Friday, October 05, 2012

Nintendo's Virtual Problem

When Satoru Iwata first introduced the idea of playing perfectly emulated old games on the then codenamed Revolution console, I was amazed by the simplicity and brilliance of the idea.   I remember thinking to myself that in one fell swoop, Nintendo could have the entire Mario library accessible to their fans on their next-generation hardware.

Virtual Console concept introduced at E3 2005
"We are redefining the term backward capatability," Iwata boasted at Nintendo's E3 2005 when the idea was first introduced.  "We have designed the revolution to be a virutal console capable of downloading 20 years of Nintendo content," he added to much applause and fanfare.  Then he dropped something of a pie-in-the-sky goal for his vision. The [Wii]  is "technically capable of playing virtually every Nintendo console game ever created."

It was an amazing insight, and in 2005 that was an incredibly progressive idea.   With the introduction of the Virtual Console service on the Wii in 2007, early barometers of its success were promising.  There were a crush of games and I was able to explore entirely new platforms from the rapid addition of TurboGrafx titles, ranging from Bonk to Sim Earth, Ys and Military Madness (Nectaris).

While fans naturally clamoured for releases of favourites like Megaman, Final Fantasy titles, Sonic, Mario and more Mario, early on, there were also  real attempts by large publishers to release era specific titles that may not have been on many wishlists. This included KOEI’s suite of Super Nintendo strategy games such as Ghengis Khan II and Romance of the Three Kingdoms IV and even the heavily niche open-world exploration sim Uncharted Waters: New Horizons.

However, something happened between the service's early success and the following years when releases in the service dwindled to a crawl.  This shift started by the appearance of restricted releases to only a few a week, sometimes no releases at all.  It led to a kind of skewed economics, a rationing of slots, that led to increasingly selective releases.  Third party publishers on the services selected their best selling games and increasingly the diversity found initially began to recede. Fewer selections lead to fewer returning customers to check out what’s new and the service stagnated.  This undoubtedly lead to a downward spiral of diminishing downloads leading to fewer releases to funnel downloads to even fewer games which in turn lead to even fewer downloads and interest.

Speaking personally, after the initial rush of releases in 2007 and outside of a few select event releases such as the Import Sin and Punishment release, I just gave up checking because it’s not worth  waiting a week to find out next week’s release  of one VC game (on a good week) is yet another game I didn’t want to play.

This trickle down, top down approach is even more evident on the 3DS eshop service.  Not only are we being asked to re-buy Super Mario Brothers and The Legend of Zelda (again) to pad the available selection of 3DS virtual console games, third party support has been lukewarm and where support exists, they inevitably dig for their better selling GameBoy titles and stop there.  While the Wii’s Virtual Console store had at least a launch phase to accrue an impressive and diverse starting library, the 3DS VirtualConsole selection in contrast is being choked to death with draconian release of the week practices.

The following are things I feel Nintendo can explore to help better their Virtual Console service:  

Treat virtual console as an investment rather than a cash cow – Yes, VC downloads have high margins. Rather than approaching releases by asking “how much can we make right now” the focus should be on“how much can we make in longer term” ;  This would shift the focus from curated limited release of Virtual Console content to a more flexible strategy of building a community of repeat customers who come back again and again because there’s something new and worth checking out every week.  

The thinking needs to move beyond just Mario and marquee mascot titles of the era.  Yes, a lot of people love those games, but those don't add depth to the service.  Virtual Console is currently a one-note service for many people, a place to get legitimate copies of Mario and Zelda games, but not legitimate copies  of hundreds of other titles that they grew up with.  To achieve the critical mass needed, the number of games releases must increase, niche titles will be part of it, and third parties must be involved.

Virtual Console as a loss leader – The question for Nintendo to ask is  "what can Virtual Console bring to the table to help us sell more 3DS units?"  Given the early success of VC on the Wii and the continued support by fans who own Nintendo platforms, the answer is quite clear.  The Virtual Console service can do a whole lot to make the 3DS value-proposition a lot stronger to a broader swathe of the public.
  • To foster this active community of purchasers,  a lot of games need to make it on to the market while at the same time making it as riskless as possible.  Third parties must be given a risk free way to release as much of their back catalog as possible and monetize even their most obscure niche products without fear of not being paid. One option is to allow publishers to sell the first several thousand copies of a game at 100% share of the profits to encourage publishers to release  a broad selection of titles, not just their top selling game of 1994.  
  • As part of the Virtual Console initiative Nintendo should spend money tracking down owners of games that may be in ownership limbo because the publisher and developer are no longer in business and if possible find a publisher or publish it themselves.  (A game on my personal wishlist is the fantastic  1993 console port of Gremlin Software’s Utopia: The Creation of a Nation; easily one of the best strategy games on the Super Nintendo) or Square USA's  western developed ARPG Secret of Evermore,  a moody and atmospheric gem in the rough with impecabble writing from Square's US localization team.
  • Spend the money to get special emulators for FXChip titles and esoteric hardware that may only be supported by one game so those games will also have a place on the service.
  • Finally, don’t treat the Nintendo 64 like a premium platform.  It’s a 15 year old console, and the N64 titles available on the Wii VC does the N64’s third party library a great disservice. 
Under-appreciated at the time, a popular pick for Virtual Console  by fans

Tap into Nostalgia – Yes, we know it’s a ROM dump but Nintendo doesn't have to treat it as such.   Tie in the Virtual Console service with Virtual Nintendo Power or Virtual EGM Virtual Famitsu, and Virtual GamePro to allow players to relive their childhood in sync, with the appropriate issue made available with each game purchase, for a small fee.

Create a  virtual ‘rental service’ that so many of us used as children and use it to the advantage of the service. Make it a place where players can spend 99 cents to try any VirtualConsole title for 24-48 hours without being stuck with buyer’s remorse while having the option for say one week to pay the price difference to 'upgrade' to a full purchase.  Not only does this generate a cashflow that can be plowed back into servicing the Virtual Console, it allows players to try before they buy and converts full access to Virtual Console content into a kind of in-app purchase.  This also allows Nintendo to justify charging the relatively higher prices for ROM dumps of nostalgia.   In the current environment of smarthphone apps, easy access emulation of classic games, and free games, the calculus is free/ 99 cent app download vs. A $3.99 download of a 15 year old game, the calculus is often not  in favour of the 15 year old game.

Treat Virtual Console as a Platform instead of a Brand -  Nintendo may not have thought that far ahead in 2006, but in 2012 they’ve had six years and millions in profits from the Virtual Console downloads, not to mention billions in income from the Wii to chart a course for the future of the service.

Virtual Console should be a platform that sits inside Nintendo consoles and portables.  Like itunes, or Amazon's Kindle downloads, Virtual Console should be seamlessly accessible across all capable Nintendo devices.  Gamers gave the DSi a pass because we knew it wasn’t powerful enough, but the fact that the 3DS eshop and Wii shop continues to have segregated  libraries and storefronts is a major hindrance to sales.  We are now at a point where someone could conceivably own the same marquee Virtual Console games multiple times. This blatant anti-consumer practice has not gone unnoticed.  A common refrain from many who used to own a Nintendo DS or Wii is to complain about the loss of their digital downloads when they traded it in or upgraded and how much better (insert smartphone here) is at managing their downloads.

This pattern of compartmentalization by platform appears to be repeated again with recent hints that while transferring Wii Virtual Console purchases to the Wii U is possible, they must be limited to running in Wii mode when run on the Wii U, ruling out the possibility of playing Virtual Console games on the Wii U GamePad while the TV is freed up.   The obvious question to ask is why do we need to run an emulator of an old Nintendo console on an emulation of the Wii hardware?  Why can't we run it directly off the Wii U?

More importantly for Nintendo, all the neat Miiverse connectivity social togetherness that cost millions of dollars in research and development to implement for the Wii U will be turned off when your users are playing these emulated version of old games on a Wii environment.  Wouldn’t it make more sense to have these games run natively on the Wii U so someone can post on the Miiverse how much they still love playing Super Mario Bros., post a screenshot of their 'hard-core' accomplishments and high scores or to ask for help from the community? 

Nintendo's Virtual Console remains a compelling and brilliant concept.   Despite their competitor’s best efforts to copy the service, they cannot match the depth and nostalgia factor Nintendo has with the first fififteen years of games between the NES and N64, or the 20 years of Gam Boy/Color’s library of titles.   This is a significant competitive advantage that is difficult to copy short of buying Nintendo, and this can be used by the company to parley customers of the Virtual Console service into regular and loyal customers to their digital stores.

The ball is in Nintendo’s court.  With the Wii U and their new DLC infrastructure, the door is open to not only patch their existing slate of Virtual Console games to run natively on the Wii U, but to relaunch the service, rebrand it not ONLY as a platform for nostalgia but as a repository for gaming history.  This will bring more games to the service AND gamers willing to spend $2 to $5 on a whole variety of titles back to the table again.

It took the slow painful decline of the WiiWare and DSiWare for Nintendo to figure out demos and featuring games matter in digital stores.  I hope it doesn’t take them another generation of atrophy to figure out that having a seamless Virtual Console ‘platform’ that offers a vast selection of games that is portable across  all Nintendo platforms and accessible everywhere is where they need to be.   

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