Nintendo shook the gaming world today when it announced a partnership with DeNA, a Japanese company that makes free-to-play games for mobile phones. Calls for Nintendo to make smartphone games have been a regular feature of media coverage and the company’s investor meetings, but CEO Satoru Iwata (pictured above right) has dismissed them at every turn, saying that mobile games risk cannibalizing and devaluing Nintendo’s valuable, popular characters. So with today’s shock announcement, has Iwata lost it, or at least gone back on his word?
The answer is neither. We haven’t seen the games that will result from the deal yet, but Iwata laid out his thinking with clarity and eloquence on stage in Tokyo today, leaving me in little doubt that the DeNA tie-up makes sense for Nintendo’s future.
Iwata began by acknowledging that Nintendo had a difficult time shifting from the wildly popular DS and Wii to their successors, the 3DS and Wii U, which coincided with the rise of smartphones. But although this caused some observers to believe that dedicated gaming consoles would inevitably get cannibalized by mobile devices, Iwata identified a crucial difference between Nintendo and its competitors: that Nintendo produces, by far, the most important content for its various systems.
No one ever calls for Sony to bring Uncharted to the iPhone, or for Microsoft to release Gears of War on Android. But Nintendo has several beloved, long-running franchises that it keeps exclusive to its hardware in the same way, which only heightens the demands for, say, Super Mario Bros. on the iPhone. "We recognize that our business model of producing both video game hardware and software is effective even today," Iwata said, "and we do not share this pessimistic view of the future for dedicated video game systems." In other words, while smartphones and tablets may have captured certain casual users that might have bought a Wii or DS were it still 2007, the base of people willing to buy Nintendo hardware to play Nintendo games remains large enough for a sustainable business.
To that end, Iwata confirmed that Nintendo is working on a next-generation dedicated video game platform with a "brand-new concept," codenamed NX. The release is likely years away — Nintendo says it won’t announce further details until 2016 — but the mention is significant in the context of the DeNA deal. It demonstrates that the company isn’t going to leave its current fans behind, nor is it going to stop focusing on games consoles.
But that doesn’t mean Nintendo can or should ignore mobile devices entirely. "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," Iwata said today, referencing the company’s earlier decades as a maker of toys and playing cards. "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." Mobile gaming has simply become too big to ignore, despite Nintendo’s previous misgivings, and the obvious read is that this represents a major backtrack.
Iwata’s pledge not to port Nintendo games directly to smartphones is hugely significant, though. Much as you may think you want a touchscreen version of Mario Kart 64, such a move would inevitably fail to meet Nintendo’s standards. From the NES D-pad to the Wii remote, Nintendo has consistently tied its control methods to its software design, and crudely cramming legacy software onto a pane of glass was never going to work. "If we cannot provide our consumers with the best possible play experiences, it would just ruin the value of Nintendo’s IP," Iwata said today.
Instead, Nintendo and DeNA will develop new software from the ground up for mobile devices, which will limit the cannibalization leaves the two companies free to try new business models as well — it’s difficult to sell paid software on iOS and Android these days, even if you are Nintendo. But Iwata downplayed the prospect of using the traditional free-to-play mechanics seen in DeNA games like Rage of Bahamut, Magic & Cannon or Final Fantasy Record Keeper, even though Nintendo itself has experimented with the style in certain 3DS games.
Whatever the two companies decide, the partnership is one that makes sense; like Apple’s arrangement with IBM, it benefits two parties that have little overlap but a lot to gain from each other. Nintendo is perhaps the most acclaimed video game developer in the world and has a second-to-none portfolio of IP, but is famously terrible at the internet and has almost no experience working on platforms other than its own. The recent shutdown of Club Nintendo is evidence of this; DeNA and Nintendo are set to launch a new cross-platform membership service this year that will "create a connection between Nintendo and each individual consumer regardless of the device the consumer uses," in Iwata’s words. The service will also be a "core element" of the upcoming NX platform; if this helps shift Nintendo’s draconian policies toward digital software ownership, it alone will be a massive win for customers.
DeNA, meanwhile, brings an understanding of the mobile market and social gaming that Nintendo has lacked. "DeNA’s expertise lies in, for example, the infrastructure technology that can handle a massive amount of traffic," CEO Isao Moriyasu (pictured top left) said today. "We are also able to manage live operation by analyzing user activities and quickly reflecting the insight to improve our service." The company is in need of a hit, though — Japanese games like Mixi’s Monster Strike, GungHo’s Puzzle & Dragons, and Line’s Disney Tsum Tsum have been more popular than anything on DeNA’s Mobage service of late. But what better differentiator than Nintendo property?
Ultimately, the success of this deal will depend on whether Nintendo is able to adapt its peerless development ability to mobile platforms with DeNA’s technical support, and it’s hard to ascertain that without seeing the software first-hand. But I walked away from the press conference today impressed with Iwata’s vision: one which acknowledged Nintendo’s weaknesses, identified its strengths, and detailed a way to alleviate the former without compromising the latter. We won’t get Super Mario Bros. on smartphones — we might get something a lot better.