Nintendo’s save game: Why Mario on your phone is a huge deal

Share

Nintendo Co., Ltd. announced last week that it will start making video games for the super computer in your pocket (the smartphone). The company's stock shot up on the news, and it put every other player in the mobile game space on notice. And yet, I don't know if everyone understands how big a deal this will turn out to be.

What this move tells me is that Nintendo may be the most consequential video game company on Earth. If you think that's nonsense, bear with me a moment as I unpack what I mean.

If you have played video games in the last 30 years you probably reacted to the news of "Mario on your iPhone" with some excitement. Even if you're not a fan of Nintendo games, you probably know someone who is. But unless you also follow the business of video games you might not know the company is in third place in the current phase of the console war, and has struggled for years to sell its hardware at the same rate as its rivals at Xbox and Playstation.

The console video game business is at its core a race to become the hardware standard. The last major success Nintendo had was the Wii (launched in 2006), which swam against the tide of more power, more pixels and more shooters that were reshaping the gaming world. It attracted millions of new customers, but over time the low-powered Wii and its strange gesture control system couldn't attract enough software to capitalize on their early sales momentum.

But while the Wii disappointed down the stretch (it still sold 100 million units), its successor, the Wii U, has been a disaster. In this chart from games site Polygon, you can see that Nintendo has had some poor-selling hardware in the past, but never as poor as the Wii U.

The reasons Nintendo is having trouble selling the Wii U have been dissected ad nauseum by many industry analysts, but the end result is the same: Nintendo still can't attract third-party software developers to make games for its consoles. It creates a vicious cycle: No one buys the console, so no one makes games, so there's less reason to buy the console. Rinse, repeat.

As a full disclosure let me say I have been a fan of Nintendo since I got my first NES in the late eighties (the console known as the Famicom in Japan). Lately though, we have drifted apart. I don't own a Wii U and these days I spend a lot of time on rival devices.

I also spend a lot of time playing games on my phone. The most lucrative source of revenue in the mobile app software universe is gaming. Because people tend to play games on their phones in stolen moments between whatever else they are doing in their lives – in the shopping lines, on the bus or subway or maybe on the toilet – the games industry calls these "casual games." The 10 most-downloaded apps in any app store on any week of the year typically include several games.

Some of these games have been enormously successful, earning millions of dollars a day in micro-transactions or in small upfront payments. Unlike the typical console game, which can sell for $50-$70, mobile games start off at a lower price point, and many have trouble earning their way to a sustainable revenue-per-user number. There are many, many more failed smartphone games than there are successful ones. So, you might ask yourself: What does a console maker like Nintendo know about making games for this market?

Nintendo has been making hand-held portable games for decades. The Gameboy and its many descendants have been a profit centre for Nintendo since they arrived in 1989, sometimes the only bright spot for the company. It has had touch-screen games on its portable DS machine since 2004. It knows how to make mobile games.

I usually put a lot of stock in the views of Wired's Game|Life editor Chris Kohler, an astute Nintendo watcher. In his Friday podcast he made the case that Nintendo's sole goal with this new strategy was to make a lot of revenue, and that means investing heavily in new addictive free-to-play games that copy other successful games with a thin layer of Nintendo characters painted on. In other words, probably not the stuff Nintendo fans grew up loving – no Duck Hunt, no Super Mario Bros. 3 on your phone, but maybe a Super Mario match-three game heavily larded with in-app purchases and prompts to buy more content or characters.

The likes of Supercell and King (makers of Clash of Clans and Candy Crush Saga) have made multi-million-dollar businesses in this manner. But where I differ from Kohler is thinking that their success will last. They've made lots of money so far, but Nintendo could eat their lunch.

As hardware and software sales have declined, it's clear that Nintendo has a core of customers willing to purchase a Nintendo system just to play its exclusive games. The best selling Wii U games are its own titles, usually variants of Mario: Smash Brothers, Land, Kart and Party. On Xbox and Playstation, the best-selling titles are third-parties like Call of Duty that sell across both platforms.

Now, imagine that Angry Birds or Candy Crush was only available on one type of phone, that maybe wasn't as powerful as some of the others. Let's say the best mobile games anywhere were only on Windows Phone. Would you buy a Windows Phone just to play those games?

Well Mario and his pals have defied the gravity of the console market for years, making millions selling the equivalent of Windows Phones to customers who just want to play Mario. The only limit seems to be the poorly received Wii U – a single-use console (that costs $250 or more) is just too high a barrier to entry no matter your level of Mario affection. It seems to have taken Nintendo years of losses to finally realize this.

I recently listened to HowStuffWorks.com's fun Techstuff podcast, which did a three-hour plus exploration on the rise and fall of Atari. It is an amazing history: Atari invented modern video gaming as an industry (it doesn't matter that they stole some key ideas, because they executed on them, and that distinction is why we use Apple computers and not Amigas). Atari lost though – they barely exist now, and one of the companies that killed them was Nintendo.

Atari lost its way for many reasons, but one of the things they did wrong was dilute their focus from their core appeal: They stopped making great games.

Nintendo can still make great games, but even just okay games work because of the characters, what the games industry rather bloodlessly calls intellectual property. I recently played Mario Party 10, which is essentially a board game on a video screen. You roll dice, you advance along a board, there are prizes and setbacks: It's like a game of Life or Snakes and Ladders, only with Donkey Kong, Princess Peach, Mario, Luigi and Bowser. What made it awesome was playing as Bowser, smashing and roaring around. The sheer delight of those moments was not diminished by a familiarity with the characters or the fairly tame gameplay. This is what Nintendo has that almost no one in gaming does: characters that will turn a boring game into one you'll play over and over.

Simply put: There are no characters in all of mobile, console or perhaps PC gaming with half the emotional appeal of Mario, Zelda and the gang. And certainly not over the length of time our culture has been enjoying Mario.

And Nintendo is one of the most interesting and innovative game companies when it comes to making new control schemes into a form of artistry. Multiple-button gestures, asymmetrical play, using sensors in unique ways, they've done it all. The only way they could fail in this new plan is if they make really bad games. Smartphones present a new set of challenges, but inventiveness is not Nintendo's weak spot.

The decision to create mobile games was not made lightly. Reports last week suggested the company has been mulling the move since 2010. But to go back in time when it was selling consoles at a brisk clip isn't an option. To launch full steam into the biggest barrier-free pool of game-players the world has ever known (there are more than a billion smartphones out there) takes guts, but it is a prize worth fighting for.

And it's not clear to me that just because Nintendo will be making software for someone else's devices – Samsung, Apple, HTC, Sony, whoever makes the phone in your pocket – that they will never sell a full console game again. If anything, Nintendo will be minting a new generation of fans who have never spent the money to own the third-choice console – people who might be willing to follow those characters back to Nintendo's next console (currently called NX, to be released in 2016). And even if they don't, mobile gaming will grow, not contract. If Nintendo can take a big chunk of that market it will have a useful revenue stream for years to come.

The Wii U is a burning platform. But Mario and his pals aren't. To have stemmed the decline of its console business for so long is a remarkable testament to their stickiness.

Nintendo's intention to make games for smartphones looks like a surrender to some folks, but it could be one of their biggest victories yet.