On Thursday, Satori Iwata delivered the keynote address for Nintendo entitled, “Disrupting Development,” where he highlighted several ways that Nintendo has disrupted the business to produce a change in the industry.
Mr. Iwata started his presentation by speaking of a company that found itself in the No. 2 position after years of being No. 1. The company decided to address this situation with three unique goals: 1. Reconsider its Strategy, 2. Redefine its Business, and 3. Expand its Market. His undertones alluded to the current positions of Nintendo and Sony, but he surprised the audience by revealing that he was actually speaking of Pepsi. He further explained that Pepsi stopped asking how they could sell more cola and started asking, “What else do people want to drink?” By following this new strategy, Pepsi is now No. 1 in bottled water and in snack foods. Just ask any developer and they’ll tell you the three key snack foods are Fritos, Cheetos and Doritos. The lesson learned from Pepsi is “think different and hold to your strategy.”
The game market is ready for a disruption. Mr. Iwata stated that we need to expand the audience and our imaginations. We need to reach out to the casual gamer and the non-gamer. The Nintendo DS is a good example of this. With 6 million copies of Nintendogs sold, Nintendo has created new players.
In Japan, the PS2 console sold 6 million units in 21 months, the GameCube reached this milestone in 20 months, and the Nintendo DS reached this in just 14 months. Nintendo DS production is still struggling to keep up with the demand.
Disruption needs to come from other places besides hardware. The Brain Train software has been released in Japan followed by More Brain Train and Big Brain Academy. This software has sold extremely well and Satori told the story behind this software. The idea for the software actually came from one of the members of the Board of Directors, who commented that no one his age were playing games. He suggested that they needed a game designed for seniors. A task force was assigned to develop a game that would have appeal to all players. An idea was proposed to base a game on the popular Train Your Brain book written by a neuroscientist, Dr. Ryuta Kawashima. The key concept behind this book included exercises to work your brain and concepts to measure you brain age.
Mr. Iwata could only schedule to meet with the author on the day that the DS system was launched in Japan, but the meeting was successful and he spent 3 hours meeting with Dr. Kawashima. Using electrodes positioned around the head, Dr. Kawashima showed through visual imagery that playing the prototype developed by the Nintendo team caused more blood to be circulated about the brain’s surface. The game includes handwriting and voice recognition making it immediately accessible to all players. The team was given a 90-day development schedule, which had a side benefit in that the team members were too busy to complain about the tight schedule.
Once the game was completed, the CFO made a rule that the sales force had to spend the first 15 minutes of every meeting with resellers playing the game. The resellers were quickly sold on the game and purchased 70,000 copies of the first version, a respectable, but modest number. When the game was released, the in stock copies were quickly exhausted. When the second version was released, resellers bought 850,000 copies and still ran out. To date, these games are the biggest DS seller of all time. Mr. Iwata finished this story with an important moral, “listen to your board of directors and your CFO.”
Mr. Iwata stated that the game succeeded because the people at Nintendo believed that people wanted something new. He then announced that all session attendees would be given a copy of Brain Age and encouraged them to have their parents and other non-gamers try to the game.
Mr. Iwata then continued his presentation talking about Nintendo’s approach to new technologies and how the DS WiFi proved to be another disruption to the industry. Their goal was to enable players across the globe to connect as easily as if they lived next door. This goal would make it easy for players, but it was hard for developers. Nintendo’s experience is that online gaming tends to attract aggressive players, but connectivity issues need to be addressed for the casual games as well. The team working on this issue called their work, Project Houseparty, which doesn’t seem to translate well into the US market. Through easy connections, you should be able to play with people you know as well as total strangers. Players need to be given a choice on how to play. It is this freedom of choice that makes WiFi a success. There are currently over 1 million WiFi players in just short 6 months.
Mr. Iwata then invited a team to demo Metroid Prime Hunters and commented that even though expanding markets means new players, Nintendo has not abandoned core gamers as the Metroid game shows. Other games in the works for gamers include Tetris DS, Super Mario Brothers for DS and the announced Legend of Zelda, Phantom Hourglass for the DS.
Nintendo has announced their next generation console, which is currently being called the Revolution, sporting a unique controller. Mr. Iwata then explained how this unique design came about. The design team noticed that game controllers are scary for most non-players, but everyone seems really comfortable with a television remote control. The goal of the controller design team was to create something that was 1. wireless, 2. approachable, 3. sophisticated, and 4. revolutionary. After many ideas, they decided that a direct pointing device would be good and one of the developers suggested a revolutionary idea, to create a controller that would let you play a game using only one hand. This raised an issue of backwards compatibility. The Metroid team declared that this controller would work for their game. This problem was solved using a separate attachment that could detach from the main controller like numchucks.
Mr. Iwata then announced that the Revolution system would include a virtual console including all the older Nintendo titles along with the Sega Genesis titles.
One of the major barriers still to overcome is the cost of games. $50-$60 dollar games means larger games, larger teams, licensed games and more marketing cost. The market reduces its risk with sequels, but if this were to happen in a bookstore, then you’d eventually end up with only encyclopedias for sale. The scenario also doesn’t give new ideas a chance to succeed. Nintendo understands the current business model, but also realizes that it needs to create new models that offer a combination of opportunity and affordability.
Mr. Iwata concluded the presentation with a quote, that Nintendo will “not run from risk, but run to risk.” By disrupting the industry, they hope to reach new players and show them the surprise and joy that can come from video games. Video games are meant to be one thing, “fun for everyone.”