What Nintendo was thinking with the Wii U's stumbling debut

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Reggie Fils-Aime, president and chief operating officer for Nintendo of America, probably wishes last week's Electronic Entertainment Expo (E3) went a little more smoothly.

Many expected the Japanese game company would reveal crucial details regarding its Wii U game console, which is currently scheduled for a nebulous "holiday" launch, has no price attached to it, and no official line-up of day-one software.

When this information was withheld at the company's E3 press conference in Los Angeles last Tuesday (the event focused instead on showcasing Wii U games in development), the press wondered whether Nintendo's next system was really ready for its fall debut.

It was with these questions in mind that I sat down with Mr. Fils-Aime on the second day of the show.

Over the course of our 20-minute chat he made clear that Wii U is not being rushed to market in light of tumbling Wii sales, that he will not shy away from measuring the system's performance against that of its record-breaking predecessor, and that there is still "work to be done" when it comes to explaining to the public what Wii U is all about.

Chad Sapieha: Heading into E3, what were the main things about Wii U you wanted to get across to the press and public?

Reggie Fils-Amie: We wanted to get across that the Wii U experience is something unlike anything they've ever experienced before. It's something that they will want to experience for themselves.

We also wanted to communicate that no matter what type of gamer you are, we have products for you, whether you want a more active experience, like Assassin's Creed or Batman: Arkham City – Armored Edition, or you're a fan of a game like Wii Fit U.

Third, we wanted consumers and media to understand that what we're showing at E3 is just the tip of the iceberg. We're just beginning a steady stream of information about Wii U.

Nintendo has recently experienced some difficult financial times. Is Nintendo rushing Wii U to market to compensate for sluggish Wii sales?

The short answer is no. This is not a system that has been rushed in any way.

And, in fact, our challenging financial performance has not been due to the Wii's performance. It was driven by our performance on Nintendo 3DS.

In Canada and the U.S. the sell-through rate of Nintendo 3DS after 14 months is better than it was at the same point in time for the DS. However, because of the lack of strong software from Nintendo, the lack of online capabilities, and the lack of other entertainment at launch, it caused us to [reduce the handheld console's price], which generated a significant negative situation for us.

Now that our 3DS business is healthy and on a positive path, that product is going to be the predominant volume and profit driver for our business this year. The impact that the Wii U will have will be somewhat modest because we're launching it during the holiday season.

In the games industry, success is often a comparative measure. The Wii sold incredibly well for its first few years, which places you in a tricky spot with Wii U. Many people will compare Wii U's initial sales to those of the Wii. How will Nintendo judge Wii U's performance and whether it's a success?

Rightly or wrongly, we will compare the sales rate of Wii U to that of Wii. We have to. In order for us to grow our business and financial performance, in order to reach more consumers, we have to achieve a level of performance similar to that which we had with the Wii.

That's a tough proposition. As you highlighted, for the first three years we were constantly sold out on Wii. So we have a very high bar. We will have to compare ourselves to our historic performance. In addition, we'll compare consumer reaction, look at sell-through sales, and look at online activity. And all of these aspects will be important.

But make no mistake. I'll be looking at the weekly and monthly sell-through patterns of this new console versus the Wii to understand how we're tracking.

You just mentioned online activity. Nintendo has struggled with online features in the past. Now it looks like online is central to the Wii U experience. What was your driving philosophy behind online for Wii U?

We recognized that the Wii U had to have a strong account system.

Here's a little bit of background. Up until the Wii U, the device held all of the account information. Whether you played or your kids played or your partner played, it was all one set of data to the Wii. The same was true for DS and 3DS.

With Wii U, we're going to have an account system. This means you're going to create a Mii, as will all the other members of your family, and the behaviour for each Mii is going to be captured in an account. For example, if you've achieved a certain level in a game, that information will be unique to your Mii. Parental settings will be specific to each Mii.

This is critically important, because it means things like messaging and achievements and other key online functionality is tailored to you.

Nintendo President Satoru Iwata mentioned in a pre-E3 video that the system's social features have been designed to persist and evolve with each new generation of Nintendo hardware.

I think what he's trying to communicate is that in addition to having this robust online experience, it's almost like having a third platform. By third I mean you have your home console, your handheld, and now this key network platform.

This network will be applied on every future platform. Why is that important? Once I build a relationship with you through an account system, all of those behaviours and experiences are going to be there for you to go back to. If you buy a piece of digital content, it will be there for you, even in future systems.

You could sum up the original Wii with just a couple of words – motion control – or an even an image of people standing and playing in their living rooms, and everyone just got it. Wii U seems a bit more complex, not quite as easy to quickly encapsulate. Do you think this might prove a problem in terms of marketing it to casual gamers?

You're right. Accessible, active play became a very simple way to communicate what Wii was all about. But when we were sitting at E3 in 2006, we weren't talking about active play as the summary of the proposition. We got there over a few months as we really thought hard about the system and reflected on the software that really resonated with consumers.

Similarly, our job over the coming months is to come up with a concise collection of words that communicate what the Wii U is all about. That's work still to be done.

I do think that the concept of asymmetric play [enabled by the Wii U's Gamepad controller, which provides players a second screen] will be a key part of the proposition. It's this idea that you and I are playing the same game, but we're playing it differently, and because of that it's a lot more fun.

Nintendo's press conference lacked a lot of information that people expected, including launch date, pricing, specific launch software, and what would be included in the package. What was your rationale for withholding that key information at this stage?

The rationale is this: We want to see what resonates. We want to understand which games and experiences really resonate with consumers, and then use that information to make decisions moving forward. This is something we've done every launch year. We did it with DS, we did it with Wii, we did it with 3DS.

We'll take all of the information coming from E3 and use it to make final decisions on launch date, launch price, configuration, launch day software, launch window software, and follow up-software. Because now we have the benefit of information.

Nintendo is sticking with its traditional hardware cycle [five to seven years], but Microsoft and Sony are stretching theirs. That means that while the Wii U will launch as a relatively powerful machine, it may no longer seem so in just a couple of years when its competitors release their next-generation consoles. Consequently, some people are expressing concern that Wii U might date itself quickly...

Three comments. First, it's not about power. If it was about power, then the GameCube would have been the number one system in its generation and the Wii wouldn't have been the number one system in this last generation. It is not about power. It is about fun, it is about the experience.

Second. Our competitors can say what they want about some super long cycle, but let's see what their behaviours are.

Thirdly, the way development works is that the longer developers work with a system, the better they can tune performance. Case in point: Look at the very first GameCube games, and compare them to a game like Resident Evil 4. It was graphically beautiful, and demonstrably more advanced than the first GameCube games.

The same was true for Wii. A great example is Super Mario Galaxy 2. The graphics are just beautiful. And look at the motion control we were able to achieve in The Legend of Zelda: Skyward Sword.

The longer developers work on a system the more they tune it, the more they push the system, the more they learn tricks to really optimize performance. I share this because what you see here at E3 are games that represent a relatively short amount of development time. Imagine what we'll see two years from now when developers have been working with Wii U longer and learn how to push everything out of the system.

Our competitors will do what they want. From our perspective, this is the right time to launch a new piece of hardware. And, the fun, the capabilities, and the experiences that we're offering today with a second screen are demonstrably better than what can be done today on other platforms.

Would you admit that, with Wii, Nintendo lost some of the hardcore gaming audience?

You know, I really chafe at that comment. Define the hardcore. I know people who are playing Smash Bros. Brawl competitively today. They're playing hours on that game. People are playing hours on New Super Mario Bros.

What I'll tell you is that with the Wii we did not have the benefit of multiplatform games from key publishers. I didn't have The Elder Scrolls V: Skyrim. I didn't have the best of the Call of Duty games. That's what I missed.

With the Wii U's graphics capability, processing power, and HD-output, we'll get those games. That's a huge competitive advantage versus where we were with the Wii.

Third-party publishers need to see more than just capable hardware. There needs to be a sizable audience. To create an exclusive, high-quality game for a new platform, they have to believe that they'll sell a certain number of copies. It's very early in the Wii U's lifecycle. How are you approaching third-parties to create these games for Wii U?

Well, the proposition for a third-party publisher or independent developer is pretty simple. We need to show them that the install base is there for them to sell a quantity of games that represents a profitable proposition.

What we're sharing with these publishers and developers is how first-party games will drive an install base, and how, from a marketing standpoint, we'll reach the type of consumers that they want to create content for.

Then we have to deliver on it. What will help us are games like Batman: Arkham City – Armored Edition, Assassin's Creed III, Mass Effect 3 and Zombi U.

Thanks for taking the time to answer my questions. I appreciate it.

Sure.

The preceding interview was condensed and edited for flow.