No One Is Buying Nintendo's Cautionary Tale About Mobile and Social

March 2, 2011 at 10:06 pm PT

Leaders in the gaming industry reacted negatively today to controversial comments made by Nintendo’s President Satoru Iwata at the Game Developers Conference this morning.

Iwata, who presented the show’s only keynote, said he fears today’s emphasis on mobile and social is going to hurt the industry.

Later in the afternoon, critics said his statements only prove his ignorance and point to the company’s own weaknesses.

“Long-term, Nintendo is doomed,” said Michael Pachter, equity research analyst of Wedbush Securities. “He’s under full frontal assault by Apple.”

In the keynote, Iwata explained the games industry is no longer focused on building the highest quality experiences, but rather is narrowing in on free or very low cost titles.

“The majority of people here are creating games for social and mobile. I fear our business is dividing, and that threatens the employment for those of us who make games for a living,” he said.

Iwata also addressed Apple’s impact on the industry, but without every naming the iPhone and iPad-maker.

The lack of acknowledgment felt particularly strange given that his comments were being made at the exact same time that Steve Jobs was across the street, unveiling the iPad 2, which has all the hardware capabilities in place to become a serious gaming device.

The closest Iwata got to talking about Apple, and probably Facebook too, was when he said that “these platforms have no motivation to maintain the high value of video game software. For them content is something created by someone else.”

For emphasis, he added: “The value of games does not matter to them…The fact is, what we produce is value, and we should protect it.”

[A video of Iwata's entire speech can be viewed on Nintendo's web site.]

Iwata gave the impression that he was oblivious to the burgeoning mobile and social sectors around him, which despite being in their infancy, are generating significant revenues and attracting large audiences. Together, they both have the ability to define the future of gaming.

“He may be right, but then the 200 to 300 million people who play games on Facebook are wrong,” said Jeff Brown, the VP of corporate communication for Electronic Arts ”Social gaming as a whole aggregates into a business that is undeniably big money.

“When it’s that big you are forced to pay attention,” he added.

Among the large publishers, EA’s ahead of the game when it comes to preparing for the day when consumers switch from paying $60 for an Xbox title to paying a few bucks or nothing at all for an iPhone or Facebook game. Yesterday, it furthered its commitment by expanding its third-party publishing platform into social and mobile through its acquisitions of Chillingo and Playfish.

So far, it’s paying off.

EA’s digital business was up 39 percent in 2010 and its on track to hit three-quarters of a billion in revenues this year.

Zynga, the undeniable leader on Facebook, also took offense to the statements.

Zynga’s Chief Game Designer Brian Reynolds, who came from the traditional games business and was lead designer on the big hit Civilization II, was especially baffled by the comments about being able to make a living in social.

Last year, Zynga hired more than 800 people and today has more than 1,500 full-time employees in 13 offices, spanning six countries.

“I expected better from Nintendo. They are missing the point of what we are doing,” he said. “We are making games that everyone can play and socialize on while playing.”

What’s more, Zynga is doing a great job monetizing, he said.

Sources tell BoomTown’s Kara Swisher that it’s close to completing a funding round of $500 million, valuing the company at $10 billion –making it worth more than EA’s $6 billion market cap. In 2010, its revenues were rumored to total $850 million.

“We do it in a microtransaction way, and it’s free to play, but they’re wrong that they don’t make a lot of money,” Reynolds said.

The gaming industry has always been fraught by disruption.

In the past, the storyline has been about the consoles wars with Microsoft, Nintendo and Sony all going head-to-head to be the gaming leader. Now, it’s about the platform wars with consoles vs. mobile and social.

How quickly do things change.

It was only a year ago at GDC that Zynga seemed to piss off everyone when accepting an award on behalf of Farmville for best new social/online game.

In a similar manner as Nintendo today, Bill Mooney, the general manager for Farmville at the time, used his acceptance speech to make the argument for why everyone should leave console gaming for social games. He even solicited resumes at the podium.

Mooney’s overtness was translated as lack of respect for the traditional games business, which is what seemed to bother people the most.

What’s different with today’s platform wars vs. yesterday’s console wars is that this time, it’s not about one beating another. It’s about expanding the market opportunity for gaming. Ultimately, if you give people a choice of platforms to play on, more people will play.

Reynolds said while Zynga has made huge gains since last year, it still hasn’t been fully recognized for its work.

“What we’ve done has permeated everywhere, but we don’t have the recognition from the old guard. The young guys — they get it, but the forces of the industry are living in the past. The longer it takes them to realize that, the more it will cost them to buy your way back in.”

As for whether Nintendo is wrong or right, and whether it will have to pay heavily down the road to get back in, we’ll have to wait and see.

The rest of Iwata’s hour-long keynote was spent promoting its upcoming 3DS launch at the end of the month.

Today, Nintendo’s North American President Reggie Fils-Aime announced a partnership with Netflix to offer streaming video.

It also formed a partnership with AT&T to give internet access to the handheld gaming devices wherever it operates WiFi hotspots.

Webush’s Pachter said despite the pressure from Apple, he believes the 3DS is novel and has the ability to sell tens of millions of units, but it will face competition from the iPod and iPhone, which have similar games and much lower prices.

EA’s Brown also wouldn’t count them out. “The instant you stop thinking they are relevant, they turn the industry upside down.”

Tagged with: 3DS, Apple, AT&T, audiences, awards, Bill Mooney, BoomTown, Brian Reynolds, Chillingo, Civilization II, DS, EA, Electronic Arts, eMoney, Facebook, games, gaming, GDC, GDC 2010, GDC 2011, iPad, iPad 2, iPhone, Jeff Brown, Kara Swisher, Michael Pachter, Microsoft, Netflix, Nintendo, platform, Playfish, Reggie Fils-Aime, revenues, Satoru Iwata, social games, Sony PlayStation, Steve Jobs, Tricia Duryee, video, Wedbush Securities, Wii, XBox, Zynga

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GeorgeS

“…he fears today’s emphasis on mobile and social is going to hurt the industry.”

Translate that as, “…he fears today’s emphasis on mobile and social is going to hurt Nintendo.” In that sense, he’s probably right.
http://www.facebook.com/profile.php?id=726424357 Kurt Baumann

So the fear here is actually real. People get too tied up in who is making money and who isn’t and attribute sour grapes to those who disagree with a obvious trend of money making, ie; social games.

But that doesn’t mean he isn’t right about what these games are doing to the gaming industry. Immersive games like Everquest that had real game are being swept under the table as easy to play and minimal thinking games become popular. The fact that they make money hand over fist has nothing to do with the reality that these games are killing a segment of games that otherwise would be funded and enjoyed by consumers.

I will posit that social games are entirely different from the gaming industry, in that they are more about the social aspects than game play. How often have you started a game, and then gotten bored because it was the same thing over and over and over…? That pretty much describes a social game to me. It’s more about interacting with your friends than it is about the game play. As there is none, game play that is.

So the comments here are most likely pissing in the wind of change, but dont’ attribute what he’s saying to ignorance, because it’s not all about money. Sometimes it is about art, and the definition of that art. Gaming as we know it has changed in the last 3 years, and it’s not likely to go back to where it was. With all of the money to be made in the mass market, why fund a game like EverQuest? That’s just one of many examples. Yeah I hear you on WoW, but to be honest that game is pretty boring as well. Follow the little gold ? marks and win. Yea!
http://www.thenetworkgarden.com hypermark

There is a classic tale told by Herb Caen (legendary writer for the San Francisco Chronicle), where he talks about how SF has lost its magic, how the locals are all being run out of town, only to be replaced by carpet-baggers; how craft has been replaced by cheap and now…”

The punchline is that reading this as a San Franciscan would when Caen wrote this piece in the mid-eighties, you would be nodding yes, yes, yes. But then, Caen tells you, “Would it surprise you to know that I wrote this sentiment in 1954?”

Moral of the story: each generation, each incumbent sees their mode, their ethos as the “right way,” and turns a jaundiced eye to the “new way.” And the story repeats with each generation. Progress, though, maintains a blind eye to the good old day wishes of the incumbent. It just rolls forward.
Anonymous

Hmm ” iPad 2, which has all the hardware capabilities in place to become a serious gaming device”??? i don’t know much about ipad2 but does it have a joystick or dpad???? otherwise it’s not a “serious gaming device”
http://www.facebook.com/profile.php?id=726424357 Kurt Baumann

Yes and no.

This is like Photography coming along in the art world and everyone running around saying why Paint now that you can see what is really there. And stating that Photography was not art.

Same thing here, but with the kind of money that is being easily made in social games it’s hard for what happened in the art world at the turn of the century to happen in the gaming world.

In the art world, much as you say in your post, things came to pass that Photography didn’t change Painting and probably propelled Painters to look at the world in a different manner, cubism etc… And Photography became an artform in itself.

That isn’t like to occur here. Because money flows to what’s easy, not always to whats good, or even good for us (note High Fructose Corn Syrup). The money is flowing into social games because of the numbers. Does that make it a good game? Or good art? No it just makes it profitable. We will lose good gaming because of it.

Nintendo rightly or wrongly is pointing out that this rush to the lowend will have an impact on the quality of games being funded. Why would you fund a game that is forcast to make 50M in one year and then die out over the next 2-3 years, when you can put the same money into a social game that could generate 200M and then die out over the next 5 years? You wouldn’t.

Hence the industry and we gamers lose.

Is that the way of the world, well apparently so, but don’t knock those who stand up and point out whats going on.
http://www.thenetworkgarden.com hypermark

Well, my point, to take your analogy, who defines what is art and what is right?

It may seem obvious that social gaming and mobile apps represent a dramatic step down from seriously crafted console games selling for $50, but that is the way it is with most disruptive innovation.

The new innovation typically is less powerful and less impressive, and the incumbent user sees it as something they couldn’t possibly want.

It was that way when the PC disrupted the mainframe/mini, when the web disrupted the PC and now with the mobile and social – ala Post-PC – disrupting dedicated console games.

Quite typical is that the toy grows into a serious machine and an even larger market and richer ecosystem in due time.

There are throngs of people who couldn’t understand why you’d want to hear people talk in movies when you had silent films. That’s not to say that they were wrong — that’s not my point. It’s that mediums change and evolve, and the disrupted usually respond the way Iwata has, by lamenting, dismissing or by falling on their face in the new domain, almost to prove their bias.

Lamenting is not leadership.
http://www.facebook.com/profile.php?id=726424357 Kurt Baumann

Good points.

I think the thing is that not all change is good even if the “masses” like it.

But change will come regardless.
Steve B

Uh, yeah… Why is it so oblivious to many (including Pachter and the author of this article) that there is plenty of room in the market for Farmville and Mario? Iwata’s right; he’s just covering his bases, making sure people acknowledge the difference between simple, 10 minute fun and a full-fledged gaming experience.

Yes, cheap smart phone games are increasingly popular, but that hasn’t stopped New Super Mario Bros on DS from selling over 25m copies at around $30 a pop, no less… all $ in Nintendo’s pocket. Not to mention Mario Kart, Brain Age, Nintendogs or countless others. Yeah, that sounds like “doomed” to me.

There will always be people that want quick, simple “app” games, just like there will always be people who want real hand-held games for a richer experience.

You also fail to acknowledge that at the same event, Iwata also actually credited Microsoft for their progress with their “Live” service and contribution to social gaming.

Oh well, such is the mainstream media on such topics…
Anonymous

Actually, it’s hurting the entire industry already. Nintendo is the strongest company in the gaming industry today, so they will not be the ones that are worst affected by this.
http://pulse.yahoo.com/_DXQRZRK4OQIZO7HBOV7HEVNZJY Taggart

I think he’s right–gaming on social networks or phones is about simplicity, simplicity, and in practice that means dumbing things down. Because when you’re trying to get everyone to game everywhere–subways, waiting for their coffee, etc.–it’s about making a game that some 55 year-old comptroller can learn to play in 2 seconds. You don’t need 10,000 programming hours for that, and you hardly need programmers. But the market dictates everything, and 300 million old fogeys beats 8 million true gamers. So he’s right: quality will go down, fewer real game designers will be needed, and the industry will shift. There’ll be less great quality games because there simply won’t be an incentive to hire all the artists, engineers, and designers to make a typical video game when you can make more money making stick figure games.

No One Is Buying Nintendo's Cautionary Tale About Mobile and Social

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