Wiretap: Nintendo's Big Chance

    Welcome to Wiretap, the GIA's newest editorial feature – a column devoted to the kind of industry analysis that an intelligent gamer craves, but can be difficult to find among the myriad columns that so often populate gaming journalism. Rather than laying out the theme of Wiretap in some long-winded introduction, I'll let the column itself do the talking. To kick off Wiretap, the GIA will present a dissection of each of the major hardware companies: their past, their present, and their potential futures.

    This week: Nintendo's Big Chance.

    Nearly 20 years ago, Nintendo saved the gaming industry from collapse with a unique mix of hard-knuckled business sense and imaginative software. It built a market share during the days of the NES that would make the Justice Department blush, and became synonymous with gaming to the point where Mario was more widely recognized by children than Mickey Mouse. It made more than all of America's major movie studios combined, and exercised that power without restraint in a market that had little chance to say otherwise.

    While that kind of business made for an amazing and historic run, it was impossible for such unbridled success to last. Nintendo was first brought down to earth in America by the brash marketing of Sega, and now the company finds itself playing catch up worldwide to another brash newcomer: Sony, wielding the strongest consumer electronics brand in the world.

    At heart, Sony's PlayStation took the ideas behind the Genesis and did them one better, hitting Nintendo everywhere it was truly vulnerable – licensing fees, storage medium, development costs, and most of all, style. It caught the Nintendo generation as many of us were outgrowing old habits, and gave a hip twist to gaming that had never been seen before. Nintendo of Japan (NCL), meanwhile, attempted to start trends rather than follow them, a noble stubbornness which all but guaranteed a second place finish in the hardware wars. Now, a company known for its lack of flexibility must finally recognize the changing habits of gamers if it wishes to be number one again.

    Surprisingly, recent trends in gaming have left Nintendo with an unexpected chance to turn many of Sony's best tricks against them. But the question remains – will Nintendo of Japan be flexible enough to take advantage?

    When it comes to hardware, Nintendo appears to have remedied just about every issue that plagued the Nintendo 64. Perhaps designed too much around the 3D worlds that NCL pioneered with Super Mario 64, the system lacked the ease of development that has been a common, key trait of all popular consoles. Even as Nintendo of America powered the system to a healthy market share in the U.S., Japanese gamers showed little interest in the Nintendo 64 until late in its life. Even the system's primary strength, 3D graphics, looked awful in the hands of the average developer. When combined with an archaic business model that dated largely to the days of the NES, this hardware difficulty drove scores of developers to the PlayStation.

    Legendary game designer Shigeru Miyamoto may prefer cartridges for pure gameplay, but he has never worked for a development house that had to pay cartridge licensing and manufacturing fees. In fact, licensing and manufacturing have been two of Nintendo's most steady sources of income, albeit while narrowing the profit margins of many a third party. When Sony offered cheap entry onto a platform that was accessible to program for, every single third party developer in the entire industry produced more games for the PlayStation.

    With less than two months remaining before the Dolphin's public debut at Space World, the advance word is that Nintendo has solved these problems in spades. The Dolphin features DVD storage for cheap and plentiful space, while the acclaimed sound technicians at Factor 5 have ported their acclaimed set of sound tools, MusyX, to the system. Meanwhile, the PlayStation 2 has abandoned the ease of development that marked its 32-bit predecessor; opting instead for Sega Saturn-esque architecture: multiple processors, mandatory assembly coding, and important graphics features missing from hardware. Suddenly (and startlingly), Nintendo now has the cheaper and easier platform to develop for.

    In 1995, there were nothing but reasons for developers to leave Nintendo. Now, there are an increasing number of reasons for them to come back, should Nintendo of Japan prove welcoming enough.

    NCL has always been known for playing business hardball, a situation which strained relations with important Japanese third parties to the point where the American market was affected as well. Rumor has long held that Capcom of America spent years trying to convince their Japanese parent company to develop Mega Man and other franchises for the N64 with no success. All this despite the fact that, historically, companies closely aligned with Nintendo systems have almost always found success.

    And now, despite the promise of the Dolphin, NCL's silence has resulted in very few third party commitments with less than a year remaining before the scheduled launch. Ease of development may mean little if Nintendo continues the nonchalant attitude towards recruiting third parties which has marked the past few years. This silence is even more surprising when second party developers such as Silicon Knights, a veteran of the PlayStation, have raved over the system. President Denis Dyack has publicly stated that he considers it “one of the best pieces of technology and gaming machines that I've ever seen.” So why hasn't NCL moved more aggressively to make this known? Has it learned a valuable lesson from the early hyperbole of the PlayStation 2, or is the most secretive company in gaming still dead-set on keeping everything to itself?

    Even if Nintendo has a great Space World showing and developers are presented with a fantastic environment on the Dolphin, the damage may have already been done. Square, EA, and Namco, arguably the most important third parties in the industry, have invested massively in the PlayStation 2. Nintendo must provide a system that is persuasive enough to lure support from developers that have committed so strongly to a continued future with Sony.

    The best examples can be drawn from past console cycles. With the PlayStation, Nintendo's delay turned into a huge liability when the N64 proved to be both a costly and difficult platform. But with the SNES, Nintendo's delay was the extra time taken to build a well-rounded and accessible system that would come to dominate the industry. Sony has left the door open for Nintendo to take the lead once again, but time is running out if Nintendo intends to seize this opportunity.

    NCL's most important change will not be in hardware, but in philosophy. It can no longer expect the gaming world to come to its feet when there are other viable options for development. The PlayStation 2, despite well-documented troubles, enjoys major support from key third parties, and the X-Box is aiming for the same low cost development strategy as Nintendo. The N64 saw zero significant in-house games from Namco, Square, Konami, Capcom, Enix, and EA. Even so, Nintendo still boasts the world's most acclaimed software, gaming's most valued franchises, and an increasingly potent stable of second-party developers. These things alone supported an entire console. But in an increasingly competitive market with three fierce competitors, it cannot hope to recreate past successes by itself.

    Come this August, the veil will finally be lifted from the Dolphin. If Nintendo continues to believe it can direct an entire industry with a wag of its finger, then it will continue to call second place home. However, if Nintendo has learned the lessons of the past console generation – namely, that the greatest successes come with the support of third party developers – then the Dolphin just might lead the house that Mario built back to glory.

Column by Ed McGlothlin, GIA
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