Are Apps Killing the Video Game Industry?
Special to CNBC.com
Over the past year or so, Nintendo has taken a fairly predictable approach in its reaction to the rise of app-based gaming. The bite-sized titles, company officials would say nonchalantly whenever asked, could be a fun diversion, but didn't compare to the deeper experience of the more feature-rich games on its mobile devices.
These days, the company sounds a lot more concerned.
“Game development is drowning,” said Nintendo president Satoru Iwata at the recent Game Developers Conference. “Until now, there has always been the ability to make a living (making games). Will that still be the case moving forward?"
Iwata was particularly outspoken about his fear that the explosion in cheap and free apps (like those found on the Apple iPhone and iPad) and social network games has devalued game development and could eventually put the industry at risk. He also took a pointed swipe at the gaming philosophies of both fields.
“Smart phones and social network platforms are not at all like our (industry),” he told developers. “These verticals have no motivation to maintain the high value of video games. For them, content is something that is created by someone else. Quantity is what makes the money for them. Quantity is how they profit. The quality of video game software does not matter to them. … The fact is, what we produce has value and we should protect that value.”
The comments took many people in the industry by surprise. Some felt the remarks were sour grapes from a company that is facing the most serious competition it has ever faced. Others noted there was truth in the words that underscored the fear mainstream developers are feeling: That the race to the bottom in app pricing is teaching consumers that games have little to no value.
It's a lesson that the adult entertainment and music industries have both learned the hard way.
"Take a look at the music industry," notes Nintendo of America president Reggie Fils-Aime, who adds that Iwata's comments were not aimed at a specific company. "We want consumers to see value in the software, whatever that appropriate value is. And we want to see that value maintained over time."
Some developers of apps and social games say they understood the thrust of Nintendo's argument. The company is, after all, hardly alone in voicing this sort of opinion. However, they said, the brush strokes in statements like Iwata's are too wide and don't factor in the industry veterans who are exploring the new spaces.
"I have seen the strip miners and their entry into games. I have seen them exploit technology and new platforms not for the purpose of crafting beautiful creative works but rather taking the audience for all they can get," said designer Brenda Brathwaite. "Like you, we want good gameplay, we want compelling experiences, we want casual, and we want hardcore. We want to make a great game for the 43-year-old Facebook Mom, because — damn it — she deserves a great game, too.
"We are not the ones making what some of you call 'evil games' but rather the first … wave, the Marines storming the beach to take our medium, our culture, and our potential back."
While Nintendo, like Microsoft and Sony, has launched an online store offering smaller games that cost significantly less than major retail releases, the company has not shown interest in reaching out to the garage development community that is thriving on the iPhone and Facebook.
"I would separate out the true independent developer vs. the hobbyist," says Fils-Aime. "We are absolutely reaching out to the independent developer. … Where we've drawn the line is we are not looking to do business today with the garage developer. In our view, that’s not a business we want to pursue."
The company instead hopes to re-engage audiences with innovative technology and games that take advantage of that technology with the 3DS, which hits U.S. shelves on March 27. The system sold out quickly in Japan and is expected to do so here as well.
Nintendo, however, says it is determined to avoid the constant sell-out situation it faced with the Wii upon that system's launch.
"Our goal is not to have that situation," says Fils-Aime. "Our goal is to be able to meet the needs of every consumer beginning with Day One of the launch."