Will You Follow Nintendo to Wii U?

GUEST AUTHOR BLOG: Nintendo’s Wii U: A primer for nongeeks by Jeff Ryan author of, "Super Mario: How Nintendo Conquered America."

At the Electronics Entertainment Expo(or E3) video game trade show in June, Nintendo announced that its rumored successor to the Wii was in the works. Called the Wii U, its selling point was an off-white tablet touchscreen, with standard video game buttons on either end. Hold the device like a controller, and you’ve got an extra screen of data between your fingers. This, Nintendo said, will allow for new types of gameplay experiences, just as the Wii did.

Super Mario
Super Mario

But will it?

Nintendo has bet the farm that it will.

And to put others’ money where its own mouth is, the Big N assembled an impressive number of third-party developers who all announced they’re making games for the Wii U. In the world of video games, these guys rule the roost.

Nintendo could make the greatest games in the world for the Wii U, but if no one else is making games, buyers who don’t have the discretionary income to buy multiple game systems might stay away.

Time to bring up everyone’s favorite video game business analogy: Gillette. That company’s famous-razor-and-blades analogy is cited so often because its two-part tariff structure does indeed carry over to video games. Microsoft and Sony initially made its hardware at a pretty serious per-unit loss, in the (correct) expectations that purchasers would buy enough games (each sale putting a crisp $5 bill’s worth of licensing fees in Microsoft’s till) to make the gamble pay off.

Nintendo’s relationship with the razor is different: it operates under “lateral thinking of seasoned technology.” It has never sold high-end tech at a high-end price. Instead, it makes its money by finding new uses for nifty gadgets – that’s the “lateral thinking” part – and assembles them together in a box they can sell for a reasonable price point. So besides outselling the Xbox 360 and the PlayStation3 handily, Nintendo has been making money on every Wii sold from day one. Don’t tell anyone, but Nintendo’s big secret to profitability is…marking up its products for profit. Shh!

Why has no one thought of this? Because everyone else is invested in an arms race, and nowhere in evolution or warfare is an arms race a prudent use of costs. Those who have tried to buck the trend have ended up either with $700 machines of middling value no one can afford, or reasonably priced machines no one wants because they’re chintzy. The war is over market share. Hence, when a big gun like Electronic Arts says it’ll make games for the Wii U, it’s like the British joining your coalition.

The Wii U will offer HD graphics, and will be able to play the same types of high-end games currently offered by Microsoft and Sony, which can’t be “ported” to the weakling Wii without a serious downgrade in its graphics. That sounds great…until you realize it means Nintendo’s 2012 console will be equivalent to Microsoft’s 2005 console.

Nintendo’s big gamble is that the Wii U will offer years worth of unique games: at E3 they demo-ed a chase game where four people searched for a fifth with regular Wii controllers in a four-way split screen. The fifth person was using the Wii U controller, and could hide out without anyone seeing him on a shared screen. Again, this could lead to impressive games. But it’s also a feature Nintendo honchos were adding to Gamecube games a decade ago, letting them share a tennis game between the TV and a portable Game Boy Advance unit.

"Nintendo asks gamers to leave their comfort zone and try something new each time around. It’s usually worked for them, but not always."" -Author, "Super Mario: How Nintendo Conquered America", Jeff Ryan

No one much cared then: will they care now?

And speaking of portable gaming, ever since 2004 Nintendo has sold 120 million units of the DS, its successor to the Game Boy. The DS’s defining feature is a two-screen set-up, with one a touchscreen. Same exact thing as the Wii U. This might be a positive, because game designers have had eight years to figure out how to design games using that set-up. (Early Wii games were legendarily terrible, since few understood how to incorporate movement into a game without making it a cheap gimmick.)

But for 30 years people have undervalued Nintendo. Donkey Kong, its first hit, was done to save face after a flop. The Nintendo Entertainment System was toxic to US retailers, who refused to stock it. Its Wii was considered a toy more than a video game, but that “toy” got snapped up by people who would never buy a “real” game system.

One of Nintendo’s biggest franchises is the Legend of Zelda series, with a brave elf named Link facing down big bad opponents to save a princess. Super Mario is also about saving a princess, although its games are totally different. Same goal, two very different executions.

Similarly, Nintendo and its rivals goals are the same – ka-ching! – but they go about it in different ways. Microsoft and Sony are electronics companies, with games as one of their business channels. Nintendo is just games: it doesn’t even consider itself an electronic company, but instead an “amusement” company. That differing philosophy is how something like the Wii U gets born. And it’s also why no other tech company can do that Nintendo does.

But as with razors, as with Link’s weapon of choice, there’s a double-edged blade to all this.

Nintendo asks gamers to leave their comfort zone and try something new each time around. It’s usually worked for them, but not always. Gamers may choose not to follow Nintendo to the Wii U. But Nintendo is the only gamemaker who unfailingly asks gamers to do something new.

They may not succeed forever at it, but they’ll have lived — and one day died — innovating.

Jeff Ryan is the author of "Super Mario: How Nintendo Conquered America." He blogs at www.supermariobook.com, Twitter:@dailymario.

Email me at bullishonbooks@cnbc.comAnd follow me on Twitter @BullishonBooks