Iwata: Free-To-Play Games a "Challenge" to Nintendo's Business Model - News

By Brent Galietti, February 3, 2014
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During Nintendo's third quarter financial results briefing, Nintendo president and CEO Satoru Iwata fielded questions from investors. One question was about Nintendo's hardware-software model and the difficulties that the company is currently facing. Iwata discussed Nintendo's challenges with their hardware-software model and mentioned free-to-play games specifically as an obstacle.

It's not raining money these days.

"The integrated hardware-software model has a significant handicap today, as the traditional way of explicitly telling consumers the investment they need to put in to buy hardware and software now comes across as being relatively more expensive due to changes in our environment. Although people may actually be spending more money (to play games on other devices not dedicated to video games), it is less visible, so the hurdle we have to clear in order to encourage them to purchase dedicated game systems has comparatively become higher. As with games that are free-to-play, or “free-to-start” as we like to call it, there is a tendency within the entertainment industry to make gaming as easy as possible to start playing. Because our hardware and software are integrated, we first need consumers to purchase our hardware to get our business off the ground, a challenge I outlined when I talked about changing the way we sell our products. Our mid-term goal would be to give an answer to this question in a way that had never been seen before."

Iwata's reply shows that Nintendo is aware of the impact of free-to-play games, which range the gamut from mobile titles (Clash of ClansWhat's the Phrase?) to bigger "core" titles (League of LegendsHearthstone). However, the company does not yet show interest to take the full plunge into free-to-play and smart device gaming.

"Only two years ago, many people urged Nintendo to follow other companies into what was then a very lucrative area, but no one says so any longer," notes Iwata. "In a similar vein, those who now claim that we should make games for smart devices might or might not be saying so in three years. It is our determination for our mid-term future to make efforts to devise our own solutions different from others."

Despite Iwata's response, Nintendo hasn't shut the door on free-to-play or smart device gaming entirely. The company is working on a free-to-play version of submarine game Steel Diver and Iwata stated that Nintendo is looking into smart device gaming at a recent press conference.

"We are thinking about a new business structure," said Iwata at that press conference.  "Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. It’s not as simple as enabling Mario to move on a smartphone."

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