Nintendo’s chief executive Satoru Iwata dropped some tantalizing clues this week about the company’s plans to enter the market for smartphone games and, separately, create a new piece of dedicated game hardware, code-named NX.

Iwata still hasn’t called me to explain this and tell me I was right in 2008 when I warned Nintendo about the success of the iPhone and the disruptive effect it could have on the Nintendo handheld gaming business. But he was also right to be wary. Back then, smartphone games were a small market, and there was no way to set Nintendo’s games apart from the pack of free and 99-cent titles.

In 2013, I suggested he buy Ouya, the maker of the $99 Android game console. But he didn’t listen, as Nintendo was committed to its money-draining Wii U game console. Back in January, 2014, I suggested that Nintendo dump the Wii U. It very well may have done that secretly at the time, but it didn’t tell anyone publicly. Nintendo appeared to keep its head in the sand for too long, and now Android and iOS games are available to more than a billion people worldwide. The Wii U has sunk to an estimated 22 percent market share versus 28 percent for the Microsoft Xbox One and the 48 percent market share for the PlayStation 4. (Those numbers are estimates by VBChartz. They’re not to be trusted, but they’re all we’ve got.)

Iwata said in a press event in Japan that he wants hundreds of millions of people to play these new games based on Nintendo intellectual property on smart devices. He also said Nintendo, through the NX, remains enthusiastic about dedicated game systems.

“Let me confirm that Nintendo is currently developing a dedicated game platform with a brand-new concept under the development codename ‘NX,'” he said. “It is too early to elaborate on the details of this project, but we hope to share more information with you next year.”

That’s a long time to wait. In the meantime, the Wii U is going to sink like a rock. But it gives me plenty of time to speculate and offer my armchair quarterback advice to Iwata, yet again. For this purpose, it was good for me to attend Nvidia’s GPU Tech conference this week in San Jose, Calif., where there were a lot of smart hardware thinkers in attendance.

Nvidia Shield set-top box and controller.

Above: Nvidia Shield set-top box and controller.

Image Credit: Dean Takahashi

Nvidia announced at the Game Developers Conference in San Francisco that it would launch its Nvidia Shield set-top console in May for $200. The box runs Android, and it has no hard drive. While it includes a powerful Tegra X1 processor, it will mainly benefit from a Netflix-like subscription service that streams games over a cloud from the Nvidia Grid platform. These games will run in the cloud and stream to the device without using the Tegra X1.That means they are not tied to the local hardware on the machine.

That’s an intriguing choice by Nvidia. You can download and run a game on the Tegra X1 if you wish. But the cloud version of the game will run at 1080p resolution at 60 frames per second, so long as you’ve got a decent broadband connection. Nintendo’s games have always gotten more juice out of limited hardware because they were tightly coupled to the Nintendo local dedicated hardware, said Jon Peddie, analyst at Jon Peddie Research, in an interview with GamesBeat. Android devices won’t have the same kind of hardware-software efficiency, he said.

If Nintendo uses something like the Nvidia Grid, it could get the Wii U games to run on the NX. That would make all of the current 9.3 million owners of the Wii U happy, as it will preserve their investment. But it assumes the cost of porting games to the cloud is not prohibitive. With Nintendo games, I do not think that is the case. Since Nintendo is cutting the life of the Wii U short, it should seriously consider this option. If Nintendo embraced cloud gaming, it could have its games run not only on its new console, but it could also stream its games to any device, just as Nvidia is doing with games streamed to its Shield Portable and Shield Tablet devices.

One of the things Iwata said hinted to me that Nintendo is not fully embracing the cloud, which has its own challenges for people without broadband connections. Iwata said that even if Nintendo takes its intellectual property and creates games that run on dedicated video game systems and smart devices, it will not port the titles for consoles to the smart devices just as they are. There are too many differences in controls of console controllers and touchscreens on smart devices, Iwata said.

“We have no intention at all to port existing game titles for dedicated game platforms to smart devices because if we cannot provide our consumers with the best possible play experiences, it would just ruin the value of Nintendo’s IP,” he said.

In other words, Nintendo will not try to get the same game, or an old game, to run on more than one device. Nintendo plans to put its best efforts into making games for a dedicated game device, which we can assume is the NX. And Nintendo will also, with the help of partner DeNA, create new games for mobile devices. Iwata said that Nintendo has even more passion for dedicated game systems, even as it has decided what to do with games on mobile devices.

Nintendo sat on the sidelines and watched a $10 billion annual market develop for apps on Apple’s App Store alone, not counting Android. Mobile games are expected to hit $30.3 billion this year worldwide, according to market researcher Newzoo, and that number will eclipse console game sales for the first time this year. I am very intrigued at how Nintendo has figured out how to differentiate its content on mobile after that seven-year wait.

It could be that Nintendo will use mobile devices in conjunction with a home console, sort of how the Wii U tried to do with a tablet and a console. Or perhaps it will take the physical toy and digital game hybrid, the Amiibo toy characters that interact with the Wii U, to a new level. Iwata said Nintendo saw synergies between dedicated game systems and smart devices. The possibilities are very exciting, and Peddie thinks Nintendo will have a traditional machine that embraces mobile.

DeNA and Nintendo together and never to part.

Above: DeNA and Nintendo together and never to part.

Image Credit: Serkan Toto

Nintendo is going to develop a new membership service akin to its old Club Nintendo service. DeNA already has a social network service dubbed Mobage. Nintendo’s could embrace that social networking service and add compatibility with the existing Nintendo 3DS, Wii U, smart devices, PCs, and upcoming Nintendo NX. Iwata said that is going to happen, and that part of his comments suggest to me that he will embrace some kind of cloud service.

“Until now, when we said, ‘platform,’ it meant a specific video game platform,” Iwata said. “Now that we are going to release games on smart devices and make use of globally widespread PCs and smart devices for our new membership service, we would like to offer more consumers with software that is suited to their tastes. In other words, we are challenging ourselves to redefine what ‘Nintendo platforms’ mean.”

I am excited about Nintendo’s possibilities. I think they should study what Nvidia has done and take the best ideas. But I am also wary. Nintendo initially ignored everybody’s advice and ultimately gave in and took that advice. They ignored smartphones and stood behind the Wii U when everybody told them it was dead. Iwata also veered off into the idea of making health-related entertainment devices, akin to health wearables, without ever producing a product. It also moved too slow at almost everything it did, including publishing big franchise titles for the Wii U. Those are some gargantuan mistakes.

“They were in denial,” Peddie said. “They thought their brand was so strong they could maintain a handheld that was desirable, even when the price of games on Android and iOS was zero to a few dollars.”

Given the failures, Peddie said he believes that Nintendo will “deviate from its current partners.” That could be bad for Advanced Micro Devices, which supplies the processor and graphics for the Wii U.

As for its chances for success, Peddie said, “They surprised the industry for several generations of machines, starting with the Nintendo 64. They’ve always had exciting, world-class content. The content will in my opinion remain their strong suit.”

He added, “They are like every other console maker, subject to the availability of hardware from a very small population of semiconductor suppliers. The trick for them and their semiconductor partner will be to find ways to differentiate and exploit the uniqueness of their content.”

The lucky thing for Nintendo is that brands are on the upswing on mobile devices. And Nintendo has some very powerful brands and franchises, like Mario and Luigi. Those brands could be as powerful as anything Disney has, and they could be huge if they are allowed to spread across a number of platforms. But even Disney had to buy Pixar to stay up with the times and refresh its approach. With DeNA, Nintendo hopes to do something of the same.

Iwata has not stopped by my office to get advice from me. I am waiting for him to come. But I share a gamer’s love for everything that Nintendo has done and all that it could still accomplish in the industry. I have been a big critic of what Nintendo has done in the dawn of gaming’s digital era. But I share hope about its possibilities in the future.

 

 

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