On March 17th, Nintendo announced a partnership with Japanese mobile game publisher DeNA to bring titles featuring its famous characters to smartphones and tablets. This comes after years of such calls from investors and decreasing relevance for Nintendo in an industry that is moving quickly on to new business models and types of games.
It really can’t be understated how important Nintendo’s move to mobile is. As a mega cross-generational brand, Nintendo has the power to turn mobile gaming and the free-to-play business model on its head (in free-to-play, the games are free but players pay to purchase additional content such as items and new levels). The strength and appeal of its franchises (Mario, Zelda, Pokémon to name a few) goes back generations of gamers now, and the quality of its games on average is nearly unsurpassed.
How will Nintendo’s announcement affect current mobile game heavyweights such as Supercell (Clash of Clans), King (Candy Crush Saga) and Kabam (Kingdoms of Camelot), in terms of not only product development and level of quality, but marketing? Will we see an arms race to acquire top-tier movie and television licenses to compete against Nintendo’s beloved franchises?
As much as Nintendo talks about dedicated gaming consoles still being relevant (naturally, as it is still selling WiiU and 3DS hardware), it’s reasonable to wonder if Nintendo’s decision will move the goal posts towards mobile platforms for the other two console manufacturers (Sony, Microsoft), at least to some degree.
Sony and Microsoft have previously danced around the big smartphone elephant in the room with a few half-hearted games and companion apps for their hardware and cross-platform media distribution services. However, Nintendo is now effectively throwing down the gauntlet (although, to be fair, it has yet to show any games stemming from the partnership) with an all-out offensive on gaming’s frontier that may force its competitors’ hands. Company president Satoru Iwata announced that Nintendo will release five apps by 2017 with a first smartphone game due out by the end of 2015.
Incidentally, I had previously talked about mobile games becoming a mature market. Given Nintendo’s general conservative nature and its past reluctance to enter the mobile space, the move is very strong evidence that this is indeed the case.
Let’s back up a bit and break down the mechanics of the partnership: Nintendo will be creating new games (not simply recycling old games) using its characters for mobile platforms. Mobile game company DeNA will allow Nintendo to use its tremendous back-end infrastructure and mobile game expertise, essentially making the games run online in an efficient manner. Together, they’ll also build a cross-platform membership service that will link these new games and mobile platforms with Nintendo’s existing software and hardware.
Think of it this way - Apple and Google provide the retail space through their app stores, while DeNA handles the warehouse and the logistics to run both large-scale promotions and get stock from the warehouse to the store in a timely manner. Finally, Nintendo is creating the luxury brand product to be sold on the store shelves.
On many levels, this partnership makes sense for both parties. DeNA uses its already built infrastructure and knowledge of analytics-driven design and live event management. This mitigates tremendous potential risk and expenditures for Nintendo, especially given its past issues with delivering compelling, easy to use online services on their hardware.
Nintendo, meanwhile, brings its design chops and brand power to DeNA, a company that in recent years has seen its status slip outside of Japan as a top mobile game publisher.
What are some of the interesting and key decisions that Nintendo will have to make that could change the course not only of its business, but that of the industry?
On the execution side, the question to ask is how much will its monetization strategy focus on durable items and content (purchasable items that the user owns permanently, such as Mario Kart tracks and Zelda dungeons) versus consumables (purchasable items that only last a certain number of uses, such as an item that grants the player invincibility for a limited time). Given CEO Satoru Iwata's negative stance on free-to-play, it will be interesting to see how Nintendo approaches free-to-play, or if it will use a variety of business models.
Nintendo is also famous for its commitment to quality, delaying games in order to reach desired levels of perfection. This is antithetical to how mobile games work - experiment with a small initial release, fail fast if necessary and, in case of success, update the game every week or two with new content to keep players playing and paying. How will Nintendo strike a balance between this commitment while keeping up with a regular cadence of updates necessary to retain users?
Opportunity-wise, how will the company utilize the unique cutting-edge hardware features (that are ever-growing) on smartphones? Given Nintendo’s famous creativity, this is exciting. Additionally, new Mario/Zelda/Metroid games are a special event for gamers because Nintendo is careful about milking the cow with a glut of titles that are too similar. There's a danger here, but also an opportunity to reinvent older franchises that have fallen by the wayside, such as Punch-Out, Ice Climber or Kid Icarus, on a platform that is conducive to making smaller, cheaper games.
Nintendo’s move to mobile games is one of the most exciting and interesting events to happen in the industry in some time. While there are many question marks surrounding how it’ll execute this foray, the potential exists for Nintendo to change the game industry, or at the very least, stabilize its relevance and business for years to come.
Posted in: Industry Transformations