese (Hudson-Soft). I never hear about CAPCOM, Nintendo, Konami, Atlus, Arc System Works, Square-Enix, or Grasshopper Manufacture struggling. Albeit Japan’s business practices are very different from the West, but it goes to show just how reckless the West is. For every financially sound studio there are TONS of others in the West where one mistake costs them their livelihoods. I can see why Nintendo would bet on a resurgent Japanese industry

  • Jesse

    Just put out Pikmin3, a new Zelda (or the HD remake of Windwaker), a 3d Mario, and a Mario kart this year, and Nintendo’s sales will go up, Regardless of their Hardware decisions, you have to admit that their launch titles were not very good.

    • they were mostly all very good

  • Spookyryu

    that’s why nintendo feel so confident with the strategy, telling us that they will sell in lost the wii u and it will be profitable after one game sell, that’s how you make bussiness, and that’s how we all win

  • nintendo will be fine

  • I would love it if the Wii U could become the home for Japanese games that wouldn’t otherwise make it to the US. Their handhelds have kind of been that way. If they could find a way to make that work on their home console too, that could fill a serious void, and bring in a lot of new consumers.

  • Like I always say, Nintendo have a lot of experience in the videogaming market and are committed 100% to it. Even I may question their strategies but it seems that they are carefully calculated and tend to be a success most of the time. Only time will tell but I have faith on Ninty.

  • Cinnamon267

    While the rumours do suggest the 360 is using slower DDR3 RAM it is using a lot of it coupled with 32MB of embedded RAM. Making the combined peak bandwidth pretty dang high. Much higher than what the Wii U is producing even without the embedded RAM. If the numbers are correct. Which they seem to be. Pretty detailed stuff out there. CPU and GPU being seperate shouldn’t prove to be an issue. They know how to design around lead free solder, now. And Microsoft wouldn’t be interested in spending the money to fix the issue. Like the had to do in the past.

    The likelihood of the Wii U producing many games at 1080p isn’t likely. Most 3D games won’t be 1920×1080. Everything I’m reading suggests the Wii U’s GPU is only 1.5x the shader power of the 360 GPU. Makes it more capable, but don’t expect many, if any, 3D games at 1920×1080. Rayman Legend is. Benefits from being on a “2D” plane. though.

    Wii U would be a more interesting decision, if they were consistent with being smart. Hardware might be intelligently thought out, but software is insane and backwards. Storage is insane and stupid DRM things make it a deal breaker. And, well, games that are interesting.

  • 23agearg

    think about it big business has dumped console gaming and are investing heavily in social and mobile gaming. Social gaming took a giant dump last year and investors lost billions, and now all of their money is sitting with mobile hoping its the next big thing.

    Microsoft and Sony are entertainment giants [not just video games] and they also have a giant hold on the market. if you split the market into even parts, Nintendo is about 1/8 of the overall market with the rest being domingated by MS, Sony, and Moble.

    Those other 7/8 are gona do evertyhing they can to silent another comepetitor. Mobile can’t shut down yet – not with so much investment, so the only way to shut down a competitor is to send your puppet game journalists free stuff and let them know that Sont and MS are going to blow Nintendo out of the water again and emphasize the negative with Nintendo and boom no one buys Nintendo and its a never ending black hole.

    just you wait and see PS4 and 720 are not going to do any better when they laucnh this holiday but somehow it won’t be so havily advertised in the games journalism media news