http://www.nytimes.com/2007/06/08/technology/08nintendo.html?ref=technology&pagewanted=all
Nintendo Changes Direction, and It Pays Off
By MARTIN FACKLER
Published: June 8, 2007
TOKYO, June 7 — If there is a secret to the smash success of Nintendo’s Wii video game console, it may be this: even the creative loner can benefit from having friends.
Nintendo is known for turning out hits with memorable characters like Donkey Kong and the Super Mario Bros., but it has had a reputation for cold-shouldering game software developers because it preferred to make both its hardware and software internally.
The company, based in Kyoto, Japan, certainly produced innovative designs like the GameCube or the touch-screen on the portable Nintendo DS, but it was perennially outclassed and outsold by the more powerful Sony game machines. Sony’s PlayStation 2 outsold the GameCube six to one. Contrast that with the success of the Wii. The Wii and Sony’s technology-packed PlayStation 3 went on sale in the United States in November, a year after Microsoft rolled out its Xbox 360. As of the end of April, Nintendo has sold 2.5 million Wii consoles in the United States, almost double PlayStation 3’s sales of 1.3 million and closing in on Xbox 360’s 5.4 million sales, according to the NPD Group, a market research firm.
What changed? The secretive company is coming out of its shell. It has made a concerted effort to woo other makers of game software as part of a broader change in strategy to dominate the newest generation of video game consoles.
The new Nintendo surprised employees at the software maker Namco Bandai Games when during a routine meeting at Namco Bandai’s Tokyo headquarters a year and a half ago, Nintendo’s usually aloof executives made a sudden appeal for their support.
The Nintendo group had come to demonstrate a prototype of the Wii, which had not then been released Wii. They handed Namco Bandai employees the unique wand-like controllers and as the developers tested a fly fishing game, the Nintendo team urged them to build game software for the console, listing arguments about why Wii would be a chance for both companies to make money.
“I had not seen that attitude from them before,” said Namco Bandai’s chief operating officer, Shin Unozawa, who was at the meeting. “Nintendo was suddenly reaching out to independent developers.”
With its new approach, Nintendo hopes to avoid the disappointments of its previous home game console, GameCube, which placed a distant third in the United States against Sony’s PlayStation 2 and the Xbox of Microsoft, say analysts and game developers. It also promises to change the famously secretive corporate culture of Nintendo, though only slightly; Nintendo refused repeated requests for interviews with its executives.
Nintendo’s new strategy is two-pronged. Making the Wii cheaper and easier to play than its rivals attracts a broader range of new customers, including people who never bought a game machine before. With Wii, Nintendo has avoided one mistake it made with GameCube, which was competing with its wealthier rivals on expensive technology-driven performance. While Wii lacks the speed and graphics of PlayStation 3 and Xbox 360, Wii sets itself apart with novel ideas like its wireless motion-sensor controller that gets game players off the couch and jumping around.
The other thrust of Nintendo’s new strategy is to enlist software developers like Namco Bandai to write more games for Wii than they did for previous Nintendo machines. Nintendo’s hope is that this will help erase one of Sony’s biggest past advantages: the far greater number of game titles available for its machines. The more games a machine has, the industry theory holds, the more gamers want to play it.
In March, Nintendo’s star game designer, Shigeru Miyamoto, even goaded software companies to devote their top people to developing games for Wii. That is a big change from Nintendo’s previous strategy, which was to write most of its own software. Game developers say Nintendo has been more forthcoming with providing the permissions and codes needed to write games for its consoles.
“The relationship is warmer and more active than before,” said Jeff Brown, the spokesman for Electronic Arts, the giant game developer based in Redwood City, Calif. The push appears to be bringing results. Analysts say one reason for Wii’s popularity has been its larger number of available game titles. At present, there are 58 games on sale in the United States for Wii, versus 46 for PlayStation 3, according to the Sony and Nintendo Web sites. That is a huge contrast with the previous generation of game consoles: to date, PlayStation 2 has 1,467 titles, overwhelming GameCube’s 271 titles.
Nintendo, which was founded in 1889 as a maker of playing cards and made its first video game in 1975, is also opening up in other ways. In March, Nintendo announced that it had licensed its Super Mario Bros. characters to another software maker for the first time, signing a deal allowing Sega to use them in a sports game to appear ahead of the 2008 Beijing Olympics.
“Nintendo is determined not to repeat past mistakes,” said Masashi Morita, a games analyst at Okasan Securities in Tokyo. “It is taking a whole new approach with Wii.”
In Japan, the home market of Nintendo and Sony, Wii’s success has been even more striking than in the United States. Through the end of May, 2.49 million Wii consoles were sold, 50 percent more than the combined sales of the PS3 and the Xbox, according to Enterbrain, a market research firm in Tokyo. Aided by the Wii’s popularity, Nintendo’s net profit jumped 77 percent in the most recent fiscal year, ended March 31, from the year before to $1.47 billion, on sales of $8.13 billion. Its shares, traded in the United States as an American depositary receipt, have doubled in the last year.
Wii’s success stands in marked contrast with Nintendo’s performance in the earlier generation of game consoles, when it shipped just 21.6 million GameCube machines worldwide compared with Sony’s total shipments of 117.9 million PlayStation 2s, according to Sony and Nintendo. Nintendo’s turnaround has been so startling that there is now talk of the end of the era of Sony’s dominance, with the more than $25 billion global game market now increasingly likely to be split more evenly among the three big rivals.
“Wii’s success shows that from now on, we are looking at a divided market,” said Yoichi Wada, chief executive of Square Enix, one of Japan’s biggest game developers. “We can no longer afford to focus our resources on writing games for just one manufacturer.”
While Square Enix made far more games for PlayStation 2 than for GameCube, it has been developing equal numbers for PlayStation 3 and Wii, the company said. It has so far announced plans to release three games for both new consoles, most of them variants of its popular Final Fantasy series.
The Wii’s simplicity is also the selling point for software makers. Mr. Wada said developers had been slower to write games for PlayStation 3 because of the greater complexity of the console’s main processor, the high-speed multi-core Cell Chip. He said PlayStation 3’s production delays had also made Sony slow to provide developers with the basic codes and software needed to write games for the new console.
At Namco Bandai, Mr. Unozawa said PlayStation 3 was so complex, with its faster speeds and more advanced graphics, that it might take 100 programmers a year to create a single game, at a cost of about $10 million. Creating a game for Wii costs only a third as much and requires only a third as many writers, he said.
But Mr. Unozawa also said Nintendo’s promotional visit in late 2005 helped make Namco Bandai more willing to write games for Wii. When he saw the Wii prototype, and then later saw a PlayStation 3 prototype, he and his colleagues decided the Wii might have more potential than the expensive and difficult-to-operate Sony machine.
“The Wii just looked more fun,” Mr. Unozawa said. “It changed our thinking.”
As a result, on the day Wii rolled out in Japan, Namco Bandai had three games ready for it, including a version of its Gundam robot combat game. By contrast, when PlayStation 3 came out, Namco Bandai had two games ready.
Mr. Unozawa said Nintendo’s more open and cooperative attitude also helped make Nintendo appear a little less intimidating. That helped lower what he and other game developers called one of the biggest hurdles in the past to creating software for Nintendo: fear of Nintendo itself. The company was so good at writing games for its consoles that few wanted to compete against it.
Now, game developers and analysts say, Nintendo is showing itself more willing to be a partner and not just a rival.
“Being cool toward other game developers didn’t work,” said Masayuki Otani, an analyst at Maruwa Securities in Tokyo. “Nintendo has learned that it pays to be friendly.”
