Don't Leave Me Now

by Jonathan Metts - March 7, 2004, 7:26 pm PST

Jonny takes a look at the exodus of third-party publishers from GameCube, and what Nintendo can do to stop it, both now and for the next console.

Nintendo practically invented the console licensing business with its Famicom/NES system in the 1980s. The idea was that Nintendo would design and manufacture a game system, market it to the public so that everyone wanted one, and make it irresistible to other game companies, who would want to sell their games to this rabid audience. Nintendo took in a licensing fee for each game sold on its system, but the games sold so well that licensees (third-party publishers) couldn’t afford not to cash in. This business model was operating on a much smaller scale with some earlier game consoles, like when Activision became the first third-party game creator for the Atari 2600, but Nintendo took it to a whole new level. The company was rationing cartridge production runs, censoring content for its American audience, and limiting publishers to a certain number of games each year.

Back then, Nintendo was in complete control of the licensees and their games. The company was also releasing many of its own games on the system, a practice which has been toned down considerably by the market’s successors. (Nintendo, of course, has continued to produce a large number of quality titles for its own systems, which introduces a very powerful variable into the licensing business, but more on that later.) As Sega’s Genesis system hit the market and introduced real competition for Nintendo, and quite a few lawsuits were resolving in the U.S. court system, the once despotic console creator had no choice but to relax its controls on licensees. Then Sony entered the market with its PlayStation and introduced the concept of “wooing” licensees. With at least three viable or semi-viable consoles available, Sony realized that publishers would have to choose which system to release games on, or else face the daunting technological and financial challenge of producing a multiplatform title. The fledgling console manufacturer developed a number of ways to attract third-parties to its system, such as drastically reduced licensing fees per game, extensive development tools and assets for each publisher, exclusivity deals for key titles, and a marketing campaign which quickly overwhelmed a stoic Nintendo and floundering Sega.

In the wake of Sony’s domination, the hardware companies have realized that a competitive console market shifts the balance of power from console manufacturers to the licensee companies. Nintendo is now offering considerable incentives to publishers it once held with an iron grip. There is a bidding war for third-party titles, and the bids consist of not just money, but image, flexibility, hardware features, advertisements, and more. In most respects, Nintendo has drastically improved its efforts to attract third-party publishers. There is still room for improvement, but the company is doing a much better job than it did in the N64 era. These advances are dimmed by the presence of an additional competitor in Microsoft, and a wider market means each industry player must work even harder to bring in licensees.

Where Nintendo has failed to attract publishers is market viability. The extent of this failure is quite apparent if you look at Xbox, completely new to the market but already seen as a friendlier home for third-party titles than GameCube. Most consumers have not been conditioned to expect a great third-party lineup on GameCube, and few publishers have found success on the system. This is not to say that GameCube is a failed console; in fact, Nintendo is competing with Microsoft almost entirely on the basis of its first-party games, and it is reasonable to assume that Nintendo could continue this battle, without significant third-party support, for quite some time. However, like any business, Nintendo wants to grow larger and more profitable, and for this to happen, the company must compete on Sony’s level, not Microsoft’s. In order for Nintendo to have any chance of recapturing the throne as market leader, it needs much more third-party support, the kind Sony has thrived upon for years.

Microsoft has shown that you don’t need to have the most popular console to get strong third-party support. The key difference in how Microsoft and Nintendo have attracted licensees this generation is that Microsoft is clearly going after teenagers, young adults, and casual gamers. These are the people who buy the most video games, and they are the people being targeted by most licensees. Certainly, the GameCube has many games appropriate for casual and older players, including some excellent exclusives, but the system is not well known for these games. It’s all about perception, and Microsoft has been very skillful in positioning the Xbox as the “cool” system. This image isn’t just important to consumers; it also influences third-parties, as can easily be seen in the types of games that publishers are releasing on Xbox compared to the ones they are releasing on GameCube.

After more than two years, GameCube is losing the image war, even though it is beating Microsoft in some other areas. Though there are more GameCube owners than ever before, they are mostly just buying Nintendo’s games. Sales of third-party games are truly pitiful on GameCube, even for games released simultaneously on all platforms, and especially for the sports games that are so popular with casual gamers. Several licensees have dropped portions of their lineups for GameCube, or have simply left the platform altogether. Sega Sports bowed out early, after abysmal sales of its (excellent) football and basketball games on the system. Konami never did crank up support for the platform, releasing only the Disney Sports games in the first two years. The huge publisher did produce its most critically acclaimed series, Winning Eleven Soccer, for the GameCube, but there was no U.S. release. After initially supporting the console, several companies have said they have no further titles planned for GameCube, including Eidos, Acclaim, Midway, and LucasArts. Many other publishers have scaled back their lineups on GameCube, releasing only the games expected to appeal to the system’s demographics (young and/or hardcore).

These are major companies, and the absence of their games from the GameCube library has already been felt, and it will become even more intense as this generation proceeds. Nintendo simply cannot afford to continue losing publisher support if it intends to not only remain competitive, but actually gain ground in the market. The fantastic game creators in Kyoto cannot create such wildly popular and widely beloved titles that Nintendo can just unilaterally plow its way to the top. This ascendance can only be possible with the support of other companies, who can help build and flesh out a system’s game library so that there is plenty of appeal for every type of consumer.

So what can Nintendo do to win these companies back, stop the attrition before it gets worse, and convert those publishers who haven’t seriously supported the company in years? The first and most critical step is to salvage the GameCube’s image and make sure that the next system cannot be pigeonholed and stereotyped by competitors’ marketing campaigns. I’ve outlined some ways to do this in previous editorials, so I won’t repeat myself here. Suffice it to say that while Nintendo has come a long way in its marketing effectiveness, it still has a lot of work to do.

But actions speak louder than words, and Nintendo must back up its marketing strategy with real policy changes in how it deals with licensees. It can’t just present its console and say “let them come”. To attract and keep third-party support, Nintendo must actively encourage companies to support its console, through whatever means necessary. The new collaboration policy, in which Nintendo co-develops a game with a licensee, could prove to be very fruitful in producing high-quality titles. However, Nintendo does not have the resources to collaborate with every licensee, and it has yet to be proven that these collaborations result in stronger support with the publishers’ other titles. I think it’s great that Nintendo and Konami have worked together to bring the original Metal Gear Solid to GameCube, but does this mean that the upcoming Metal Gear Solid 3 will also be released on the system? There’s certainly no guarantee, nor even a strong indication of that at this time.

One measure Nintendo can take is to diversify its first-party game lineup. The theory that publishers are intimidated by Nintendo’s games is silly. Licensees will tend to release games on a system that are in line with the first-party games available. You don’t see a dearth of first-person shooters on Xbox because Halo is so popular; quite the contrary, actually. And it doesn’t even matter very much whether these first-party games are successful. Every year, Sony releases another turd in its NFL Gameday series. If the games are critically loathed and sell poorly, why continue the series? The answer is simple: by showing support for the sports genre with its own lineup, Sony is making it clear that PS2 is a friendly home for sports gamers, and thus for third-party sports titles. Microsoft figured this approach out early on with its XSN sports lineup, with similar results. The same goes for Sony’s RPG offerings and Microsoft’s online titles. First-party games set the tone for what consumers can expect from that platform. The titles Nintendo has released on GameCube tend to be in genres that don’t perform well in most of the market, and the company has not shown that it’s serious about many popular types of games. The clear result is that third-party releases of such games sell poorly on GameCube or are not released on the console in the first place. Nintendo has to define its console’s market and demographics through its first-party titles. No amount of advertising or negotiating will make the general public believe that GameCube is a good system for Genre X if Nintendo itself is not devoting any resources to that type of game.

Nintendo also needs to support publishers who want to release online titles on GameCube. The company’s current hands-off approach isn’t doing much good. Nintendo can attract third-party online titles to GameCube without its own games having online features, although the latter would certainly help, as outlined in the previous paragraph. Nintendo is currently offering hardware specifications for the modem adapter and broadband adapter to developers, and that’s about it. There are no first-party or middleware drivers for these devices, and Nintendo has not even made the hardware itself readily available. With even a small effort to promote the GameCube’s online abilities to publishers, comparable to what Sony has spent, Nintendo could have much better online offerings from the licensees. This is important whether or not you care about online gaming, because in the current scheme, GameCube is losing entire games, not just modes, to this problem. Publishers are spending a lot of money and effort to include online modes into their games, and when they see that GameCube is not a viable platform for online gaming, some companies simply choose to withhold the game altogether from the system. For the publishers, it makes sense on several levels. Not only are they saving money by not releasing a gutted title that would probably sell poorly on GameCube without its online mode, but they are avoiding the poor word of mouth such games would spread through the market. Still other games are so dependent upon online features that they could not be released on GameCube at all. What’s really sad is that there is no good reason for licensees to be kept from releasing online GameCube titles, especially the ones who have no problem including online features in the PS2 version. The hardware is there, most likely a comparable audience is there, and yet without Nintendo’s support, it’s difficult to justify going to the trouble and expense of including online features in GameCube titles. The lack of online games also affects GameCube’s image, as some people will buy games for online features whether or not they ever actually play the game online or own the necessary hardware. It’s a subtle psychological effect that is evident on Xbox, where games without online modes often have trouble competing in sales with online titles, even though only a small percentage of Xbox users are playing on Xbox Live.

But I don’t want to dwell on the online issue, because it’s only a small piece of the third-party puzzle. I’ve outlined some of the key problems and possible solutions, but it’s quite clear that Nintendo has to do something soon. We Nintendo fans were told that the company was getting serious about third-party support, after the N64 struggled for years with almost none. Some publishers have come to GameCube with more open arms, but others are not satisfied with sales and are leaving for more fertile ground. If Nintendo can’t stop the exodus soon, the next system may continue the trend of Nintendo consoles which must survive without widespread publisher support. The company claims to be in this industry for the long-term, but it can’t support a console all by itself.

You can discuss this editorial with the author and other PGC readers in our Talkback thread.

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