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Is Nintendo working on the defining videogame controller of the smart device age?

By on March 30, 2015
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Nintendo’s partnership with DeNA makes no sense.

The thing we all know about Nintendo is that it doesn’t follow the herd. It makes surprising announcements that make the industry shake its collective head and mutter, “that will never work.” Analysts of the video game industry have a secret motto we all whisper to each other when Nintendo announces something that doesn’t make sense: “No sane analyst ever bet against Nintendo.”

But this time, no one is saying it doesn’t make sense. The market applauded Nintendo’s move into games on smart devices and free-to-play with a huge surge in the share price. Dr Serkan Toto, a respected observer of the Japanese games market, described the deal as “an earthquake that will change the entire games industry.”

I don’t buy it.

Smart device gaming and free-to-play business models are red oceans

Nintendo is known to be a fan of a Blue Ocean Strategy , as described in the book of the same name by Chan Kim and Renée Mauborgne. The subtitle of the book is “How To Create Uncontested Market Space And Make The Competition Irrelevant”, and Nintendo has a long history of doing just that. The Wii is the obvious example, eschewing the technical arms race in which Sony and Microsoft were engaged by launching a low specification machine with an innovative controller that drew in a huge range of users that Nintendo’s competitors had not considered as a target market. The dual screen DS was a similar innovation, with many observers shaking their heads at Nintendo’s quirky design and predicting that Sony’s more traditional PSP would wipe the floor with it. Similarly, the D-pad and the analog controller were novel ways of driving human-machine interaction that were adopted as industry-standard, even though they were questioned by the industry at the time.

Yet this time, everyone is saying that Nintendo is doing the smart thing. Investors seem to believe that simply by bringing Mario to the crowded, competitive, fast-moving, smart device space, Nintendo will make bucket-loads of profits, and investors will be happy.

But is this really Nintendo’s strength?

Nintendo’s strength versus smart device needs

Nintendo is a design-led organisation that thinks deeply about how humans interact with video games and their controllers. It takes its time to ship products of enormously high quality. Nintendo has shown that it is prepared to bet that it will be able to change consumer behaviour to match its needs, rather than attempting to change its behaviour to match consumer needs. It knows how to ship products, not services. It is a slow responder, not a fast one. It is a deep thinker, not a reactor.

This is not what smart device gaming demands. Smart device gaming needs rapid iteration. It needs responding to feedback. It means adapting to what the customers want, not the other way round.

Some will say that is what DeNA provides: the expertise in exactly the areas that Nintendo is weak. This is true, but managing that relationship will be hard. Both companies have a strong idea about what makes their respective games successful. These ideas will come into conflict. It is hard enough to make successful smart device games when everyone is in agreement; when each side has fundamentally different ideas about what makes a game successful, resolving those conflicts will take time.

Nintendo has even acknowledged this problem. Not just by partnering with DeNA. In an investor call last week, the investor relations spokesperson confirmed that Nintendo was entering the “red ocean” of free-to–play, despite the very idea of F2P making Nintendo’s traditional customers “uncomfortable”. He even implied that this deal is more about DeNA pushing to get hold of Nintendo’s Intellectual Property, than it was about Nintendo seeking out a new blue ocean market.

So what if Nintendo is really targeting a Blue Ocean? It just hasn’t told anyone yet

My belief is that Nintendo is looking for a blue ocean. It hasn’t told anyone what the Blue Ocean is yet, and I am about to make my best current guess. It is only a guess, and it is driven by my instinct that Nintendo doesn’t jump into red oceans. So we are all framing the question wrong. What do we know about Nintendo:

  • Nintendo targets empty markets that no-one owns
  • Nintendo obsesses about how humans interact with machines. It has always wanted to control the hardware to make the interaction between software, hardware and human as delightful as possible
  • Nintendo has invested heavily in wearables and sensors as part of its health and wellbeing initiative that has failed (to date) to excite the stock market
  • Nintendo has partnered with a leading operator of free-to-play and smart device games, a segment of games that Nintendo does not really understand
  • Nintendo has announced that it is working on a new hardware platform, the NX, that will be announced in 2016

Nintendo is working on creating the dominant videogame controller for the smart device era

My belief is that the Nintendo NX is, at its heart, a video game controller for the smart device era.

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Nintendo will harness the wearable/sensor research that comes out of its health and wellbeing division to create a new type of controller. My current guess is a glove of some sort, but it could be a smart watch and a couple of rings, or something like that.

The NX device will be a relatively low-powered box that sits under the television screen in the living room. It will interface with the controller to allow players to interact with their games using gestures, perhaps touching a smart watch, or tapping your thumb and forefinger together, or some other movement that combines gestures and wearables.

The key innovation is that the set-top-box and the controller will be sold separately. The controller will work with iOS and Android devices. This could work in two ways:

    • the controller allows players to interact with a game displayed on a touch screen device
    • the controller allows players to interact with a game displayed on a television, broadcast using a device like Apple TV, Chromecast, or even just a cable between tablet/smartphone and the TV screen.

At a stroke, Nintendo has created a Blue Ocean. It is not trying  to become another gaming platform sandwiched between the core gamer world of PlayStations and Xboxes and the mass-market world of smartphones and tablets. Instead, it has an instant addressable market of over a billion devices. Third party developers will fall over themselves to support the NX, because whether or not the NX set-top box makes inroads into consumer markets does not matter: Nintendo has invented the de facto standard for how humans can interact with smart devices without using the touch screen.

That is a Blue Ocean worthy of Nintendo. It ties together the wearables research, Nintendo’s historic approach to product development, its ambition for new markets and its desire to delight its fans with something they have never seen before.

It would be an exciting, innovative, fascinating evolution of the video gaming market. It makes much more sense than Nintendo asking its fans to pay 99c to make Mario jump just a little bit higher.

 

Image credit: Maurizio Pesce, licensed under Creative Commons

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com
  • Check it out.
    I remembered this article from18 months ago as I enjoyed reading Nicholas’ vision.

  • Matthew Nelson

    Lol xbox steam and psn were all originally focused on their online gaming platforms. nintendo could care less because they know that this is just the first frontier as far as internet platforms go. Bro, we haven’t even reached practical quantum computing yet. Theoretically, we can create universes with this technology maybe not very big ones at first, but universal simulations nonetheless. And ideologically we should have that technology in 50 – 100 years. The problem is that, while keyboards are fast, they are very binary. one domino infront of the other, and lastly a very 2d approach to data submission. We all know that there is a better way, but without biological modification we are restricted to peripheral devices, and those devices must be both accessable to a general majority, and supersede the previous peripheral. And nintendo is focusing on just that because gaming (fun) comes first.

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  • Zuxs13

    Apparently you have never played a game made by Kabam then…

    Well of course you don’t care to defend your position, because it makes absolutely no sense. No sense from a marketing stand point and no sense from an engineering standpoint.

    Where do you propose the question to your readers, where their “iterative guesses” are?

  • I am pretty certain that there are no mobile games made out of wedlock. Or all of them are. Or something.

    The post made it clear this was a guess. I’m not interested in defending the position. I’m interested in other people’s iterative guesses on my initial position. I start from the premise that mobile is a red ocean, Nintendo doesn’t fight in red oceans, so something else is going on. This was my sighting shot to open up the discussion. I’m all ears to interesting alternatives.

  • Zuxs13

    So are you staying that there are no such thing is illegitimate mobile games? Because that would clearly show just how little you know about the industry.

    I like how you have an argument with a commenter by trying to attack them back, rather then provide an sense of a real argument. You provide no facts or evidence to support your argument, especially when you get called out.

    You seemed to have avoided my comments on QoL.

    What evidence leads you to think NX will be some form of wearable device or “low powered box”?

  • I think you misunderstand the purpose of my website, and indeed what I do for a living.

    And I love the way that you claim not to be prejudiced while using the phrase “legitimate mobile games”.

  • Zuxs13

    I said real games not gamers. It has nothing to do with prejudices. I’m not against them making mobile games, if anyone can make legitimate mobile games, Nintendo can.

    So clarify your beliefs, because your article speaks volumes towards my insinuation.

  • Your statement of my beliefs is incorrect. Your invocation if the phrase “real gamers” speaks volumes for your prejudice.

  • Zuxs13

    When Nintendo said dedicated gaming machine, they were not referring to a machine that would allow smart phone games on the TV. That’s been done already.

    They announced it to reassure people that they were still making dedicated hardware for real games.

    It feels like you are under the impression that current Nintendo games are going to end up on cell phones. They are NOT. They will be making new games for mobile, creating an app that will span all platforms that will allow you to buy games for 3ds, wii u , NX from mobile.

    It seems like you are just grasping at straws to draw people to your failing website. You have no evidence to back your claims, no research to support it, and no real knowledge of what you are talking about.

  • A device that sits under your TV that is controlled by a controller that also works with your smart device would still be a dedicated gaming device.

  • Zuxs13

    You do know Nintendo has stated that QoL (their “health and well-being initiative” as you call it) are Non-wearable devices right? They have stated this multiple times, and also stated that it will be separate from their Gaming division, even indicating that there wont be any, or limited interaction between each product line.

    Nintendo has been dabbling in the Free-to-play market for about 3 years now. But they also stated that the games/apps they put on smart devices will vary in price models.

    Your idea of the NX goes against everything Nintendo has said in the past two years, and said about NX its self. They called it a dedicated gaming device. You call it a controller for smart phones, that is nothing like what they have mentioned.

    We know they have combined both handheld and console development teams under one roof now. We also know that they hired people familiar with SoC designs in North America (likely to do with their QoL products since those are being made in Ca). None of these indications are that Nintendo is just going to make a controller to work with Smart Phones. They would fail miserably if this is theri plan. Its a good thing you don’t work for them.

  • Zuxs13

    Of course it makes sense. Nintendo can not create a unified account system across mulltiple platforms alone, DeNA can.

  • My starting premise is that the Nintendo/DeNa deal doesn’t make sense. This is my first guess about what is really going on. I’m open to alternative suggestions.

  • CD

    What is there to read between a solid confirmation that the NX is their next dedicated hardware, and how does that turn into being a controller for smart phones? This is fan fiction for share holders at best.

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  • More broadly, the role of an analyst is to read between the lines of what people are saying to figure out what is really going on. Taking things at face value is not analysis. Not is regurgitating press releases.

  • Go on then.

  • Mazzle

    Wow great “analysis”. How about start reading what Iwata said about NX? A dedicated gaming-system! Simple as that. Stop talking crap like many of your colleagues. Is it that hard?

    …Sometimes I think I would fit better in such a position just because I can read news and Q&As about/from Nintendo

  • Kirielson

    While I see where you’re coming, I think that’s a bit ambitious even from Nintendo’s point of view. To do that platform as you state, they’re going to have to get their online to be BETTER than Xbox Live and Steam.

    There is very little hope from that at all at this point unless Box or Dropbox, or a major internet player can take over and give them what they need in Nintendo’s vision,

  • Jack Napperino

    Look at you with you picture of Logbar’s RING from CES 2015

  • Clark S

    This is an interesting piece, Nicholas, and a bold prediction. I see two main problems with it:

    1. The Wii didn’t actually work. Oh, it worked in the “blue ocean” sense — the promise of motion controlled gaming was so novel that it captured consumer imagination, the price-point was right, and (most importantly) the Wii Sports title that came in the box actually fulfilled some of that promise. But pretty much no other titles did, because the controller didn’t have anywhere near the capability and fidelity that Nintendo promoted to developers. It took almost two years for them to release the MotionPlus controller, which at least approached the functionality the Wiimote was supposed to have. By that time, devs and publishers had figured out that the only company that was going to make money on the platform was Nintendo (and a couple of fitness games), and the Wii was gathering dust in consumer rec rooms alongside all of the Guitar Hero controllers.

    Nintendo will have an uphill battle selling mass market consumers on another radical rethinking of the controller that doesn’t really deliver on their hype — witness the preposterous WiiU tablet. They certainly won’t sell 3rd party developers on it until it’s extremely well established; a chicken-and-egg problem of the first water. Do they need 3rd party support? Not in Japan, perhaps, but certainly everywhere else.

    2. Nintendo will never relegate themselves to being a peripheral manufacturer, creating controllers designed to work with iOS/Android hardware rather than their own proprietary box. The potential revenue streams are fewer, their ability to assure a consistent consumer experience isn’t there, and the demotion in prestige would be utterly anathema to their company culture.

  • Good challenge Nicholas to think of Nintendo as looking to enter and disrupt/define the space. Thinking Nintendo is just going to enter the current status quo of the mobile gaming space and just put their IP across it just doesn’t strike me as a Nintendo thing. Thinking bold and long term is more their thing so out of the box hypothesising seems to reflect better on Nintendo’s innovative and generally vertical integration approach to game hardware & software (and is way more fun!)

  • That’s a bold prediction (guess). Just like Michael Pachter or Ray Kurzweil are never really on target but always bold. I always love food for thought. Thanks Nicholas.