FirstAdopter.com

Quote:
Q: The official PR line of why your company and Nintendo discontinued your relationship was "business is business", is that all there really is to it?

Dyack: You know, I spoke with Matt from IGN about it, but at the end of the day, Nintendo is going down a strategic path where we believe they want to make smaller, simpler games. But Silicon Knights is not built for smaller, simpler games. We love those guys but as much as we tried to come to a half-way point to make a Silicon Knights game that fits within a strategy that Nintendo wants, we just really couldn’t do it. So it’s really strategic differences. The industry is massive, so we both could be right, but at the end of the day, we have to take the company in directions that we think will be successful for us, and that is the bottom line. So it’s pretty straight forward.

Many would love to see Nintendo create a kick ass Game Boy with a PSP quality screen and super processor, and a full next generation home entertainment system that would beat PS3. This isn't the path of profitability for Nintendo, however - I believe.

They might be on the wrong path for fanboys wishing to see them humiliate Sony on traditional turf, but they are on the correct path for the shareholders.

My interpretation of Nintendo's strategic thinking is:

1. THERE IS NO MONEY FOR #2 IN THE TRADITIONAL CONSOLE RACE
Nintendo has realized that in the high-spec hardware race the
- margins on hardware are incredibly small to negative
- first-party games are huge, 10-20M USD risks every time
- taking in account HW margin and 1st party risk, lifetime platform profitability will be achieved only by market leader
- Nintendo hasn't got in traditional terms an edge on Sony, so why waste cash trying like MS

2. SONY VS. MICROSOFT BATTLE WILL DRAIN THE MARKET FROM ANY PROFIT
With two resourceful companies fighting for number one spot, the market profitability will be destroyed. The following means will be used:
- Hardware pricing below profitability
- Cuts in third-party margins
- Excessive marketing campaigns

3. NINTENDO PROFITS BY CHANGING INTO A DIFFERENT MARKET SETTING
Nintendo DS is a manifestation of Nintendo's thinking - an affordable device that plays simple yet fun games, with low-spec components and day one profitability on HW.

4. USE THE NARROW YET TALENTED DEVELOPMENT BANDWIDTH WISELY
Nintendo's development and 2nd party management resources are very limited but extremely talented. Nintendo can maximize the benefit of them by using them to do a multitude of smaller projects. Nintendo DS software (in Japan) has shown the most astounding shift we've seen in 10 years towards entirely new types of content - simpler, shorter, more accessible titles. Key examples of very recent franchises are:
- Elektroplankton
- Nintendogs
- Brain Training for Adults
- Made in Wario
- Polarium
- Daikasso! Band Brothers
- Another Code
- Simple DS

5. CATER A LIMITED "BIG SCALE" OFFERING OF SURE HITS
Nintendo realizes that within the people who buy simple and fun devices there is some, albeit limited, appreciation for deeper and more immersive games. Hence, Nintendo keeps on bringing out a limited amount of big scale blockbusters, such as Zelda and Metroid.

6. CREATE NEW CHANNEL OF DISTRIBUTION TO OVERCOME RETAIL SHORTHAND
Nintendo has been experimenting on online distribution and DRM with iQue for some while. These learnings will be leveraged on Revolution and the back catalog.

7. TAKE HOME CONSOLE TO A SIMILAR ROUTE AS DS - NOT CUTTING EDGE BUT FUN
Everything we know about Revolution shows that it follows the DS example of innovating through simpler games and intuitive controls. Key factors for Revolution are
- Day 1 profitability on hardware due to lower spec components
- Deliver bare acceptable minimum to minimize cost, as with no HD
- Innovate on interface to create new types of games, the "revolution"
- Very easily accessible hardware that is easy to fire up for short gaming sessions

8. LEGITIMIZE NEW "SIMPLE GAMING" APPROACH WITH MARKET NEED
Nintendo's rhetoric has been for a long time that "games have become too complex" and "gamers have gotten bored". They key here, I believe, is that Nintendo believes that it cannot have a competitive edge on complex games in a big scale - their development pipeline doesn't scale to 10-20 games per year, nor does their 2nd party management capability.

The conclusions I would make at this point is that

- Expect difference between Revolution and PS3 / Xbox 360 reflect difference between PSP and DS
- Nintendo will not be doing high end multimedia devices
- Nintendo will not be doing "PSP killers" or "PS3 killers"
- Nintendo will do simple and affordable devices
- Microsoft and Sony will compete traditional market to zero profitability
- Nintendo will make a lot of money

The only things I can quite fit into my theory are