Topic: The Long Tail and Nintendo's Future

[BlackGriffen]

For an understanding of the background material, read this Wired article.

The summary (since I know many of you won't): 20th century mainstream media is a business model based on producing as many "hits" as possible. That business model, in short, is collapsing as the internet permits companies like Amazon.com, NetFlix, and Apple (iTunes) to serve niche markets that the "hits" strategy misses. Does this sound familiar? Nintendo continues to pursue a business strategy centered on "hits" whilst Microsoft and especially Sony do more to serve the "tail" with their broader libraries. In order to succeed next generation, Nintendo is going to have to move as quickly as possible to become the market leader as the tail provider. In fact, I would say that either Nintendo or Microsoft is more likely to take on this role than Sony, and I'll explain why later.

The good news, for Nintendo, is that none of the console makers currently serve the tail the way Amazon et al do, so there is an opportunity. I'll try to outline some of what is necessary to capitalize on the tail, and give suggestions for how Nintendo could do so.

First, and most important: hits are still necessary. Hits, like Halo, Zelda, etc are what draw people in. They're like that first free hit of crack that gets people to look at what else you have to sell. So I'm not advocating abandoning making blockbusters altogether, but supplementing them (admittedly, at some expense to the hits, but to the overall benefit of the company).

So, in order to be able to serve the tail, you need to have a library that is both broad (many titles, much of it crap) and deep (mainstream hits). These are some things Nintendo could do to achieve that end:

• Reduce licensing fees
  
• Present third parties with a choice of distribution channels.
  
• Offer multiple tiers of licensing fees depending support required in the development process and on which distribution channel the party wishes to use.
  
• Make the system easy to program for
  
• Bundle one or several "emulators" with the system with cheap software "dev kits" for the PC.
  

The fees option is self explanatory. Increasing the number of different distribution channels is something that is necessary when one truly gets a  broad library. Simply put, you don't want to ship out a game to all the retailers if it is virtually guaranteed not to sell well enough everywhere to justify it. Keeping the present retailer centric distribution strategy for the "hits" is a good idea (probably charge the highest fees here, too, since it is the most expensive). Then, offer lower license fees for access to distribution channels that take less money. Some possible alternate channels include: burn on demand, rental chains only, online retailers only, electronic only, etc. The way I imagine a "burn on demand" service running is as follows - Nintendo, either directly or through vendors, takes in orders and then burns extremely limited runs of a game to ship to the consumer (I considered an "in store" version of this, but the potential for piracy is way too high if Nintendo doesn't directly control the burners). Nintendo may or may not even include physical instruction manuals, opting instead to distribute them electronically and letting the gamer and/or the store print them out. The "rental only" and "online retailers" only are self explanatory. Electronic distribution, too, is straightforward but deserves a comment. It would obviously only be for games (and maybe demos) that could fit on a memory card - maybe in RAM in the case of demos. In other words, this would the the distribution method of choice for very cheap and very simple games - we're talking Tetris clones, simple board game software, etc. The key is to sell these games cheap, and thus they must be licensed cheap. What's not so obvious is that Nintendo should continue to offer GameCube games through one or more of these alternate channels ($15 per game + S&H for burn on demand sounds reasonable).

The "emulators" comment is intentionally somewhat vague. Usually, one would refer to what Nintendo is most likely to do as "middleware." That is, software that takes care of much of the heavy lifting on the programming side of things. I think, however, that putting emulators on there might be a good idea. More specifically, I think it would be advantageous for Nintendo to expand it's library as much as possible by offering emulators for NES, SNES, N64, and if they can manage to make the deals, Sega Genesis and more. Offer the ROMS electronically distributed (fully encrypted with a crucial chunk of the ROM missing - requiring a brief download from Nintendo's servers in order to play - Hell, the entirety of NES ROMs could be considered the "chunk"). The key to keeping piracy of the ROMs down would, of course, be to sell them cheap - $5, but better less. Providing people with the tools to make fun new games inexpensively is also key. I'm not talking about fully blown dev kits, but dev tools for a specialized 2D "emulator" that would make puzzle games, board games, and games like Alien Hominid easy to make - justifying selling it at $10 or less electronically.

Ok, so Nintendo could have a really massive library. That is not enough. Nintendo also needs to help people to, basically, sort through all the crap to get at what they're interested in. To do this, Nintendo will basically need to emulate the above companies that have met the needs of their tails well. In short, Nintendo must provide some sort of online community. What's more, Nintendo should encourage people to review the games they've played - even a simple 1-10 on several categories should suffice, but full blown reviews would also help. With these reviews, Nintendo can offer genuinely helpful suggestions on what a player may want to try next based on what gamers with similar preferences enjoyed. Nintendo should also be able to get a much better grasp on what sort of markets exist for which sorts of gamers - improving their ability to serve the market.

Offering demos is also an important part of the sorting process - whether Nintendo lets you download them or order for several to be placed on a "burn on demand" disc you would then buy is an open issue.

That, I believe, covers the three areas mentioned in the Wired article: make everything available, cut the price in half then lower it some more, and help people find what they want. Granted, not all of this is immediately feasible, but it seems to me that Nintendo should be able to achieve all or most of what I've outlined by mid to late 2007. The important question, however, is this: will Nintendo do it? Honestly, I doubt that Nintendo will implement everything I've mentioned. Despite that, it is possible that Nintendo is moving in that general direction. Nintendo is always making noise about serving a broader audience, keeping development costs down, etc. We'll see.

All three companies, frankly, have their strengths and weaknesses for moving in this direction. Sony's weakness is that the PS3 looks to be even harder to program for than the PS2, though that shouldn't effect the simple games I have in mind as library thickeners too much. Microsoft's weakness is that they don't have the massive old library to tap into (Sony has PS1/2, Nintendo has NES, SNES, etc). The weakness Nintendo seems to have is perhaps both the easiest and hardest to overcome: a backward looking corporate culture heavily invested in the 20th century business model. Whether the all slowly move in the direction of tail service, suffering a protracted battle for dominance, or one of the three figures out how to serve the "tail" of the video game market effectively and achieves market dominance, only time will tell.

I encourage everyone to offer alternate suggestions, criticisms of mine, etc. Even though I have written this post in an essay-esque style, it should be clear from the tone and mountain of stylistic flaws that I consider this more of a brainstorming session. Hopefully there will be enough time for the info to filter back to Nintendo HQ to act on in a meaningful way with the Nintendo Revolution.

BlackGriffen

[Caillan]

Quote
The weakness Nintendo seems to have is perhaps both the easiest and hardest to overcome: a backward looking corporate culture heavily invested in the 20th century business model.

'The Long Tail' is especially applicable to games, because by nature they are niche products. Even the generation's biggest titles like Halo 2 have pathetic mass-market penetration. I'm interested to see what happens in the future, becasue at this rate I think the increased prices of the next genreation could cause a sort of mini-crash. Steam is in theory successful, but is in actuality a piece of crap devoted to preventing you from playing your games properly. (Well not quite, but it's another restriction.) If Half-Life 2 and CS weren't such huge titles, Steam never would have caught on.

Nintendo has already demonstrated its willingness to dabble in forms of alternate distribution with the iQue. The device has, apparently, been a success. Now that they're 'working with the internet', it seems at least possible that they will do something similar to what you are saying. The problem, however, is that the iQue was only ever released because it countered piracy. We'll just have to see if Nintendo considers its model successful enough to release something like it in the West.

Nintendo is the only company in a position to do this. The XBox doesn't have a previous generation, and Sony's own games aren't as good as Nintendo's. Even if Sony try extensive liscencing agreements, the games are still 700MB or so and limited to one generation. Nintendo have three generations worth of classics, which are at the largest 64 megabytes. If they could liscense from 'neutral' thrid parties like Capcom as well, then Sony definately couldn't compete.

As a gamer, the idea of being able to play old Nintendo games at a small fee excites me. There are ROMs sure, but they're not the same as playing a legitimate game on an actual system. The problem is, right now Nintendo release games two and even three generations old at almost full price. Until people stop buying them, I don't think they're going to give us them any cheaper.  

[KDR_11k]

Should've stayed awake in economy class: Small batches and human labour increase the per unit cost. If Nintendo made three copies of some game the copies would have a much higher cost to make each (base cost + additional effort to set up the hardware, supervise the process, etc). Online distribution (Steam done right) would work much better. That makes it hard to impossible to use for low bandwidth/volume users so they'd need to set up those in-store devices or just hope that anyone hardcore enough to care about those small games is hardcore enough to get unmetered broadband. For me neither would work because this city (moved recently) has no major stores that would receive these units and my internet connection is heavily volume-limited (university connection), never mind I'm not allowed to connect more than my PC to the net and the necessary software isn't available for consoles.

[BlackGriffen]

Quote
Originally posted by: Caillan
Nintendo has already demonstrated its willingness to dabble in forms of alternate distribution with the iQue. The device has, apparently, been a success. Now that they're 'working with the internet', it seems at least possible that they will do something similar to what you are saying. The problem, however, is that the iQue was only ever released because it countered piracy. We'll just have to see if Nintendo considers its model successful enough to release something like it in the West.

That's the point. The best way to counteract piracy is to make games that are cheap enough that piracy isn't worth the hassle.

Quote
Nintendo is the only company in a position to do this. The XBox doesn't have a previous generation, and Sony's own games aren't as good as Nintendo's. Even if Sony try extensive liscencing agreements, the games are still 700MB or so and limited to one generation. Nintendo have three generations worth of classics, which are at the largest 64 megabytes. If they could liscense from 'neutral' thrid parties like Capcom as well, then Sony definately couldn't compete.

It's true that Nintendo is the only company in a position to do the electronic distribution to the extent and with the ease that they can - they also have Gameboy and GBC libraries that they can tap into, don't forget. I wouldn't count MS or Sony out, though. Licensing partnerships with the likes of Sega, Namco, Atari, the folks who made the Wonderswan Color, and the like would go a long way in their favor. Nintendo's best bet would be to encourage these parties to go non-exclusive (it should be easy - they're all using PowerPC compatible CPUs, and two of them will use ATI GPUs).

Quote
As a gamer, the idea of being able to play old Nintendo games at a small fee excites me. There are ROMs sure, but they're not the same as playing a legitimate game on an actual system. The problem is, right now Nintendo release games two and even three generations old at almost full price. Until people stop buying them, I don't think they're going to give us them any cheaper.

Very true. That strategy is reminiscent of Disney, as mentioned in the Wired article, re-releasing it's "classics" every 10 years to catch a new wave of kids. Nintendo can continue to charge whatever it thinks it can get away with on the big games, but this would enable them to take advantage of the little ones, too.

Something I think is also worth mentioning is the casual gamer. No, I'm not talking about sports heads who buy Madden every year, or the folks who only buy mega hits like GTA on the PS2. By far the biggest gaming audience is the folks who play games like Solitare, Bejeweled, and Tetris. You know, the folks for whom even Super Mario Bros. 3 was too complicated, let alone SMB 4 or SM64. These are the people that Nintendo can capture with this strategy. By distributing games like tetris, chess, checkers, connect 4, chutes and ladders, mancala, othello, go, backgammon, poker (of all kinds), and various other games that are played in casinos and family rooms across the world. Make sure that they're online enabled, and even though no single game would be a killer app, taken together that's exactly what they amount to. Even simple non-games like letting people draw pictures or mosaics and share them with people online or the 3-d equivalent (letting people build things in 3-d with legos, erector sets, or tinker toys and share and brag about them online) would be simple to develop and should be worth distributing electronically at a buck or two a pop.

The critical flaw in my theory is that I don't take into account how the handhelds should work with this. With them, the burn on demand channel I mentioned is probably impractical (unless they can make blank cartridges that can only be written to once, cheaply). Online distribution is also difficult to manage, at least for the GBA - the DS has enough RAM because of it's one cartridge many players feature that it should be able to hold stuff in memory until you turn it off, in which case Nintendo would need to provide unlimited downloading of a game you bought or some kind of place to store the game locally. Doing rental only titles still makes sense. The online community is also definitely essential - in fact, it should be the same community as the Rev. Annoyingly enough, the PSP seems to be more poised to take on such a strategy because of its large memory sticks and disc based medium (permitting "burn on demand"). For all of them, though, assuming that they'll always be able to connect to the internet is not possible. The mobility thing makes this difficult at best.

So Nintendo could certainly integrate the handhelds into this model, I'm sure. I'm just less certain of how they should implement it.

BlackGriffen

[Ian Sane]

I think the whole "tail" argument applies really well to Nintendo.  Nintendo makes virtually nothing but hits or potential hits.  Every game is designed to have huge mass appeal.  There aren't any niche Nintendo titles.  Nintendo's games are only niche in the sense that the Gamecube userbase is so small that they rarely make million-seller games anymore.

The PS2 is without a doubt the most popular console not just for the mainstream but for hardcore gamers as well.  Sure it has the weakest graphics capabilities, and is infamous for malfunctioning, and only has two controller slots, and SCEA limits the release of certain games in America but these don't matter.  If you're a hardcore gamer and like non-mainstream style games like strategy RPGs, shmups, or anything 2D the PS2 is the console to get because it has the most variety.

Nintendo has no variety.  If you don't like the "hits" Nintendo dishs out then you won't like the Cube at all.  Nintendo tries to make it so that their library appeals to everybody ie: every game can be enjoyed by everyone.  As a result they tend to stay away from hardcore genres, make nearly all of their games family friendly, and overuse franchise characters like Mario because the franchise ensures a "hit".  As a result Nintendo's lineup keeps getting more homogenous, predictable, and dull.  The franchises are becoming less interesting.

I think BlackGriffen's ideas regarding distribution are great but in order to work Nintendo needs to provide more variety.  They don't have any "tail" games right now so having non-hit friendly distribution will be useless.  First Nintendo has to start expanding their game designs and make games for different age groups and in different genres.  They have to make games that won't have universal appeal but will have massive appeal for certain groups of gamers.  Case in point Treasure's games would be ideal for "burn on demand" distribution.

I've always felt that Nintendo should strive to appeal to the hardcore.  Let Sony keep the annual sports games and the licenced junk and the generic EA product.  Nintendo can't beat Sony for the casual market anyway.  Instead Nintendo should focus on the hardcore gamers who realistically already like Nintendo's games.  Make Nintendo consoles the place for 2D games, non FF RPGs, online games, point-and-click adventure games, schmups, hardcore fighting games, etc.  The goal would be to lineup all those games that hardcore gamers love but the mainstream ignores.  The ideal result would be for most hardcore gamers to not even need to own a Playstation console and that any sort of niche hardcore game automatically is made for the Nintendo console.  Like anyone who regards gaming as an art form doesn't even think about going with another console.

This type of attitude and marketing would go great with the distribution methods BlackGriffen suggested.  I've always thought it would be great to make a hardcore console but I never really thought of a way to make it work financially in the current mainstream focused market.  These methods would allow it.  I could make a hardcore game and make it burn on demand only and have it be successful.

There's one problem however.  In order to do this Nintendo needs to be more than a console maker and a developer.  They have to become a distributor and I don't think third parties want to give Nintendo, who is a tyrant at the best of times, that much power.  In order to really work Nintendo needs a retail web site and literally every game on the console has to be available on the site.  And virtually every game has to be available for "burn on demand" which either means Nintendo has to own a copy of the game to burn or they have to set something up where the publishers agree to work with that model.  In order for the ROM distribution to really take off the entire NES, Gameboy, and SNES libraries should be available but that would require all of the third parties to play ball.  The whole idea require a lot of co-operation between companies and a lot of flexibility from Nintendo.

Still I think the idea could work really well if executed correctly.  I actually think Nintendo is ill-suited for this and it might work better as a model for a newcomber to use.

[BlackGriffen]

Quote
Originally posted by: KDR_11k
Should've stayed awake in economy class: Small batches and human labour increase the per unit cost. If Nintendo made three copies of some game the copies would have a much higher cost to make each (base cost + additional effort to set up the hardware, supervise the process, etc). Online distribution (Steam done right) would work much better. That makes it hard to impossible to use for low bandwidth/volume users so they'd need to set up those in-store devices or just hope that anyone hardcore enough to care about those small games is hardcore enough to get unmetered broadband. For me neither would work because this city (moved recently) has no major stores that would receive these units and my internet connection is heavily volume-limited (university connection), never mind I'm not allowed to connect more than my PC to the net and the necessary software isn't available for consoles.

That also makes it impossible for Nintendo to capitalize on this strategy in a meaningful way with demos and anything from the N64 on. Letting people burn games in store is, I feel, a mistake; it puts the hardware necessary for piracy outside of Nintendo's control. It also effectively puts the ROMs themselves in the wild because it would only take one crooked employee to screw things up. As we all know, Nintendo is vehemently anti-piracy, so I doubt that it's a mistake they'd make.

Who said human labor had to be involved in a "burn on demand" system? The only hand labor necessary I can think of would be someone loading up blank discs, jewel cases, and some kind of blank labels in hoppers and then putting things in the mail (thus "S&H"). Everything else (burning the disc based on an electronic order, printing the label, and packaging it up for shipment) can be automated. It's similar to how Amazon does it, but they have to keep an inventory because the can't print on demand. On Nintendo's end of things, the only thing I can think of them having to invest in is a burning machine and discs for it instead of the disc presses they normally make games with. That is, unless they can get presses that can dynamically change what software they make. Nintendo doesn't even have to literally burn on demand in most cases, either. They could keep a small inventory of games based on predicted demand.

That's the thing you appear to have missed - the setup cost can be amortized across thousands of different titles because the difference in the setup necessary is miniscule and controlled electronically/automatically. So, sure, if they only had one obscure title or demo, I'd agree with you. The trick is to get volume by expanding horizontally, so to speak.

BlackGriffen

[Ian Sane]

Didn't Nintendo allow people to burn there own copies of Famicom disc games in Japan?  Of course in the 80s internet piracy wasn't an issue but the method exists nonetheless.  Realistically I think having burning in store works provided it's on a Nintendo machine that the employees of the store can't access.  It's like a vending machine.  You go to the machine, scan your credit or debit card, pick the game you want, and it burns the disc and prints the label right there in the store.  The disc just pops out of one slot, the label out of another, and a case out of another.  Every week or so a Nintendo guy comes in and puts more blank discs, cases, and labels in the machine.  The general public is never given blank discs.  The only way to pirate is to bust open one of these machines and steal discs and somehow make yourself a burner.  You can also order online (and print off your own label if you prefer) and then pick which store location you want to pick it up at.  You go to the store, confirm your credit card number for ID, and then it burns you a copy of the game.  The store gets credited for all in-store sales on the machine and gets a cut for any online purchase picked up at the location.

Though having Ninendo themselves burn stuff isn't too hard.  You get a similar machine that has a conveyor belt sort of thing that just does the same thing.  This is just information printed on a disc.  You have a computer program that tracks orders and tells the burner what game to make and it just becomes part of the shipping process.

[BlackGriffen]

I think that you've missed a couple of important points, IanSane. First, hits are still necessary. You still need hits with broad appeal to lure people in so that you can get them to look at the other parts of your library. This includes the shovel-ware like Madden and it's ilk. Second, I think you have underestimated the size of the tail. There's no way that Nintendo by itself could possibly hope to provide enough variety to serve all of it. That's why Nintendo needs to get third parties on board, but more than that, expand the third party universe beyond the corporations making big budget third party games now. That's where the "emulators" comes in. Flash is one such program that I would put in that category. Use that, and Nintendo immediately has a large community of potential licensees who would be happy to make (probably quite literally) a couple of bucks by letting Nintendo distribute their stuff for a dollar or two. If you doubt the potential of such games, remember that that's how Alien Hominid started out. You might also like to try playing Tontie.

You bring up an excellent point, however, about Nintendo's tyrannical behavior and wariness of the same by third parties. That's an obstacle that Nintendo needs to overcome regardless of whether they follow this business strategy or not. Hopefully the tyranny was more endemic of Yamauchi and Iwata won't behave similarly. Regardless, you are right that Iwata does labor under that shadow, whether he deserves it or not.

BG

[Ian Sane]

Well actually I wasn't implying that hits aren't necessary.  They are.  But they don't have to be Madden.  Nintendo has made huge hits before.  For example Goldeneye was a game that had huge appeal with all gamers.  Zelda usually has that appeal, as do the "real" Mario games.  Nintendo themselves already have a fair share of hits and can get some from third parties while still targeting hardcore gamers.

I also wasn't suggesting that Nintendo do it all by themselves.  But they still have to provide more variety on their own.  Third party support is a must but Nintendo can't expect to attract third parties without a strong initial userbase and they can't get that if they just make the same stuff they do now.  I'm really just suggesting that Nintendo broaden their horizons as a developer and help fill in cracks in the lineup and such.  They're not going to be able to rely on third parties to provide mature games for example.  They have to get some of their own mature hits to attract third party mature games.  Ditto with online games.  Third parties tend to copy the console maker so if Nintendo makes just family-friendly games in a few select genres that's largely all we'll get.  And of course they have to make deals with third parties which is partially what I meant about them providing more variety.  Nintendo has to make an effort and not just hope that third parties will provide variety on their own.

I guess I didn't real make everything clear in my posts.

[BlackGriffen]

Quote
Originally posted by: Ian Sane
[...]
I guess I didn't real make everything clear in my posts.

That, or I misread your post. Either way, now that you've clarified yourself, I agree with you for the most part. I'm less willing to dismiss the Madden-like shovel-ware, even if only for perception's sake. I completely agree that Nintendo should diversify themselves some. The strategy I've advocated for a long time has been to have several different Nintendo brands/studios with specialties in different parts of the market. Having Retro Studios become their adult game shop, for instance, would be ideal. Just give the name "Retro Studios" top billing on the package and make it seem like it came from another company. It's the same strategy Disney uses with Touchstone Pictures and others.

That way, Nintendo can diversity without harming the family friendly main brand. They may even consider making the hardware part of the company a separate subsidiary in name only so that it can distribute games that Nintendo wouldn't want its own name tied to.

BlackGriffen

[Ian Sane]

"I'm less willing to dismiss the Madden-like shovel-ware, even if only for perception's sake."

The thing is that stuff is going to be there anyway.  Third parties like EA, Activision, Ubisoft and THQ are the first third parties to support a new console because they make mass-market games and then port them to every format possible.  Unless Nintendo specifically tries to shoo EA away Madden will be on any console Nintendo makes.

[BlackGriffen]

Hah! To hear you describe it, Nintendo couldn't even shoo Madden away if they tried.

BG

[zakkiel]

"As a result Nintendo's lineup keeps getting more homogenous, predictable, and dull. The franchises are becoming less interesting." Not so. It's simply that the interesting or innovative games get very little attention.

Hardcore gamers are a niche. There are many others.

I'm personally highly skpetical of niche games for consoles as the final answer. Much greater variety is absolutely necessary, true. But the cost of making games is rising so high that the only games you can afford not to be pretty successful are backgammon and the like. I mean, you can cut corners on other games, but then you just wind up with a fairly crappy game. And people don't buy backgammon and chess for consoles; they get these things as add-ons for other appliances like phones and PDAs. Finally, I don't know how representative I am, but when I look at my game library they're all hits. When I talk to people, the games they mention are the hits.

Focusing on hits doesn't preclude variety. SSBM is designed as a hit game (which it is) but it's completely unique.  

[BlackGriffen]

Quote
Originally posted by: zakkiel
"As a result Nintendo's lineup keeps getting more homogenous, predictable, and dull. The franchises are becoming less interesting." Not so. It's simply that the interesting or innovative games get very little attention.

Hardcore gamers are a niche. There are many others.

I'm personally highly skpetical of niche games for consoles as the final answer. Much greater variety is absolutely necessary, true. But the cost of making games is rising so high that the only games you can afford not to be pretty successful are backgammon and the like. I mean, you can cut corners on other games, but then you just wind up with a fairly crappy game. And people don't buy backgammon and chess for consoles; they get these things as add-ons for other appliances like phones and PDAs. Finally, I don't know how representative I am, but when I look at my game library they're all hits. When I talk to people, the games they mention are the hits.

Focusing on hits doesn't preclude variety. SSBM is designed as a hit game (which it is) but it's completely unique.

You know, that's a very popular misconception. The idea that game production costs are mysteriously increasing, that is. The cost to produce a game of similar caliber of SM64 is the same now as it's ever been - if anything it would cost far less now to make it because you could use standard APIs and such instead of having to code it in assembly. In other words, the cost of making any individual game is actually going down. What's going up is the capacity of the machines for handling complexity, art, and detail. Thus, the cost of cutting edge games is going up, not the cost of games in general. The real problem with the industry is that the economic model it's based on requires developers to make all of their games cutting edge. Nintendo can shift the industry model somewhat away from that by taking advantage of the tail of demand. The need for cutting edge hits will never go away, but by making it so that developers can make less expensive games and sell them for cheap, for a profit, the companies can afford to spend more on their cutting edge games than they could otherwise.

I thought I should also add that Nintendo does not necessarily have to become the direct distributer. The service that Nintendo needs to provide is helping gamers figure out what games they might like, and making sure that they have an easy way of obtaining that game. Literally speaking, Nintendo could provide referrals wherever the gamer could obtain the game - be it an online store (with or without electronic distribution), a rental service like GameFly, a local brick and mortar store, or maybe even eBay. The best part is that it provides a potential advertising revenue stream for Nintendo. Even with a burn on demand system where Nintendo is holding the levers, so to speak, they can make the service only available to retailers. That way Nintendo can even make it transparent to the consumer - the games will be on "special order" or just have a ship date that's farther out.

BlackGriffen

[KDR_11k]

Know what I'm thinking? Give each unit a unique key. To download games you give Nintendo your serial (which is linked to a key in their database) and they send you an encrypted game. You can store it anywere you like, copy it as often as you want but it only works on your system because your system is the only one with the key to decrypt the file. You could theoretically replace your private key with a different one to play the games from another machine but you couldn't play your own games anymore. Also, since Nintendo could blacklist these keys, any key used by the pirates will not get new games. That makes modding ineffective.

[zakkiel]

"You know, that's a very popular misconception. The idea that game production costs are mysteriously increasing, that is. The cost to produce a game of similar caliber of SM64 is the same now as it's ever been - if anything it would cost far less now to make it because you could use standard APIs and such instead of having to code it in assembly. In other words, the cost of making any individual game is actually going down. What's going up is the capacity of the machines for handling complexity, art, and detail. Thus, the cost of cutting edge games is going up, not the cost of games in general." Which is what I meant, hyperbolically, when I said bakcgammon. But actually the middle market doesn't seem to exist. Either players don't care about graphics at all, or they want them cutting edge. You have Bejewled or HL2, and never the twain shall meet.

"The need for cutting edge hits will never go away, but by making it so that developers can make less expensive games and sell them for cheap, for a profit, the companies can afford to spend more on their cutting edge games than they could otherwise." SM64 was, I'm thinking, a fairly expensive game in it's day, and it was hit. Something similar for consoles today would most definitely not be a hit. So now the question is: has the price of making games of that level fallen enough to justify the incredible drop in revenue a game of that level could generate today? I don't think so. Not even close. The market is WAY too polarized for that, and there's a sharp limit on how much industry standardization can make the cost of development fall.

I really don't think Nintendo can spit into the wind on graphics. Reggie's right: graphics are the price of entry. They aren't all, or even most, but no one's managed a successful alternative business model.

[wandering]

I think pay-to-download is the future.
I'm not sure, in this generation, if games with modern graphics could take advantage of that.
But imagine if Nintendo started a new line of pay-to-download games with SNES quality graphics for 5-10$ a piece. Imagine if they could be downloaded directly with the Revolution, with no computer needed.  Imagine if they could be played on either the DS or Revolution. (specifically, the games would be put on a DS strorage add-on OR on internal storage located in the Revolution or Revolution controller.) Imagine if the games were licensed by Nintendo but could be made by just about anybody.

On another note, the proprietary nature of current game consoles really hurts. I don't know if you could fully take advantage of the 'long tail' in a Netflix/itunes music store manner unless a standard is reached and game systems act like VCRs/CD players: where all game systems can play all games. And where anybody can make and release a game without getting approval or being charged a licensing fee.  

[BlackGriffen]

Quote
Originally posted by: zakkiel
Which is what I meant, hyperbolically, when I said bakcgammon. But actually the middle market doesn't seem to exist. Either players don't care about graphics at all, or they want them cutting edge. You have Bejewled or HL2, and never the twain shall meet.
[...]
SM64 was, I'm thinking, a fairly expensive game in it's day, and it was hit. Something similar for consoles today would most definitely not be a hit. So now the question is: has the price of making games of that level fallen enough to justify the incredible drop in revenue a game of that level could generate today? I don't think so. Not even close. The market is WAY too polarized for that, and there's a sharp limit on how much industry standardization can make the cost of development fall.

I really don't think Nintendo can spit into the wind on graphics. Reggie's right: graphics are the price of entry. They aren't all, or even most, but no one's managed a successful alternative business model.

There's no gentle way to put this, so I'll be blunt: you're wrong. You take the current industry model, say "That's the way it's always been, so that's the way it'll always be," and run with it. Read that Wired article. Now read it again.  Make sure you actually understand it's implications this time.

Go ahead, I'll wait.

Now, I'll try to answer your question more directly: Would a SM64 caliber game be a hit? Most likely not, but stranger things have happened. Would a SM64 caliber game be profitable (aka a commercial success)? With the present distribution model, definitely not. With a different model, it would certainly make more revenue than it would now. The reason it's not profitable to make a SM64 caliber game now probably has more to do with the fact that reaching the audience that would buy it using old distribution channels would cost too much for it to be worth it. Change your distribution model, and suddenly reaching that audience is dirt cheap. Then it definitely become worthwhile to publish all of the old games - you know, the massive libraries of games that have already been developed - for cheap. It also increases the profitability of mid to low level games. Hobbyists, shareware development houses, and even the development powerhouses of today will all expand to fill in that middle ground.

All it takes is: opening up a new distribution channel or two that isn't limited by geography, and intelligent use of user reviews to help gamers cut through the morass to find the games they'll find fun.

Let me sum up by saying that if you were right, Alien Hominid would not exist. Shareware developers (example) would not exist. Roms and emulators would not exist. Classic game compilations for any system would not exist. Warcraft II Battle.net Edition would not exist, and people wouldn't still be playing WC2 now. FreeCiv would not exist, and certainly wouldn't be under active development. The Gameboy would have lost to the Wonderswan Color. The list just goes on and on because nothing fundamental about people has changed since video games came on the scene. The only difference is that there is now a niche of hardcore gamers who need more complicated games to be challenged. You just have to consider the fundamental economic principle: people expect to pay less, probably far less, for games that that were obviously cheaper to make than other ones available on the market at the same time.

BlackGriffen

P.S. Those who suggest selling compilations - in this kind of distribution model that's about the worst thing you could do. Bundling games together and selling the bundle for the total price you would sell the games for individually makes it so that the only people who buy the bundle are the folks who either: A) want some sub set of those games bad enough to pay for all of them or B) would have bought them all anyway. I can't think of a single situation where a bundle will make more money than a suitably priced a la carte system. Bundles should always be about value (they cost less than the parts - encourages people to buy games they wouldn't normally because of the perceived value) and should always be optional.  

[BlackGriffen]

Quote
Originally posted by: wandering_nintendo_fan
[...]
On another note, the proprietary nature of current game consoles really hurts. I don't know if you could fully take advantage of the 'long tail' in a Netflix/itunes music store manner unless a standard is reached and game systems act like VCRs/CD players: where all game systems can play all games. And where anybody can make and release a game without getting approval or being charged a licensing fee.

Ah! Excellent comment. I wish I could give you a definitive answer either way on that. You're right that the proprietary nature of the hardware would hurt the ability of a tails style system to succeed. It is that same closed, proprietary, and very uniform nature that makes it possible for games to be made to take as much advantage of the consoles as they do, though. Just compare the PC gaming market with the console one. In the former, devs have to make their games with the "lowest common denominator" in mind - made to work on 3 year old hardware and whatnot. In the consoles, the only limitation to how thoroughly a dev can exploit the hardware is time, skill, and money.

It's a difficult tradeoff between making as much money off of the old software as possible and making the current console a success by giving it the edge of your past libraries - and thus aiding the new big hits. I would suspect that, especially in the beginning of such a model, the balance will favor keeping past libraries to your own console. After that it gets fuzzy. Console makers may find a balance of opening up everything older than 2 generations back, one generation back, or even select parts of the old library.

Thank you for bringing that up.

BlackGriffen

[wandering]

edit: I made this post before you made your second one. I agree with you regarding the advantages of a proprietary, top-down industry. And I feel like small improvements could be made in this upcomming generation to allow Nintendo to release more obscure titles. And, I changed my mind somewhat, I feel like big change could happen even with the industry staying the way it is.... but not until the generation after next. Okay, back to the original post:
/edit

don't we already have distribution channels not limited by geography? We already have amazon, gamefly, import stores, and other online retailers. Not to mention regular game stores where I'm sure you can speacial-order games.
I guess if Nintendo created their own online store...and tied it in with on-demand game burning....then that might convine Nintendo to support more obscure titles. Or if they pursued some of the other stratagies listed here....like games that are burned in-store, rental-only games, etc....these things might help....
But...I don't think a strategy to fully take advantage of the 'long tail' and create a market filled with obscure games will be entirely viable until games can be downloaded directly to your game system. Then there'd be almost no overhead, and no distribution worries for Nintendo. But I don't think something like that will be viable until at least the generation after the one coming up. (which is sort of nice, because by then, games really will be photo-realistic, and people really will stop caring about graphics).  

[zakkiel]

Quote
There's no gentle way to put this, so I'll be blunt: you're wrong. You take the current industry model, say "That's the way it's always been, so that's the way it'll always be," and run with it. Read that Wired article. Now read it again. Make sure you actually understand it's implications this time.

 There's nothing remotely difficult (or particularly revolutionary) in that Wired article, which I did just reread for your benefit. I don't disagree with most of it, just with your uncritical dumping of into the game industry without paying any attention to the realities of the business. The burden is on you to demonstrate that an alternative model will work. You haven't.

Here's the limit of the article: it devotes no space to considering production costs. All the products it examines in detail are low-cost, low-bandwidth. There are two exceptions. The first is videos, the second video games. In the case of videos we have no reason to assume that those non-hit videos that earn Blockbuster money aren't mostly just old hits. In the case of video games, we have the old hits explicitly described as such, and the article gives no numbers whatsoever on rising demand. (This is a general problem with it: a periodic absence of numbers in some vital areas, at least for our purposes - how much gaming revenue comes from non-hit games?). The "growing popularity" it describes could very easily be a brief surge in nostalgia among the Ian Sanes of the world. But possibly re-releasing old titles could be profitable up to a point, and Nintendo is doing just that. Too much, if you ask me, but it is.

But when it comes to creating new low-caliber games, you still refuse to deal with production costs which I explicitly said were the problem. You can babble about distribution all you want, until you solve that problem it makes no difference.

Quote
Let me sum up by saying that if you were right, Alien Hominid would not exist. Shareware developers (example) would not exist. Roms and emulators would not exist. Classic game compilations for any system would not exist. Warcraft II Battle.net Edition would not exist, and people wouldn't still be playing WC2 now. FreeCiv would not exist, and certainly wouldn't be under active development. The Gameboy would have lost to the Wonderswan Color.

Oh please. There's a reason shareware developers aren't in the Big 4. There are lots of reasons the Wonderswan lost. And there's a reason Warcraft II Battle.net Edition brought in a tiny amount of revenue compared to Warcraft III and WoW. But yes, I already acknowledged that retro-releases can be profitable up to a point. They just represent very little profit compared to the hits in the video game industry, ports excepted.

So I could close with "you're wrong." But what would the point of that be except to aggravate you? Better, I think, to keep the discussion to the substantive points.

[BlackGriffen]

Quote
Originally posted by: wandering_nintendo_fan
edit: I made this post before you made your second one. I agree with you regarding the advantages of a proprietary, top-down industry. And I feel like small improvements could be made in this upcomming generation to allow Nintendo to release more obscure titles. And, I changed my mind somewhat, I feel like big change could happen even with the industry staying the way it is.... but not until the generation after next. Okay, back to the original post:
/edit

don't we already have distribution channels not limited by geography? We already have amazon, gamefly, import stores, and other online retailers. Not to mention regular game stores where I'm sure you can speacial-order games.
I guess if Nintendo created their own online store...and tied it in with on-demand game burning....then that might convine Nintendo to support more obscure titles. Or if they pursued some of the other stratagies listed here....like games that are burned in-store, rental-only games, etc....these things might help....
But...I don't think a strategy to fully take advantage of the 'long tail' and create a market filled with obscure games will be entirely viable until games can be downloaded directly to your game system. Then there'd be almost no overhead, and no distribution worries for Nintendo. But I don't think something like that will be viable until at least the generation after the one coming up. (which is sort of nice, because by then, games really will be photo-realistic, and people really will stop caring about graphics).

You bring up an excellent point - that Amazon already does this sort of thing. The only response I can give is that Nintendo can play the role of coordinator better than Amazon, assuming the next console will be online, that is. Nintendo is also the only one who can reduce their licensing fees and offer fees that are tailored to alternative channels. Nintendo is also the only one who can open up its old library. In other words, Nintendo is holding all of the levers. So, Amazon could no more serve the role that Nintendo can than Amazon could do it for the music industry. You could almost break the strategy down into three parts: bring in third parties - all of them, make the classic library available and playable - all of it, and help the gamers sort through the resulting flood of titles. The point of the first is to get as many new titles as possible. The point of the second is that Nintendo and the third parties that have been around for a while can basically make money nearly for free that way. The point of the third is to prevent a crash like what happened to Atari (buying games was a crap shoot). Nintendo has to do the first, to some extent, and has already made it public that it will do the second, to a limited degree. So, it's just a question of degree, really, and how to handle it.

Also, the systems for downloading and burn on demand are complimentary - downloading should really only be for titles of SNES size or smaller (up to a couple MB) and the rest is for a burn on demand service and or the available through rental and online distribution only channel. The size limit for downloading will mainly be set by what can be fit on a N5 memory card. Of course, in the future this may change if Nintendo includes a hard drive, but network speed would still limit things as a practical matter.

BlackGriffen

[BlackGriffen]

Quote
Originally posted by: zakkiel
There's nothing remotely difficult (or particularly revolutionary) in that Wired article, which I did just reread for your benefit. I don't disagree with most of it, just with your uncritical dumping of into the game industry without paying any attention to the realities of the business. The burden is on you to demonstrate that an alternative model will work. You haven't.

Prove? You expect me to prove? I wish I could, but I don't have access to solid numbers, and it's pretty ludicrous to expect anyone posting on the PGC boards to have them. From what I understand, however, art is the largest cost for making games today. The art cost is also largely under the developer's control - the only thing pushing up art costs is the hit centric business model. By making, for instance, flash available as an API, companies should be able to make games that are fun and that are rather cheap to produce. Hobbyists make flash games in their spare time, for crying out loud; it can't cost that much. I say that it makes the most sense to leave the option open and then let the developers figure out how much effort is worth putting into a game of what quality - because ultimately the devs do have some control over how much effort they put into a game, and that is what controls the cost. As long as Nintendo makes a decent 2D API available, and a suitable distribution channel with accompanying licensing fees, developers will use it.

Quote
Here's the limit of the article: it devotes no space to considering production costs. All the products it examines in detail are low-cost, low-bandwidth. There are two exceptions. The first is videos, the second video games. In the case of videos we have no reason to assume that those non-hit videos that earn Blockbuster money aren't mostly just old hits. In the case of video games, we have the old hits explicitly described as such, and the article gives no numbers whatsoever on rising demand. (This is a general problem with it: a periodic absence of numbers in some vital areas, at least for our purposes - how much gaming revenue comes from non-hit games?). The "growing popularity" it describes could very easily be a brief surge in nostalgia among the Ian Sanes of the world. But possibly re-releasing old titles could be profitable up to a point, and Nintendo is doing just that. Too much, if you ask me, but it is.

Actually, the author talks about NetFlix. Blockbuster is used for illustrative purposes when talking about NetFlix. And in the NetFlix data he specifically mentions documentaries and Bollywood films. You can't seriously contend that those are "old hits." The only documentary to ever reach hit proportions, AFAIK, was Fahrenheit 911, and he gives numbers on how poor Bollywood flicks in the traditional channels do in the U.S. The point isn't that these things become hits, the point is that they do better under this distribution model.

He is, admittedly, a little vague on his Rhapsody numbers, but that's not the point. The point is that the expectation is that the new hits will sell really well, and most everything else isn't worth distributing. In a model where you had to take up shelf space in physical displays in geographically disparate locations, that is true. Just change the distribution model a little, however, and it's suddenly no longer true.

Low bandwidth? How much higher bandwidth can you get than movies (again: NetFlix)? I'll grant that downloading GameCube games, or even honestly N64 games, to a console isn't really practical, but that's where the "burn on demand" bit comes in. Even if it isn't really burn on demand, but just an online/mail order retailer only channel, it'll handle any amount of data you could realistically choose to throw at it.

Quote
But when it comes to creating new low-caliber games, you still refuse to deal with production costs which I explicitly said were the problem. You can babble about distribution all you want, until you solve that problem it makes no difference.

I didn't refuse to answer. I explained to you that the rising costs bit is a fiction - costs are falling but the cutting edge is moving up faster than costs are falling, so the cost of cutting edge games is rising. I tried formulating the answer for second tier games several times, but it always boiled down to, "It depends on what kind of game the devs want to make, and how much effort they want to put into it." Once they figure those things out, then they can make the game. The reason I bring up distribution is because the number of sales a developer can expect determines their expected revenue. Their expected revenue determines their development budget. It is then up to the developer to figure out how to make the game as good as possible within the confines of that budget. At least, that's how any sane business operates. I had just assumed that this was common sense, though, so I didn't bother to explain it to you. I just gave you real world examples of developers who already work that way as a proof of concept. Without the benefits of Amazon style user recommendations, shareware game companies are producing games of a similar quality and at a similar price to what I would expect for the second tier. I assumed you would figure it out for yourself.

Just remember this equation is what determines "worth it" for a business: profit = revenue - costs. You're focusing heavily on the costs term. I'm focusing on how to increase the revenue term because I know that developers have a fair amount of freedom to adjust the costs to fit the revenue. Even the cutting edge game makers of today eventually declare the game good enough, stop dumping money into the art department, and ship. Once you open up alternate distribution channels with different revenue expectations, developers will figure out where the quality sweet spot is just like they do now on the GBA.

Now I have explained both how revenues would increase and costs are controllable, so I would think that the matter is settled.

Quote
Oh please. There's a reason shareware developers aren't in the Big 4. There are lots of reasons the Wonderswan lost. And there's a reason Warcraft II Battle.net Edition brought in a tiny amount of revenue compared to Warcraft III and WoW. But yes, I already acknowledged that retro-releases can be profitable up to a point. They just represent very little profit compared to the hits in the video game industry, ports excepted.

So what? I never claimed that a company making a second tier game would make anywhere near as much as a hit. I went so far as to say that Nintendo abandoning hits altogether would be suicide. The point is that the games would be cheap and fast to make, and profitable (again, depending on design decisions made by the developer). Because they are profitable, there is someone who would be willing to make them. More importantly for Nintendo is that a lot of profitable non-hits can generate a lot of revenue. It also helps to fill increase the size of the library. It doesn't hurt at all that the steps to get such a second tier market going are essentially the same as the ones Nintendo needs to take to attract third party studios that make cutting edge games.

Putting the old games into the second tier channel is just common sense - all of the production costs are out of the way and advertising and promotion is unnecessary, so they only have to cover the marginal costs of distribution. Those are between tiny and miniscule, depending on which method is used. In other words, every retro game sold would be nearly pure profit even if they sold for $2-5 (+ S&H, if necessary). There are already good emulators that run on PowerPC and OpenGL, the GameCube CPU and API, respectively, so Nintendo would just have to license that code. Most of them are open source, to boot. In fact, as a side note, Sony already owns a PSOne emulator that runs on PowerPC (Connectix Virtual GameStation), though Sony bought it for different reasons .

BlackGriffen

Edit: "So I could close with "you're wrong." But what would the point of that be except to aggravate you? Better, I think, to keep the discussion to the substantive points. "
Point well taken. I was wrong to say it - naturally, you think I'm wrong and I think you're wrong, so it was at best pointless to say it. Thank you for being big about it.  

[zakkiel]

Quote
Prove? You expect me to prove? I wish I could, but I don't have access to solid numbers, and it's pretty ludicrous to expect anyone posting on the PGC boards to have them.

That's fair. But, that being the case, you can't say there's no room for skepticism.

Quote
By making, for instance, flash available as an API, companies should be able to make games that are fun and that are rather cheap to produce. Hobbyists make flash games in their spare time, for crying out loud; it can't cost that much. I say that it makes the most sense to leave the option open and then let the developers figure out how much effort is worth putting into a game of what quality - because ultimately the devs do have some control over how much effort they put into a game, and that is what controls the cost. As long as Nintendo makes a decent 2D API available, and a suitable distribution channel with accompanying licensing fees, developers will use it.

But people generally expect flash games to be free (except for the hits, which exist in flash as well). Also, there has to be a fairly significant return for Nintendo to recoup the cost of setting up the system.

Quote
I explained to you that the rising costs bit is a fiction - costs are falling but the cutting edge is moving up faster than costs are falling, so the cost of cutting edge games is rising. I tried formulating the answer for second tier games several times, but it always boiled down to, "It depends on what kind of game the devs want to make, and how much effort they want to put into it." Once they figure those things out, then they can make the game. The reason I bring up distribution is because the number of sales a developer can expect determines their expected revenue. Their expected revenue determines their development budget. It is then up to the developer to figure out how to make the game as good as possible within the confines of that budget. At least, that's how any sane business operates. I had just assumed that this was common sense, though, so I didn't bother to explain it to you. I just gave you real world examples of developers who already work that way as a proof of concept. Without the benefits of Amazon style user recommendations, shareware game companies are producing games of a similar quality and at a similar price to what I would expect for the second tier.

Depends on where you draw the line on "second tier." Perhaps we should just use a loose generation system. Make Gen 1 2d games, Gen 2 roughly N64, Gen 3 Gamecube, cutting edge... well, self-explanatory.

The cost of making games of a given generation isn't falling very much. On the other hand, gamers expect graphics in a 3d game. As a result, the they place Gen 2 games much closer to Gen 1 in terms of value than to Gen 3. Gen 2 games, as a result, have a plummeting value and almost no capacity to generate market hype but still fairly high production costs. The equation doesn't look good for them.

On the other hand, Gen 1 games present challenges of their own. First, I think you simply can't make them work with home consoles. They're time-wasters now, things you do when you're taking a break from a paper for a few minutes or whatnot. I think most people simply don't see them as something you fire up a console for. As well, in order to make money off them you would have to rely on mass appeal, and it's true, these games reach people that wouldn't touch a hit game, but these aren't the people who buy consoles.

I also think controlling distribution and avoiding piracy on games that size would be a nightmare. And, as I said, gamers know how low-cost these games are to produce and therefore tend to expect them to be not merely cheap but free.

Quote
Actually, the author talks about NetFlix. Blockbuster is used for illustrative purposes when talking about NetFlix. And in the NetFlix data he specifically mentions documentaries and Bollywood films.

You're right. I should have said Netflix. But note: he doesn't give any numbers at all about how documentaries do on Netflix in comparison to current and past hits. In fact, he spends enough time working around the omission that it becomes highly suspicious (thus, he talks about a particular documentary doing really well - in the documentary category).

Quote
Low bandwidth? How much higher bandwidth can you get than movies (again: NetFlix)? I'll grant that downloading GameCube games, or even honestly N64 games, to a console isn't really practical, but that's where the "burn on demand" bit comes in. Even if it isn't really burn on demand, but just an online/mail order retailer only channel, it'll handle any amount of data you could realistically choose to throw at it.

This is why I excepted movies from the bandwidth issue. You have a point about game distribution, though, which would actually appeal more to the less tech-savvy. I concede the bandwidth point, but point out again that this system will require a lot of investment to start up and market.

Quote
Without the benefits of Amazon style user recommendations, shareware game companies are producing games of a similar quality and at a similar price to what I would expect for the second tier. I assumed you would figure it out for yourself.

What is the second tier here? And what is the revenue involved for these companies?

Quote
So what? I never claimed that a company making a second tier game would make anywhere near as much as a hit. I went so far as to say that Nintendo abandoning hits altogether would be suicide. The point is that the games would be cheap and fast to make, and profitable (again, depending on design decisions made by the developer).

My comment was specifically about rereleasing games. There are obvious limits to what you can do with that, and I think Nintendo has done what it can. It uses these games as promotional material, it puts them in handhelds, it sends 'em out to China, and it's now entering the backwards-compatibility phase.

I would love nothing more than to go to a gamestore and have them burn me a CD of my choice five or six great Gen 2 games for $30. But I wouldn't be willing to pay too much more, and I have a suspicion that developers can't afford to go near that low.  

[Galford]

Wow a lot of good ideas on this thread...

I thought I saw this mentioned earlier, but X-Box Live has something called X-Box Live Arcade.  
It does what many people here are talking about.  The next-gen XBox Live looks to take the second tier model even further.

Also, didn't Sega try in Japan, a service where people could play old Genesis games on the DC via a SegaNet service?

The problem with this model, is Nintendo abandons any venture that doesn't make an instant profit.  Point and case, the N64DD, Randnet and to a lesser extent Silicon Knights.

More info on X-Box arcade...
http://www.xbox.com/en-us/livearcade/default.htm