The first thing people need to understand about Nintendo is that they are a design company, like Apple. They will have tremendous hits and flops over time, but net-net, they are creating shareholder value - which is why the company has $14 billion in cash and short-term holdings making it the most valuable gaming company in the world.
Running a design company isn't about jumping on trends, it's about fostering a creative culture where people are free to work and create, and then jumping on key products as they are built and figuring out how to get people to buy them. That's a tremendous job. That is why Steve Jobs was respected the way he was. This is why Satoru Iwata is highly respected within Nintendo. These guys are going to make mistakes and they are going to do things that puzzle people (Jobs was famous for closed ecosystems, when everyone else was going open), but their internal teams love them, and they perform and work for him because they admire/respect him - and there is a cult of personality around them. You can't just bring in a mercenary fly-by-night executive looking to cash-in to run these companies. The talent would just get up and leave.
You're saying Iwata has a cult of personality around him and I totally agree. Yet, I don't think this cult exists because of his abilities to build key products and figure out how to get people to buy them, but because how much money he made.
Everytime someone comes up and throw whatever criticism toward him, they'll mention how much money he managed to bring for Nintendo. This is a trademark argument from his fans.
Like you said, Nintendo can make hits or misses, but Iwata's bets are very risk ones. Sure, he scored big time with DS and Wii, touch-screen and motion controls were great implementations which improved the gameplay to an unprecedented level. That's why both DS and Wii were the sales phenomenon they were. When I say risky, is because he relies heavily on a feature to sell a machine and if that don't work, it may turn the machine completely unappealing. What if the motion controller wasn't well received, would the Wii survive? It had an underpowered hardware, unappealing controller for core gaming (reason for many core games never coming for Wii) and awful online network, in short, it was a hardware mostly built solely for motion control gameplay.
This is what's happening with WiiU and, somewhat, with 3DS. WiiU's gamepad isn't, so far, bringing anything new for the gameplay like Wii's motion controller managed to brought and isn't appealing to whenever audience in the market. WiiU isn't a powerhouse and won't appeal to the mark for it's hardware power and if the gamepad didn't manage to offer this "unique experience" that Iwata's direction heavily rely on, WiiU can't compete. I hate saying this "Nintendo can't compete" bullshit because I disagree completely with it. A well-managed Nintendo would never become uncompetitive, but under Iwata's direction, this is true and it's what Nintendo is becoming in the console market.
You said a design company it's about fostering a creative culture where people are free to work and create. How can that be for Nintendo? Like Shikamaru Ninja said, Nintendo is now very Miyamoto-centric and their hardware isn't appealing for most of third-party, hence it's lack of support from them. I don't think Iwata's direction offers freedom of work and creation.
Iwata's past choices had negative impacts on Nintendo in a long term strategy. Remember his quotes from years ago about how he was against online gameplay, HD development and how graphics couldn't improve no more? It's no mystery for why Nintendo is struggling now to adapt to HD development, hence the multiple delays for WiiU's games and to create a proper online network. His casual heavily focus for Wii was later regretted by him. It didn't managed to bring long term profits for Nintendo, hence Wii's consequential third-party support loss and premature death.
That said, Nintendo made a lot of wise choices in the past five years: they locked up Japan, which they feel is their cash cow market now largely abandoned by Sony and with Microsoft non-existent.
Japanese developers are slowly adapting themselves to the western model. Their games are trying to appeal to a western demographics. Becoming japanese-centric in a western-based world wasn't a wise decision, quite the opposite, it enhanced Nintendo's restrictiveness.
They also went on a hiring binge and got talent that was being laid off by other companies, and setup partnerships and joint-development opportunities with companies like Platinum and Mistwalker and Namco Bandai and Tecmo Koei - completely changing the way the majority of the game development community in Japan saw them. This took incredible time and effort frankly. Other than that, Nintendo has expanded Monolithsoft, Retro, and fostered relationships with a dozen smaller studios in Kyoto that are offshoots of employees from Konami, Square, etc.
Like you said,
in Japan, outside of it, those companies no longer have the same height they had before or have inside Japan. It's good for Nintendo to foster relationships with japanese third-parties, no doubt, but why they don't try to foster with western developers as well?
They've also had to build out an entire OS team and built a social network through a partnership which they are managing internally. Nintendo also had to hire, over the past few years, tons of people in network engineering to bulk up on their core software abilities - unlike Microsoft which had people ready to go on that front. They are still lacking on this front but it's come a very long way and will improve - Sony is evidence of that. Even the Xbox has changed dramatically over the years.
Yes, they're struggling to build a social network. This reminds why Iwata was so against online gaming a few years ago and, yet, Nintendo still prioritize local multiplayer over online.
In your world, they would have abandoned a few of the ideas above, and gone to the West where there were two camps: one were non-gaming executives running gaming companies fighting over the same pool of 1000-1200 developers, inflating salaries out of control, and desperate to try and release another shoot-bang game on HD consoles. Another group of people were proclaiming the end of traditional games as Zynga was going public and venture capitalists were dumping millions into Facebook games.
I hear this argument constantly. Everytime when someone suggests a shift of Nintendo's direction, someone comes up with this "how dangerous and unprofitable the current gaming model is for them" talk.
This is a stereotyped view of the market. Nintendo don't need to play it safe, play it cheap to remain competitive and they can afford to compete. When it comes to HD development, Iwata's defenders automatically associate it to AAA business model, 50-100 millions budget, dudebro and cinematic experiences. This is strawmen talk.
They can adapt themselves to the HD development without the need to follow any of these models. I think it would actually improve the HD development as a whole if Nintendo insert their philosophy on it, actually better for Nintendo rather than insist into this "low-tech, cheap" approach they have.
So then, what should Nintendo have done in the West? Throw millions into California-based companies for no reason? Buy up studios only for the talent to leave? Money hat a bunch of games from developers that had no interest in making Wii games? I keep hearing all this talk about "Nintendo and West" - but there aren't a lot of compelling things Nintendo could have done. Building studios takes years, and Nintendo isn't just going to throw millions for another nightmare like Retro to occur which consumed incredible time from NCL and EAD.
Why going after better western third-party support is "no reason"? How is Retro a "nightmare" for Nintendo if it's now one of the most praised Nintendo's internal teams? You talk like fostering western relationships is negative and would badly affect Nintendo. Sorry, but this is silliness and only japanophilist fanboys can see it that way.
As for your tirade about Iwata neutering NoA. NoA has been dead for years. That's the truth. Treehouse is the last good thing about it and that's because Nintendo's core localization team has been together FOREVER and all their kids go to school together - they are incredibly tight and will never leave unless something drastic happens. The rest of NoA? The Wii was such a novel product that many people coasted through, even though they had the ability to really get deep and do some impressive things with their fan community. That's a failure of Reggie and other execs, not Iwata who basically gave them the freedom to do what they wanted and even made a bunch of games like Xenoblade available for them to localize.
Iwata was the one who disassembled NoA's development teams. Before him, it was a powerhouse and a lot of Nintendo's internal development were conducted there. Shikamaru Ninja made an excellent post regarding this in a previous thread. Here:
From 1990-2000. Nintendo of America had production and management autonomy from Japan. NOA basically culminated its own production team, along a few co-designers, and started funding and producing games with developers.
DMA Design: Uni Racers, Body Harvest (Nintendo dropped it in 1997, Midway took it)
Angel Studios: Ken Griffey Baseball, Buggie Boogie (canceled)
Bits Studios: Warlocked, Riqa (canceled)
Rare: Donkey Kong Country, Killer Instinct, Goldeneye 007, Perfect Dark
Software Creations: Ken Griffey Baseball, Tin Star
Silicon Knights: Eternal Darkness (N64 version)
Left Field Productions: Kobey Bryant in NBA Courtside, Excitebike 64
Looking Glass Studio: Mini Racers (canceled)
Mass Media: Star Craft 64
H20: Tetrisphere
Saffire Corp: Nester's Funky Bowling, James Bond 007
Midway: Cruisn Series
Nintendo of America also procured the Ken Griffey and MLBPA license, NHL License, Kobe Bryant and NBA license, PGA license, Disney license, James Bond license, StarCraft license. Star Wars Episode I license. They were producing their own first-party games separate from Nintendo of Japan.
That all changed when Iwata transitioned from Global Marketing Chief to President. NOA Production was killed, and Nintendo of Japan's SPD Department took over all Western development (Star Fox Adventures, Geist, Eternal Darkness GC).
Henry Sterchi, Brian Ullrich, Ken Lobb, Ed Ridgeway, Jeff Hutt, Faran Thomason, and the whole crew left NOA to Microsoft and other developers. Since then, we've seen the Western model we have today. Western developers reporting directly to Japanese management, and pretty much making B/C sequels to Nintendo IPs.
The human resource issue in the US partially exists because Nintendo has a unique way of going about hiring people. It doesn't want to hire mercenaries like Peter Moore who will sell their soul for a few bucks and jump company to company (some would argue Moore killed the Dreamcast just to curry favor with Microsoft and he himself said that Microsoft helped arrange his transfer to EA because they saw an opportunity to corner both Nintendo and Sony). Nintendo hires people who are passionate about their products, and are motivated by things beyond money - much like Howard Lincoln and Peter Main were during their tenure at Nintendo. Just consider this: Iwata gets paid $1.2 million bucks a year - Bobby Kotick who doesn't even play games - made over 50x that in a single year.
Do you honestly believe Nintendo's old folks in their 50/60's play games at all? Do you believe REGGIE play games after all his out of touch statements?
This is all my opinion frankly, and I say this more to try and counter this ridiculous and IMHO ethnocentric inertia of "Iwata is a fool, doesn't get the West, and is keeping NoA weak cause Japanese companies are pride LOL lol lol!!111" - but I hope what I say will resonate with some of you - running Nintendo isn't a joke - Iwata is a great executive who is finally growing into his role. Yamauchi made LOTS of mistakes early on and Nintendo lost a ton of money with his ill-advised ventures. But that's the beauty of Nintendo - they really want to grow their executives and give them leeway to make mistakes - Iwata will learn - and when he figures out NoA - I am sure Nintendo will have an amazing core team in both Japan and America.
Although Yamauchi did mistakes, Nintendo never lost money under him, something they did under Iwata. May I remind you that Iwata kept most of Yamauchi's business models intact till today besides all the demonizing toward Yamauchi management. Do you believe Nintendo don't control the manufacturing and demand for third-parties's 3DS cartridges? This is a statement circa 2010 from Alchemist detailing Nintendo's business practices:
After Iwata's big speech at the 3DS announcement, about how third party games are not selling like Nintendo's, Alchemist's boss got a little infuriated, and posted a blog entry to vent his anger:
http://www.alchemist-net.co.jp/nikki/?p=2741
The crux of the matter is that a lot of the issues with 3rd parties on Nintendo hardware are still Nintendo's fault. In particular, the software manufacturing process leaves a lot to be desired. Here are the key points mentioned:
1. Repeat manufacture starts from X thousand units.
Say your game is more popular than you expected (or you were a little too "safe" with first run numbers). If you decide to manufacture more copies, Nintendo says you must start with X thousand (the X is secret because of NDA). Other hardware manufacturers start at 100. There's a massive risk involved for smaller publishers, in particular, here.
2. Manufacture turnaround time is 3-4 weeks.
In the case of DS games, it takes Nintendo 3-4 weeks to manufacture a second run of carts. Other hardware manufacturers have a one week turnaround. When your game is selling like hot cakes, you can understand the need to get extra units out quickly. Nintendo, apparently, doesn't.
3. Manufacturing costs have to be paid 100% upfront
Other hardware manufacturers are not mentioned here, but the example is given that "let's say it costs 1000 yen per unit to manufacture" (actual cost depends on cart size), and if a game is expected to be a big hit and sell 1 million units, that's 1 billion yen that has to be paid upfront. That's a ridiculous amount and causes a bit of a headache as far as company capital goes. He suggests reducing it to 1/3 upfront payment, to ease the problem.
4. Nintendo could try to help with TV advertising
Right now, Nintendo is sponsoring a lot of TV shows via advertising. It would be a good opportunity for Nintendo to sub-let advertising, at a reasonable price (
thanks cvxfreak) to third parties during these programmes.
He mentions the last point is really a personal request, but the others are serious issues.
tl;dr --- There really isn't anyone better than Iwata who has the respect within Nintendo's creative teams, support from shareholders, and an overall desire to see it move forward, that could come in and do the things that an extremely off-beat culture like Nintendo is now doing for the future.
I honestly doubt shareholders will keep supporting him if Nintendo continue to loose money for the next years.
