Forums - Nintendo Discussion - The Nintendo Third Party Dilemma: How we got here and why (from Gaf)

This thread is stolen right away from Gaf. i found the OP to be very well constructed and has some great info and points of view and thought i would post it here, all credit of this thread goes to the Gaf poster Arim0x

 

 

I think we've all seen it before. The wholesale blaming of developers for not trying hard enough on Nintendo platforms. The blame adjustment from Nintendo to everyone else for not doing their job. How many times have you seen a variation of this post across the internet:

Here we go, another developer blaming Nintendo for not trying hard enough. You know, maybe if they made games as high quality as Nintendo their games would sell as well too! Shocking, I know.

I've probably come across such posts ten thousand times on GAF alone. But is it really a case of third parties not trying hard enough? If we can agree that, yes, of course there will always be exceptions to what I'm about to say, I feel the following is a good explanation for why we are where we are.

If you believe it's tl;dr, the short answer is Nintendo caused every single one of their own problems with third parties. Now they have a reputation for it and they have yet to show they're willing to change. They get the success they do on handhelds because they have basically a monopoly on sales, and if Wii U was the only console selling at all it too would get all the games.

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A HISTORY LESSON
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During the NES era, Nintendo leveraged its considerable power to put into place many actions that either hurt consumers or hurt developers.

Three notorious examples, which come from this fairly succinct and decently sourced write-up about the situation, states the following:

During the preceding generations, a video game programmer would simply purchase the equipment to construct games for a system from the system's parent company. The programmer was then was free to design any game without permission from the company. (A prime example of this was the video game based on the "Porky's" movies released by CBS for the Atari VCS/2600.) Yamauchi did not like this freedom given to the designers. So he had his engineers create a chip that would lock out the instruction code from any cartridge, unless that cartridge contained another chip, called a "key-chip." This "key-chip" had a certain disabling code. The disabling code was then patented by Nintendo and copyrighted.4 The result was that it became illegal to reproduce the code, without Nintendo's consent. Nintendo then made specific contracts that companies must agree to abide by in order to receive permission to reproduce the "key-chip." This gave Nintendo complete control over its third party licensees, and they used that control to propel the Nintendo Entertainment System farther. Specific deals were made which prevented these companies from producing games for any competing home system. Because of Nintendo's considerable market share, few companies argued with this policy. The result was that many competing systems were driven to extinction because of a severe lack of games. Companies like Atari and Sega could not hope to compete with a system with over 100 new games each year, when they could only produce a dozen or so annually without the help of third party licensees. This propelled Nintendo's domination of the market further.

Another example about how consumers might have been dragged into their negative net:

Nintendo began orchestrating game shortages sometime in 1988. This was called "inventory management" by Peter Main, an executive in charge of public relations at Nintendo, but was really to keep the customers on a short leash. By limiting the amount of product available, Nintendo could keep the demand for the product high. The editor of one toy-industry journal noted that "Nintendo has become a name like Disney or McDonald's. They've done it by doling out games like Godiva chocolates." By design, Nintendo would not fill all of the retailers' orders and kept half or more of its library of games inactive and unavailable. In 1988, for instance, 33 million NES cartridges were sold, but market surveys indicated that upwards of 45 million could have been sold. That year retailers requested 110 million cartridges, almost 2.5 times the indicated demand. These practices would greatly benefit Nintendo, but drive many smaller software firms out of business. Certain titles would be produced, then sold very slowly over the span of a year, and the profits would not come in fast enough to keep these small companies afloat. The toy and electronics as well as department stores became dependent on Nintendo, in addition to most game producers. This gave Nintendo a great deal of clout in dealing with companies who were used to throwing their muscle around.

This, obviously, also could hurt developers.

In the electronics and computer industry, you can expect equipment to reduce in price over time. When new devices are created that make older ones obsolete, the older devices are reduced in price to compete with the newer ones. This is clearly evident if one simply peruses the want-ads in their local paper and notes the prices of computer systems that were considered state of the art a year previous. This logic applies to all aspects of the computer and electronics industry, including video games. Why then between 1985 and 1989 did the Nintendo Entertainment System only lower $10 in its price?

This was exactly what Attorney Generals from all fifty states were wondering when they began investigating the activities of Nintendo of America in 1989. They found that Nintendo had been fixing the price of systems and games in the stores, using intimidation to influence retailers to abide by their wishes, and were making astronomical profits. Nintendo had been doing this since they first brought out the NES in 1985. They had strived to construct the system inexpensively, however, it was being sold at the same price as the competing systems. An antitrust action was brought up against Nintendo by these same Attorney Generals, and on October 17, 1991, District Court Judge Sweet granted approval of settlement agreements.

As we can see, in the aftermath of the NES, Nintendo already developed a reputation from strong arming developers and forcing them to make decisions not in their best interest. They also had no qualms hurting consumers, but unfortunately consumers weren't as plugged in at the time and generally didn't know the shit Nintendo was pulling. But developers did, and they carried that with them.

Here is another source that touches on some things here.

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ENTER THE FUTURE
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After the SNES and Genesis battled it out to the death, a new player was about to enter the arena. This was the PlayStation. Immediately, Sony was set to disrupt the industry by implementing a low-level media set top ideal; plays music CDs, plays games on CD. They would continue to ever after slowly implement cutting edge technology that allowed them to leverage the media set top ideal... DVDs for PS2, Blu-Rays for PS3. 

Why is this important?

Well, it leads to the next of the reasons Nintendo received the reputation for being bad for third parties.

Nintendo decided to make an N64 that only utilized cartridges. The size of the cartridges ranged from 32 MBit to 512MBit, which put them immediately in stark contrast to where the industry was moving for their games. On CDs, developers had around 700mb to play around with, amongst other advantages. They lost on loading speed, of course, but consumers and developers alike were willing to take that sacrifice to advance gaming in far more substantive ways. When Sony had that legendary ad with FFVII making fun of the lack of space on cartridges, it was a wrap. The idea had settled in and the market chose for Nintendo.


Our very own mrklaw expanded on this point:

I was working for a games company doing a PS1 and N64 game and the differences were stark.

Lead times from Sony DADC were tiny, you could order a small amount of stock knowing you could request more with maybe one week turnaround, so your inventory risk was low. And minimum orders were really small. Plus the cost of production was also low (think it was around $10 per disc including printed manual and case, delivered to your warehouse).

Nintendo by contrast on N64 had large minimum orders, expensive costs to produce the carts depending on memory size, whether you had battery backup ram for saves etc, and the lead times were horrendous - 6 weeks or so. So you had to hedge your bets right from the start. If you ordered low you'd have retailers with no stock and by the time you could replenish the opportunity would have passed. Overstock and you risk being left with piles of unsellable cartridges which you've taken the hit for. You could wipe out profits instantly with a tiny mistake in sales predictions.

From this point on, Nintendo would always find a way to isolate itself from the rest of the gaming community. They would always create their stable of groundbreaking game experiences which everyone talked about, but there was also always a tacit acknowledgement that in some way Nintendo simply wasn't tuned in to the needs of the market. 

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THE DOLDRUM DAYS
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After this, Nintendo still seemingly didn't understand that it needed to be tapped into the latest industry trends. Nintendo, always just a little behind the rest of the pack when it comes to technology, missed out on how the market was going to shift with DVDs. 

Instead, they went with a a proprietary disc set up that only allowed 1.5GB, immediately putting them once again significantly behind not only market trends, but in allowing the ability for third parties to function in an uninhibited manner. Compounding this issue was the fact that Nintendo released a year late, couldn't play MOVIE DVDs (something that was starting to become very important by the time GCN released) and they were entering into the market against a system which had already contributed to the demise of Dreamcast, already dominated the talk about technical power (thus contributing to the illusion that somehow GCN was behind there too) and had to contend with image issues with the "lunchbox design" that really didn't play well with some audiences to the point where it became a running joke.

None of these issues existed in isolation, but they formed yet another image of Nintendo out of touch with the times. Not only that, they created a platform which once again had limitations which the developer would have had to work around (the size limitation of the discs), and the fact that it wasn't selling particularly well only served to enhance this problem. Once again, as we can see, Nintendo create an environment which made it impossible for third parties to exist without problems.

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THE COMEBACK KID
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Now we come to the big one. In the simplest of ideas, Nintendo decided to leverage its outsider status by coming up with a now famous blue ocean strategy which involved - in much the same way Sony did with CD and DVDs - disrupting the industry. But they decided to do it at a much more fundamental level.

With the motion control tech of the Wii, the industry was set afire by the reaction consumers had. Not only that, but the games would function on DVDs which, for most of the gen, was really all that most games needed. So why didn't this change third parties perspectives toward Nintendo?

Now let's consider for a moment what I've already articulated at length. Third party developers already had a bad history with Nintendo, and were hesitant to just jump back on board. But there is a far more important thing that happened.

Because Nintendo may not have limited their system by the size of the storage space or the size of the install base, but it limited the system by the extremely limited power the system had relative to the Xbox 360 and PS3This immediately caused the problem of making the system near impossible to release competent ports for. Not only that, Nintendo was woefully behind on yet another of the industries latest trends, online integration. Sony was as well compared to Microsoft, but they had the pieces in place to make it something worthwhile. Nintendo simply did not.

So what happened here? Well, developers initially started their investments thinking the PS3 was going to be the industry leader, and after the price reveal they didn't change their strategy. Why? Because they realized that even if PS3 wasn't the market leader, it is smarter to release games that can be PS3+360+PC than just the Wii alone. The Wii put itself in a position where not only were the ports it could potentially receive extremely difficult to make comparatively (everything from the basics of an engine would have to be completely redesigned to critical online features being stripped out because of the horrendous online infrastructure), but most games would have to be made for Wii alone in mind if they were to really take advantage of the systems Wiimote technology and thus be competitive.

The result is what we saw. The Wii, one of the most successful systems of all time, had middling developer support that started out OK and eventually drained to AWFUL. And who caused this? I think we can safely say it was Nintendo.

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THE MORE THINGS CHANGE, THE MORE THINGS STAY THE SAME
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Nintendo by this point realized that their blue ocean strategy was a winning position, and wanted to find something that was similarly disruptive to the market. What they settled on, ultimately, was a Gamepad which essentially turned the console into a DS in terms of potential application in games but also allowed key features like asymmetrical gameplay and OffTV play.

Unfortunately, this is where things took a turn for them. For they settled on a technology that, as we can now see, is simply not enough to draw people to the platform on its own. So much so that the Wii U is currently selling at levels that are comparable to the worst any major platform has ever done.

But that's not all. Once again, Nintendo decided to utilize tech that is an entire generation behind its [about to be released] competitors, forcing once more for developers to have to choose between focusing on making games that'll largely work for the lowest common denominator of a single platform, or focus on really pushing the PS4-XboxOne-PC port environment. As we saw with the last gen, they decided to do the ladder, thus instantly putting the Wii U in a terrible situation. But did they make this happen, or did Nintendo?

Frostbite Technical Director on Why Frostbite never came to Wii U
Nintendo's comically awful virtual console Wii U release list
Wii U hacked (this is bad or good depending on which side you're on)
Madden 25 not coming to Wii U (one of the biggest franchises on Earth)
Battlefield 4 Skipping Wii U
Problems with Wii U OS/firmware updates
Iwata discussing what is wrong with the Wii U including 'game delays, understaffing, etc'
A topic discussing the completely empty Japanese Wii U release schedule
A topic where Nintendo themselves discusses Wii U's complete lack of momentum and other problems
Deep Silver: No Wii U titles from us (Saints Row/Dead Island/etc)
CNet: Nintendo's Big Problem
The Wii U won't be getting Unreal Engine 4
Here is a thread showing video evidence of the inhumanely atrocious Wii U OS and its loading speeds (this is finally being worked on, thankfully though)
February 2013 NPD
January 2013 NPD
March 2013 NPD

Reading through the links carefully can give you the impression of how messed up things are for Nintendo right now. And it's all because of decisions they made.

● They decided to sell the system with a prohibitively expensive Gamepad that forces them to sell every system at a slight loss, thus making hasty price drops extremely difficult strategically
● They decided not to go into this gen prepared, thus causing massive delays in the release of what would have been pivotal Nintendo properties and causing the install base to all but stall completely
● They decided to release a platform that is once again woefully behind its competitors, making ports more financially and developmentally complicated

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DISCUSSION
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The list goes on and on. But the point I am making is that... yes, third parties do not support Nintendo platforms well. But it is Nintendo's fault, and it remains Nintendo's fault, and it has always been Nintendo's fault.

But... maybe my ideas are wrong. That's why this discussion topic exists. I believe fully to have laid out in stark detail the precise reasons that led to the current market and development conditions for Nintendo, but I specifically want to hear from those who have blamed third party developers for not trying enough to see if this changes any minds.
link to original thread http://www.neogaf.com/forum/showthread.php?t=628616


JayWood: The Bringer of  (Temporary) Dreams!

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What a depressing article. I like Nintendo, but God bless Sony and Microsoft for pushing the tech envelope, despite their respective flaws of course.

 

People tend to point the finger at 3rd parties, but Nintendo had a big hand in their predicament too.



 

Playstation = The Beast from the East

Sony + Nintendo = WIN! PS3 + PSV + PS4 + Wii U + 3DS


Even the savior of the video game industry isnt perfect.

 

Also

They found that Nintendo had been fixing the price of systems and games in the stores, using intimidation to influence retailers to abide by their wishes, and were making astronomical profits. Nintendo had been doing this since they first brought out the NES in 1985.

Very interesting and makes sense on why a lot of the old nintendo games were still priced at full rate until recently of course. I still found it funny that retailers were selling a almost 10 year old game for full price O.O.



you lost me when it says talkin bout Psx and N64

they lost on loading speed, of course, but consumers and developers alike were willing to take that sacrifice to advance gaming in far more substantive ways.

pure lie

DieAppleDie said:
you lost me when it says talkin bout Psx and N64

they lost on loading speed, of course, but consumers and developers alike were willing to take that sacrifice to advance gaming in far more substantive ways.

pure lie


explain. loading speeds was the main and most biggiest advantage over CD. though devs very much preferd having so much more space to put their games on, so as i said, explain



JayWood: The Bringer of  (Temporary) Dreams!

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I already know about this information, but using this information to shift the blame 100% to Nintendo is also wrong. I definitely acknowledge that if Nintendo were better with 3rd parties in the past, there wouldn't be nearly as many problems with third parties. But it's a lie to say that Nintendo hasn't been doing anything to fix the relationships, or that it is Nintendo's fault period. Third parties in-fact do have a part in the blame. It may be to a lesser degree, but it's not as simple as it being all one company's fault.



MDMAlliance said:
I already know about this information, but using this information to shift the blame 100% to Nintendo is also wrong. I definitely acknowledge that if Nintendo were better with 3rd parties in the past, there wouldn't be nearly as many problems with third parties. But it's a lie to say that Nintendo hasn't been doing anything to fix the relationships, or that it is Nintendo's fault period. Third parties in-fact do have a part in the blame. It may be to a lesser degree, but it's not as simple as it being all one company's fault.


true, and i agree. but he does say a good point which is that every gen, nintendo has done atleast something to make some serious trouble for third parties. when it comes to the WiiU he actually just states power of the console which is something that effects just big AAA games really. indie and sport games shouldnt care much about that. he doesnt get into that. which i find the blame to be mostly on the publishers (sports games). i stated many times that i find it very stupid for EA not to release Fifa on the WiiU. i can see a point of where they are coming from, but as a long term plan i find it very stupid. konami are even more stupid for not releasing PES



JayWood: The Bringer of  (Temporary) Dreams!

bananaking21 said:
MDMAlliance said:
I already know about this information, but using this information to shift the blame 100% to Nintendo is also wrong. I definitely acknowledge that if Nintendo were better with 3rd parties in the past, there wouldn't be nearly as many problems with third parties. But it's a lie to say that Nintendo hasn't been doing anything to fix the relationships, or that it is Nintendo's fault period. Third parties in-fact do have a part in the blame. It may be to a lesser degree, but it's not as simple as it being all one company's fault.


true, and i agree. but he does say a good point which is that every gen, nintendo has done atleast something to make some serious trouble for third parties. when it comes to the WiiU he actually just states power of the console which is something that effects just big AAA games really. indie and sport games shouldnt care much about that. he doesnt get into that. which i find the blame to be mostly on the publishers (sports games). i stated many times that i find it very stupid for EA not to release Fifa on the WiiU. i can see a point of where they are coming from, but as a long term plan i find it very stupid. konami are even more stupid for not releasing PES


In general, I personally wouldn't call the decisions made by Nintendo stupid like too many people do.  Many times they can only be called stupid in hindsight.  Some of them aren't stupid, but are a bit greedy.  I mean, at the time I do not think that most people would have seen gaming grow to where it is today.  

There are many reasons Nintendo made the "bad decisions" they did, and none of them were "stupid" for the time.  While it seems like all I do is defend Nintendo or damage control and whatever, I do it because almost no one talks about it.  I certainly don't like when these things are missed out.  It paints the situation much differently and people start feeling the wrong emotions.

In the end, I am certain if Nintendo saw any of this coming they wouldn't have repeated their mistakes.  It seems to me that too many people feel that Nintendo makes mistakes because they're "stupid" and "don't know what they're doing."  It's pretty obvious to me that Nintendo is trying to strengthen their relationship with 3rd parties and create new ones with Indies. I feel that anyone who denies it hasn't been keeping up with gaming news.





Good read, and all the points are spot on.

Also, I did not realize just how nefarious Nintendo's price fixing strategy and self-imposed software shortages were back in the late 80s... I knew about the strict licensing agreements (which is why many 3rd parties like Konami created offshoot companies like Ultra Games to get around the licensing limitations). Makes sense though, especially over this past gen where Wii launch titles like Twilight Princess and Mario Party 8 stayed at $50 retail price for over 5 years before finally being reduced. Meanwhile, most PS360 games are heavily discounted after their first 6-12 months or so on the market.

And if you really stop and think about it, hardware-wise Nintendo has always been behind the curve, they just got lucky the first couple of generations with the NES and SNES because cutting-edge technology (most notably CD-ROM) wasn't as quick to advance and was too expensive for the average consumers to be included in home consoles.

On 2/24/13, MB1025 said:
You know I was always wondering why no one ever used the dollar sign for $ony, but then I realized they have no money so it would be pointless.

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Nintendo should've just called an 11th hour meeting on the N64 with third parties and compromised on the CD-ROM issue. Yamauchi was insane to go cart only and IMO a lot of the N64 decision to go cart-only was fueled by Mr. Miyamoto who didn't like loading times.

You shouldn't let the creative fetishes of your designers dictate your business policy. Business is business. Miyamoto should've been allowed to make Mario 64 however he wanted, but otherwise he should've sat down and kept quiet.

The system was originally supposed to cost $250 and launch in 1995, but Nintendo cut the price to $199.99 before launch. What they should've done is added a CD drive to the system (you can have both carts and CDs, no law against it, the Saturn did it) and gone back to the $249.99 price point.

It would've opened the door to tons of third party support for the console.