Before we begin, I want to establish one thing. I love Nintendo. I grew up on Nintendo, I buy their stuff almost without question, I think they have the greatest output of video games in the industry. I'm the obnoxious guy you'll find on video game forums arguing for everything Nintendo, defending all the shit that they do (except for Skyward Sword, because fuck Skyward Sword). I'm the guy who'll spend $250 on the 3DS the day it launches, and the guy who'll argue that the Wii U really has the best lineup of the three consoles on the market right now, honest to goodness guys! The Wii U is my most played console currently, and the 3DS has been my most played system every year for the last three years.

What I'm trying to say here is, I really am fond of this company. I have no malice for them. Frustration sometimes, yes, but never malice. So anything I say here isn't because I'm some jaded guy who grew out of Nintendo, got into PlayStation, and refuses to touch a Nintendo machine but wants to play some of their games to get in touch with his past or something. I say this as someone who plays and appreciates their games in the here and now, and as someone who's a bit frustrated with how ass backwards the company has gotten in the last decade or so.

It's time to fix all of that. I think it's time for Nintendo to take the plunge and boldly chart new waters, and possibly lead the way for others in the industry. I think it's time for Nintendo to stop making games hardware, and go third party.

What? Why?

The first thing to understand if you want to get the crux of this argument is a general idea of where the gaming industry is headed in the next decade or so. The gaming industry is slowly moving towards a platform agnostic future. Eventually, there will be no dedicated hardware to play games sold- all games will be streamed at a server farm to local clients on PCs (or at worst, will be locally installed on PCs via game/company specific clients). In today's world of convergence centric devices, there is no place for dedicated game devices, handheld or console.

This is not some science fiction/armchair analyst future that I'm pulling out of thin air here. One look at industry trends makes it clear where we are headed. Look at Sony and Microsoft's current infatuation with the cloud. Microsoft designed the Xbox One entirely around the cloud concept. Sony is going a step ahead- they're making PlayStation a service, instead of hardware, they're doing it already. Yoshida has, in fact, already spoken about making PlayStation a cloud streaming service in the near future. It's just where the industry is headed. Dedicated hardware has no place in today's world- you can ask the makers of dedicated music players and cameras if you don't believe me. Consoles may be a popular market, but they are winding down, and sometime within the next decade, we should have moved past the idea of dedicated game hardware entirely.

The counterpoint I hear for this argument is the wild success of the new consoles, particularly the PS4. Yes, I know the PS4 is breaking all records, but it's only the PS4 that is breaking all records; the console gaming industry itself is shrinking. The total number of consoles sold this generation will be far lower than the staggering 260 million sold last gen- Xbox One sales, which were only 'record breaking' for the Xbox line of consoles to begin with, are already slowing down, and the Wii U so far represents a shocking 95% contraction from its predecessor's sales performance. Further proof of this lies in the sheer number of high profile studio closures and game and franchise cancellations- the games industry, in terms of both hardware and software, reached a massive high point in the sixth and seventh generations, but that high point was just a bubble, and that bubble has now popped. The consoles game market is now right sizing, and this right sizing is happening in the downwards direction. The rise of mobile and tablet gaming, and perhaps even more relevant to our interests as the self styled 'hardcore gamers,' the resurgence of PC gaming, is all further proof of this trend towards convergence devices, and of the move away from dedicated hardware.

Nintendo's strength has never been its hardware. Yes, they make good reliable consoles, and they have genuinely contributed to the advancement of console gaming more than any other console manufacturer, except for maybe Sega. With that said though, Nintendo's strength has always been its games. Nintendo's games are amazing. Arguably, Nintendo makes the best games in the world. You don't buy a Nintendo console or handheld because holy shit it's so awesome, you buy it to play Mario Kart or Pokemon. It's Nintendo's games that are its biggest asset, and you desire their games, not their hardware, never their hardware. For you, the hardware is just a (costly, and mostly inconvenient) way to buy into playing Nintendo's games.

Given that, then, as well as the industry's slow march towards a platform agnostic client based future, Nintendo would be best served by dropping the hardware side of the equation entirely. Focus on the games- those amazing games that have defined the industry. And this is going to be a transitory period- Nintendo might be best served in developing games for PlayStation and Xbox in addition to the PC, while they prepare themselves for the client based future. Along the way, they'll learn more optimization tricks (remember, both PlayStation and Xbox lines now share the x86 architecture of PCs), and via expanded sales, they'll be able to shore up their finances as well, which should insulate them into the future better.

Come on Nintendo, do your incredible game developers justice. They don't deserve to be hamstrung by the limitations that a Nintendo system poses on them; they deserve to have the latest and greatest hardware to show off their prowess with.

 

I don't like this. No console manufacturer has ever survived the transition to going third party successfully.

No console manufacturer has been Nintendo. Atari's talent in making games was, by the end, laughable at best (seriously, their first party output at the end was Pac-Man 2600 and E.T., a game so bad it literally almost killed console gaming for good). Sega was very good, it was excellent, but when all was said and done, it neither had the depth of catalog that Nintendo has, nor the expert management that Nintendo has, nor the great funds that Nintendo has, nor the sheer talent that Nintendo has.

If Nintendo were to go third party, Sony and Microsoft would bend over backwards to accommodate them- don't you for a minute think they wouldn't. Again, Nintendo's games are the best. They have one of the most devoted and dedicated fanbases in history. They have some of the most valuable IP across all entertainment media, IP that you really want to be associated with. This is something that Sony and Microsoft have outright, in public, on the record, acknowledged. You really think they won't heavily court Nintendo in co-branding/co-marketing/bundling deals to get preferential treatment?

This isn't even to consider the amazing things Nintendo could manage on a PC. They would probably not allow mods for their games – Nintendo likes to ship what it thinks is a finished product that needs no further work – but just think how well Nintendo's artstyle and its lovely limitless gameplay would come to life on a PC, unhindered by the artificial restrictions and limitations that Nintendo's machines pose.

So, why will Nintendo survive this transition when no one else has? The answer is simple:

  • Nintendo is better managed than either of its predecessors to have gone third party
  • Nintendo has more funds than either of its predecessors to have gone third party

Both Atari and Sega, when they went third party, were on the verge of bankruptcy, and could scarce afford making the kinds of games that they had been known for in the past. Their poor management also ensured that the companies were eventually bought out by larger corporate entities that cared about the brand, but not about the business, meaning both companies were forced to cash in on their most valuable IP by a corporate structure with no understanding of or interest in video games. These are not problems Nintendo has- they're incredibly well managed, and they have a staggering amount of money. More money than any third party publisher in the world. They not only would survive this transition, they would thrive.

 

What about the money that they make from their hardware? They'd lose out on that revenue stream.

What money? They don't make any money from their hardware. The Wii U is a loss making venture. The 3DS has never met a single sales target that Nintendo has ever set for it. Their hardware sales have constantly contracted (seriously, plot a graph of Nintendo console sales from NES onwards, and tell me you don't see a trend), DS/Wii aside, and they will continue to contract, because Nintendo makes dedicated devices that have no place in today's world.

Why can't they build better planned machines for the future that don't lose money, you ask? Simply because the market will not allow that. We're moving further and further onwards into an era where the market has certain demands from every electronic that they buy: top of the line media capabilities, social integration, a high end internet infrastructure, a great OS, expectations of 'premium' hardware (even when it is commoditized), and so on. This isn't something Nintendo has ever been good at. They make toys- wonderful, fun toys, but that's what their consoles are regardless. They are toys. And no one wants to spend $300 on a toy anymore, when they can spend that on the newest iPhone, or just throw in another $100 and get something that not only acts as a toy, but also as pretty much an iPad for your TV screen. No, if Nintendo wants its hardware to sell from now on, it has to make changes to how it approaches it: high end hardware with licensed media capabilities and a thriving internet infrastructure, all things that cost money, especially on the upfront console sale, subsidized over time by subscription fees and the like. Put simply, Nintendo isn't earning any money from its hardware, and going forward, it's not likely to earn any money from its hardware.

You keep talking about Nintendo's consoles, but what about their handhelds? Their handhelds have always been successful.

Nintendo has, admittedly, had a complete monopoly on the handheld market, a monopoly that still exists, but the handheld market itself is rapidly contracting, and will soon be so small as to be irrelevant. This, again, has to do with the rise of convergence devices (in this case smartphones and tablets) that are replacing dedicated games hardware. 

But wait, I hear you say, that makes no sense, look at the 3DS, it's still successful, in spite of being launched in a post smartphone world! Aha!

And... you'd be wrong there. The 3DS is successful, but it is also the least successful Nintendo handheld till date. Not only are its sales being outpaced by the Nintendo DS (which makes sense), but also the original Gameboy and Gameboy Color (slightly troubling, but they still sold over 100 million units, so fine), the Gameboy Advance (sold less than 100 million- 82 million units worldwide, and it's a little troubling 3DS seems to be falling behind this), and even the PSP. Last year, Nintendo released a new Zelda, Animal Crossing, Monster Hunter, Fire Emblem, Pokemon, Mario and Luigi, Luigi's Mansion, Mario Party, and a brand new hardware model for the 3DS that sold for just $99... and the 3DS still not only missed its sales target for this period, but also sold a lower amount of units than it had the year before. This is clearly indicative that the device doesn't have much of a mass market appeal. Its sales are constantly declining, pointing to a trend of the niche of early adopters (i.e. the core dedicated audience) picking it up, followed by an ever contracting amount of the mainstream.

The 3DS isn't the only system you need to look at to see the death of handhelds- the elephant in the room is the PlayStation Vita, sales of which at this point are somewhere in the region of 8-10 million units, nearly three years after it first hit the market. This puts its annual performance at a ghastly 3.33 million units- that's worse than the Wii U, worse than the Gamecube, worse than even the Dreamcast. In fact, the only time the Vita has found success has been when it has emphasized on indie games- the kinds of experiences that are prevalent on mobiles.

So yes, handhelds are dying out too. The one kind of hardware that Nintendo is consistently successful at will soon be irrelevant, irrelevant before consoles get irrelevant, and if Nintendo doesn't pre-empt this now, they'll be left as the king of a market that doesn't exist anymore, with only increasingly irrelevant and loss making consoles straddled around their necks that further enhance their vulnerability.

What about all the jobs that they would lose? Their entire hardware segment laid off...

Yes, that will suck. Unfortunately, it's also an inevitability. As stated above, the entire game industry is moving away from a hardware based business model to a client based model (and if you don't believe me, ask Sony and Microsoft, with their emphasis on PS Now/Azure Cloud respectively). Sooner or later, Nintendo's hardware department will be useless, simply because there won't be any place in the market for a console, not even the kind of console that Sony makes that still at least can sell. They will buy multi-purpose devices that also happen to play games, and as stated above, that is also not something Nintendo can reasonably expect to do and earn money at. No, Nintendo's best bet is to make that transition to making software for said devices now and get a head start, instead of waiting ten more years to play catch up with the industry. That never works out well for them.

What about the money that they make from third party licenses?

What third party licenses?

What about the money they will have to split with the console manufacturers?

They don't have to. They can easily just go PC only, and make their own Nintendo client to sell their games, where they will have no one to share their revenue with. If for some reason Nintendo decided that they wanted to go to consoles as well to expand their market, well once again, they would have a lot of leverage- Sony and Microsoft, as outlined above, would kill to have Nintendo games on their systems (for as long as those systems last- eventually, all dedicated hardware will be a thing of the past, after all), and would almost certainly provide them with much better license terms than are offered to any other third party publisher or developer. Yes, they'll still be losing out on some money from each individual software sale if they develop for consoles, but that is more than negated by the fact that there will be no loss making consoles providing a drain on their bottom line any more. And in the absolute best case, they can just go PC only, and not have to worry about splitting costs at all.

What about Nintendo's game output? What reason will they have to make anything but Mario and Pokemon if they don't have a console to sustain?

Because they won't have to worry about losses from the hardware end anymore- think about it. An F-Zero, or Star Fox, or Metroid, these have always been loss making franchises. Currently with Nintendo losing as much money as it does, what are the odds that it licenses big budget titles in these (and their other dead) franchises? They would lose even more money on top of the money they are already losing.

If they went third party, they wouldn't have to worry about hardware losses at all, and their software sales for higher selling games like Mario Kart or Pokemon could easily subsidize their development for a Star Fox or Metroid.

Why can't that happen now, you ask? Because right now they have additional hardware losses to consider, don't they?

This entire argument about third parties only focusing on the money making franchises is one that I find asinine. Think of EA, for example. They're the biggest publisher in the world. Do they focus only on FIFA and Madden? Fuck no. EA also produces games that cost more and make less: Dragon Age, Mass Effect, Need for Speed, Battlefield, Dead Space, Medal of Honor, and so on. Or think of Ubisoft. Yes, they have half a dozen Assassin's Creed games every year, but along the way, they also release games in other IPs that don't sell nearly as well, or even make losses, such as Splinter Cell, Rainbow Six, Ghost Recon, or Rayman, while also continuing to invest in new IP, such as Child of Light, Watch Dogs, or Valiant Hearts. Nintendo won't be any different. They will constantly try to diversify their lineup. In fact, no longer held back by the consideration of trying to sell their expensive hardware, which is what causes them to fall back on established franchises to begin with, they will probably end up experimenting more than they do now. So yes, we'll see a whole lot of Pokemon, Mario, and Kirby, but we'll also see more Metroid, F-Zero, Star Fox, Fire Emblem, Zelda, and so on. And things like Splatoon won't be once in a blue moon occurrences, but rather, new additions to a long line of new IPs that Nintendo will always be looking at producing.

How do Nintendo's games benefit?

By them not being hindered by asinine restrictions or considerations imposed on them by their hardware (oh, so I somehow have to take advantage of motion controls, you say? All right, waggle to roll!).

Imagine a Mario or Zelda game with the power of the PS4. Or a Pokemon game utilizing the online functionality of Xbox Live or PSN. And, in our best case scenario, imagine a Mario Kart running unhindered in glorious 1080p/60FPS on your PC, with a stable online connection that doesn't throw a tantrum and give you communication errors every half a dozen races. Imagine a game like Kid Icarus on a platform where you don't have to input numerical friend codes, and with the control scheme of a keyboard and mouse.

That's a future I'd love to be in.

 

But what about the 3DS and Wii U? Do they just abandon them?

No, that's a terrible idea. See both of them through to the end of their lifespan- as things stand now, both the 3DS and Wii U should have run their course by the end of 2016. After Nintendo have done good by their current customers, really, the best idea for them is to simply migrate slowly to other platforms, shoring up their game development and their finances, and getting a good head start on the rest of the industry as far as the move to the client based gaming future goes, instead of being dragged into something like that screaming and crying like they have been for the last ten years or so. Really, it's the best, most sensible, most financially sound, and perhaps, most importantly for us, most relevant to their development interests as well.

Still, though, that's just what I think? What about you? Where do you see Nintendo going and being ten years from now? Most importantly, why?

 

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