Image: Nintendo

Nintendo isn’t happy with the current state of its digital game sales, and says it has a three-year plan for making some “drastic” changes.

Speaking with investors following the company’s disappointing financial results and promise to slash the price of Nintendo 3DS on July 29, Nintendo president Satoru Iwata had a lot to say regarding the future of the gaming handheld. These remarks were translated into English by Nintendo and posted to the company’s investor relations website on Monday.

“In my mind, I would like to make the presence of the Nintendo eShop much larger in three years time,” Iwata said. “I don’t mean to say that we will no longer have packaged games in three years but what I mean is that we will have one more pillar. [The] expectation is obviously not 5% or 10% of growth but a more drastic change, and I am strongly motivated to increase the number of people who will use money digitally and create a future where consumer do not feel any resistance in doing so.”

“I think that the next three years will be very important,” he reiterated.

Let us hope that Nintendo puts its money where its mouth is in this regard. The current design of the Nintendo eShop, as we have argued before in these pages, is not as conducive to healthy sales as are the digital stores of its competitors: Purchases are not tied to a persistent account but to a piece of hardware, you have to input a credit card number every time you want to add funds, you can only add them in increments of $5.

More key selections from Iwata’s comments, on subject matters including the future of 3-D graphics and the Wii U, are below with our analysis.

On Smartphone Gaming

We have repeatedly investigated whether social games, as well as smartphones, are actually affecting our business. We got the same results in our latest research that there are no causal correlations. … On the other hand, it is the fact that a great variety of games are available at very low prices for smartphones. Naturally, consumers will choose more affordable ones if the video games we provide do not have much more value than those available for smartphones. However, no causal correlations have been confirmed because we think there are consumers who acknowledge that the value of what we offer does not equal to that of those available for smartphones and that what we offer holds unique value.

With the just-announced [3DS price drop], we intend to drastically change the situation toward the end of this calendar year, to realize a situation that a number of you cannot imagine today and to have many people acknowledge that there are no causal relationships between our business and either smartphones or social games. This is the main premise.

On the one hand, it is entirely possible that the 3DS sales slump was entirely due to its unappealing launch software and high price. That said, I’d like to see if anyone ever established such a causal link between, say, people buying PlayStations and then deciding not to buy a Nintendo 64. We know that happened, but can you prove the causal relationship with research?

More Mii Plaza Apps

In addition, now that a number of Miis are there in StreetPass Mii Plaza… we are developing several software titles to take advantage of them. We will not be able to offer you the full or all the specific possibilities of the Miis stored in StreetPass Mii Plaza within this fiscal year, but we can say that you will never let your 300 Miis stored in your Nintendo 3DS go to waste, as we are preparing for a number of software titles, which will feature such as a theme, to be launched in this and the next fiscal years.

Nintendo dropped the ball on this. My friends and I carried our 3DS everywhere we went for two months solid, collecting all of the puzzle pieces and beating the Find Mii minigame that required us to continually StreetPass with other 3DS owners. Once those two games ended, we all simultaneously started leaving our 3DS systems at home. Nintendo had no plan to keep us habitually using our systems. These new games may help, but one or two of them should have been ready to launch at E3.

Why 3DS Games Cost $40

…I cannot (directly) comment on it because the price is decided by the software publishers, but I think that there is a possibility that it will be even more necessary to discuss this subject with them so that the price of software will become more affordable for the users to purchase it. However, it is not my understanding that the manufacturing fees billed to publishers for the Nintendo 3DS are extremely high compared to those of the Nintendo DS. But to mention one aspect (in fact, the manufacturing fees billed to publishers for the Nintendo 3DS are lower than those of the Nintendo DS if the ROM sizes are the same), because the average ROM size is larger for Nintendo 3DS software, manufacturing costs might be one reason, especially for the titles with very big memory sizes.

It doesn’t sound like there’s a good solution — besides, of course, strengthening the digital delivery side of things.

3DS Games With No 3-D

I think there could be a Nintendo 3DS software title which does not use the 3D feature at all, and I believe Nintendo will develop such software. Instead, other features of the Nintendo 3DS should be focused on. It might be a communication feature, or other functions (such as the gyro sensor or the motion sensor). The important thing is that each respective software title has its own characteristics, and appeals to the consumers in a way that fits the software. So I am not worried in a way like, “The value of the Nintendo 3DS will decrease when the novelty of 3D wears off.”

Iwata points out, before this, that the new Wii version of Rhythm Heaven doesn’t use motion sensing, and that he doesn’t see this as an issue. I agree: Just as you didn’t need to use the touch screen to make a great Nintendo DS title, so do you not necessarily have to have 3-D display to make a great 3DS one.

Wii U: Neither Portable Nor “Home Console”

In the past, there were two categories of gaming systems, handheld devices and home consoles, and there was thought to be a great wall in between those two categories; however, the Wii U will be connected to a home TV, but it is not a simple home console, meaning it is not something “playable only when facing the TV.” This is because, the controller has its own screen, so even if you are not facing the TV or the TV is occupied for some other reason, you can still use the game system. … For your information, for game systems that have been sold as handheld devices, many consumers do not actually use them outside of their homes [which means that] there is a very high demand for playing a game system inside the house without using the TV, and we would like to answer that demand with the Wii U.

Much has been made of the explosion in popularity of portable game machines, to the detriment of home consoles, in Japan. I think Iwata is on the money with his assessment: A lot of Japanese gamers are playing Monster Hunter on their PSPs at home not because they want to take it with them wherever they go but because the small family home only has one television, and a portable game machine is private and personal.

Whether or not the Wii U proves to be a viable solution for this type of player remains to be seen, but I think Nintendo has correctly identified a unique opportunity (in Japan, at least).

Microtransactions Coming to 3DS This Year

[We] are preparing a system for micro-transactions and so-called add-on content for both the Nintendo 3DS and the Wii U, and for the Nintendo 3DS we are targeting to release something this calendar year. … For example, let’s say there is an occasion where a user says, “I’m done playing this game but I would play it more if there were additional stages,” and we were able to focus the right amount of energy to develop additional stages and that way, by distributing the additional stages, we were able to extend the life-span of the game or stimulate social topics, or increase sales. Then, we would discuss whether we could sell the add-on content at a price where both Nintendo and consumers would be satisfied.

Pay $1 for another stage of Super Mario 3D Land? It could happen. On the other hand, says Iwata…

…under Nintendo’s set of values “charging money just for changing the parameters to unlock something or to allow some large advantage,” is a totally different earnings structure that is not compensation for creative work and, while pursuing this may create short-term profits, Mr. Miyamoto and I discussed that we should not use this type of billing system since we think that we will not be able to make long-term relationships with our consumers.

In other words, no Pokémonville for you.