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How Nintendo Steals Your Money
Editorial by 
Editor
December 20, 2016, 09:26:13
 
This article was originally written for Secret Tunnel Times. If you have a soul, read it there instead.



Being home alone at night is the worst. I mean, not for me. Iím all about that Elon Musk "the absence of photons is nothing to be afraid of" anti-supernatural mindset.

But, you know, for other people who are definitely not me, it can be scary. Demons, burglars, whatever. Sometimes it seems like there are monsters hiding in every shadowy corner; ancient forgotten evils lying in wait for centuries, yearning to enact their revenge upon he who stumbles upon them.

Öthis is kinda how I feel about all the copies of Ocarina of Time I have in my house.


Thereís the Master Quest bonus disk, perched right next to its sister, The Legend of Zelda: Collectorís Edition, on my game shelf. In my entertainment center, stored deep within the Wii Uís bowels as pure data, is the Virtual Console port. Iíve got the 3DS remake sitting a couple feet away from me in my bedroom dresser, and, most precious of them all, the golden N64 cart, signed by Shigeru Miyamoto himself.

Öalright, I lied, itís not signed by Miyamoto. But itís still cool.

A lot of people get mad about this sort of shameless full-priced re-releasing. Take Super Mario Bros., for instance. Itís 30 years old, itís been ported about twenty times, you can easily play it for free using an emulator, and Nintendo still has the nerve to charge five bucks for it on the Virtual Console. "Does Nintendo know what theyíre doing at all!?" these people ask. "If this game was a dollar, maybe two dollars, Iíd buy it in a heartbeat! Everyone would! They could make so much money! (Especially if they added in arbitrary achievements to pollute its classic design!)"

Unfortunately for these people (and fortunately for the rest of us), Nintendo doesnít care what they think, and seeing how they just got 10 million downloads in one day with Super Mario Run, theyíre not going to anytime soon.


See, the conventional wisdom for mobile developers is that they should give away their games for free and then make money off of microtransactions. No one wants to spend more on a game than a McChicken, so if you want any hope of turning a profit, youíve gotta appeal to as broad of an audience as possible by keeping the barrier to entry super low. Toss in problems like game cloning, an overcrowded market, and poor discoverability features, and basic economics says that the cheapest games are going to float to the top of the Most Popular lists, become trends, and stay there. In turn, this means less funds for developers, forcing them to create more disposable games in a shorter timeframe, continuing the vicious cycle.

This problem isnít exclusive to the app store either; as Steam becomes more crowded, publishers are facing the same issues there. In the past few years, our industry has reached a point where supply far outweighs demand, and in a culture of holiday sales, Humble Bundles, and PlayStation Plus, consumers can get more games for a few pennies than they have time to play. Game devaluation is a very real problem facing our industry, and unless platform holders and review sites find a way to better curate games for individual playersí unique tastes, weíre going to see a lot of talented developers leave to go make money in a career that actually pays them for them their work.


And then a week ago, in the midst of all this economic turmoil, Nintendo struts onto the mobile scene with mushroom in hand and releases a $10 game that shoots straight to the top of the Highest Grossing charts.

How is this possible!?

Let's play a game. (You are going to do this because game theory is FUN.) Imagine that youíre the captain of a fleet of 100 ships. Each of these ships has two people on it: one of your soldiers, and an enemy soldier whoís captured the vessel. The enemy is allowing your soldier to leave in a lifeboat in exchange for the ship. However, you have a policy for this scenario: when the enemy boards, your men are to press the self-destruct button in their pockets and destroy the ship, taking their own life and the enemyís with it. You make this policy known to the enemy commander in hopes that it will deter him from trying to capture your ships in the first place.

You order your men to give the enemy soldiers on board their respective ships one final warning before self-destructing, and sure enough, 90 of the enemy soldiers retreat. 10 of them, however, call your bluff, and refuse to leave.

This is the key moment: now that your threat has failed, your soldiers donít actually have any incentive to go through and detonate the ships. If you want to maximize your gains from this situation, you allow your men to say ďScrew this, Iím not dying today,Ē and escape with their lives, letting the enemy soldiers take the ships.


And this seems like it makes perfect sense: you bluffed, it worked pretty well, and then you changed your mind from there to better suit the current scenario.

The problem is what happens next month when the enemy attacks again.

Seeing that your threat was empty last time, 50 of the enemy soldiers call you on your bluff (and 50 still retreat). Once again, wanting to minimize your losses, you allow your men to escape, and allow the enemy to take your ships.

A month later, the enemy attacks again, every solder calls your bluff, and they steal all 100 ships.

Despite the fact that going back on your word each time maximized your gains in the short term, in the long run, it completely ruined any accountability you had with the enemy. Had you made those first 10 soldiers detonate their ships in Round 1, the enemy wouldnít have even attacked you in the following months; but, by giving in, you made yourself exploitable.

AAA publishers donít seem to understand this.


Their strategy for pricing games is a lot like a naval commander who canít keep a threat: theyíll release it for $60 in the fall to get maximum Day 1 revenue, drop the price to $40 after a couple months to bring in the late adopters, lower it to $30 after Christmas, and by the time summer rolls around, you can pick it up for $15 in a sale. For any given product, this tiered approach makes sense; with each price drop, you open the game up to a new market.

After a few years of this though, people are going to catch on. As awesome as Final Fantasy XV looks, I donít need to spend $60 on it during final exam week just to stare at it in the shrink wrap when, by the time I can finally play it, Iíll be able to nab a fully-patched version of it for a fraction of the price. And even for people with all the free time in the world, why buy todayís full-priced games when you can grab all the awesome games from last year for ten bucks a pop?

AAA game sales are dropping, studios are closing, and people are finally getting sick of Assassinís Creed.

Nintendo understands something that these other publishers donít: the long game matters. We buy Nintendo games at full price because we donít have a choice; they arenít going to be on sale for an 85% discount four times a year. In a lot of cases, they wonít even see a $20 price drop for nearly half a decade.

But letís be honest with ourselves: Super Mario Run isnít doing this well just because Nintendo is smart at pricing their games. Mario is one of the most recognizable brands in the entire world. Of course a new game is going to sell well. However, I donít think you can separate this point from Nintendoís corporate philosophy as a whole.

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Nintendo goes above and beyond having clever business sense; the culture of respecting its own products enough to not give them away for a few cents permeates everything that Nintendo does. Nintendo values its games because its developers put hard work into them, and its developers are able to put in such a large amount of effort because Nintendo gives them the time they need. Metroid hasnít been annualized. Mario doesnít have game-breaking bugs or 17GB patches. When a Zelda game comes out, itís almost always praised as one of the greatest games of all time. Nintendo brings a certain integrity to the table with its approach to releasing games, and we all win because of it. Miyamoto might claim that he creates "products rather than works of art," yet he still treats his work as being far less disposable than all the developers who take themselves so seriously.

There are other publishers out there trying to fight game devaluation. Axiom Verge developer Tom Happ and cohort Dan Adelman decided not to put their game on sale no matter what until at least 6 months had passed since its release date. Jason Roher has pledged to never put The Castle Doctrine on sale ever.

The thing is, I wouldnít even be surprised if this isnít the most profitable way to sell a game. It could very well be that these guys are sabotaging their own success for the greater goodóbut theyíre an awesome example for publishers with the courage and financial ability to take that short-term hit.

Personally speaking, I discounted my own game by 90% during the most recent Steam Summer Sale, and that was its best-selling week ever by far. Since then, sales have been dead.

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These are only a few data points; I donít have the capability to scrounge over thousands of games on Steam Spy and examine the past ten years of NPD reports to put together a full picture of how price drops affect sales numbers. There are a million factors that go into why Nintendo games sell so well and why other games donít, and there are plenty of counterexamples of indie games that continue to rake in big bucks from 90% off sales even after years of discounts. This theory is very far from being conclusive.

That being said, if I was Nintendo, Iíd be feeling pretty smug right now. Keep this in mind next time you complain about Super Mario Bros. being $5 on the virtual console:

This is a company thatís been around for 130 years. They know what theyíre doing.

...usually.

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Posted: 12/20/16, 09:26:13  - Edited by 
 on: 12/20/16, 09:28:45    
 
Why not sign up for a (free) account and create your own content?
 
@Stephen

What did the PS2 have of 'value' that the Gamecube did not?

EDIT: I suppose maybe the DVD player? That's about all I can come up with.


Posted by 
 on: 12/21/16, 23:22:34  - Edited by 
 on: 12/21/16, 23:24:14
@Shadowlink

What does this have to do with Nintendo not devaluing their games?

PS2 had a DVD player, it played CDs, it played PS1 games, it had way better third party support and it had its own exclusives that some people preferred to Nintendo's offerings.


Posted by 
 on: 12/21/16, 23:29:58
@Stephen Nothing. That's kind of the point. When you start arguing a nebulous definition of 'value' (which appears to cover pretty much any reason why people could want a product) then we've clearly moved on from pure pricing as being responsible for people's purchasing decisions.

Given that, and the high attach rate of WiiU software as ST noted, it's hard to make an argument that Nintendo's pricing strategy is the issue. There's a bunch of other far more likely reasons for overall low sales. Conversely you can also argue that seeing as people find value in all those other factors, other publishers opting to not devalue games may not have an overly negative impact either.


Posted by 
 on: 12/21/16, 23:39:49  - Edited by 
 on: 12/21/16, 23:40:29
I never said that it was. You need to look at what is actually being said here.

ST's point seems to be that publishers are hurting themselves because the consumers are learning that if they just wait they can get games cheaper thus the companies lose money. Nintendo, however, keeps their value high for long periods of time letting consumers buy games and not feel like they could've had a better deal and thus are more inclined to give Nintendo the full amount.

As I said before this ignores that they lose people who don't want to pay $60 but would pay $40. The one game that has been used as an example has been Fallout 4 which sold amazingly well even on the first day when it was for the full amount. This was compared against Xenoblade Chronicles X which I am going to guess didn't sell nearly as well. I remain unconvinced of this phenomenon as something that is really hurting developers.

High attach rates only prove that the people who buy into the Nintendo ecosystem really buy-in. It mathematically does not account for people like your brother who see the price and go 'Not worth it'. Similarly I have a Wii U and I have paid full price for 2 games. Everything else I got was either on sale or a promotion by Nintendo. Remember when they literally gave away a free copy of one of their games with Mario Kart 8 to everyone who bought it? That's what convinced me to get the system when I did. So yeah, I'm not at all convinced that Nintendo charging $5 per instance of a NES game is some kind of genius business tactic no one else thought of because it devalues games.

All your sideshow stuff isn't addressing the main point here.


Posted by 
 on: 12/21/16, 23:58:02  - Edited by 
 on: 12/22/16, 00:05:02
Stephen said:
I remain unconvinced of this phenomenon as something that is really hurting developers..

You need to reads ST's article again. He provides a number of arguments that do in fact indicate it may be hurting developers.. It's not all Fallout Vs Xenoblade you know. Of course to be fair the other side of the coin is whether the games are worthy of not being 'devalued'. Nintendo can get away with it because of their quality level. Other developers may not have that luxury. I think Fallout 4 would be one of the titles that could get away with Nintendo's strategy though.

I suppose that's another way to look at it. To justify 'higher' price tags you need to also encourage higher quality efforts. Discounting should be reserved for dross. Instead, most of the industry outside of Nintendo is caught up in this universal pricing scheme. Everything from AAA to shovelware starts at full price and then within a year it all ends up discounted. Ideally the AAA games should stay at the premium price whilst only the shovelware hits rock bottom. That's how most other products work after all.


As for the 'sideshowstuff', the point of that was to highlight that 'value' or whatever you want to call it goes beyond mere pricing. You can hold up yourself and Josh as examples if you want, but as ST notes, Nintendo quite rightly doesn't care what you two think:

A lot of people get mad about this sort of shameless full-priced re-releasing. Take Super Mario Bros., for instance. Itís 30 years old, itís been ported about twenty times, you can easily play it for free using an emulator, and Nintendo still has the nerve to charge five bucks for it on the Virtual Console. "Does Nintendo know what theyíre doing at all!?" these people ask. "If this game was a dollar, maybe two dollars, Iíd buy it in a heartbeat! Everyone would! They could make so much money! (Especially if they added in arbitrary achievements to pollute its classic design!)"

Unfortunately for these people (and fortunately for the rest of us), Nintendo doesnít care what they think, and seeing how they just got 10 million downloads in one day with Super Mario Run, theyíre not going to anytime soon.

Josh is an especially egregious example. You and I both know that it's not the price stopping him from buying a WiiU. I half suspect that if I was to package my WiiU and game library up as a Christmas present for him this weekend, It'd be listed on Ebay by New Year.

Nintendo generally prices at what they think their market can bear (vs their own revenue requirements). And if they DO get it overly wrong, action does get taken- The 3DS launch is a perfect example. The WiiU package deal is probably another. So I'm inclined to give them the benefit of the doubt when it comes to more stable areas like VC pricing. Or software pricing in general really.


Posted by 
 on: 12/22/16, 00:46:35  - Edited by 
 on: 12/22/16, 00:49:24
@Shadowlink

As always you claim to know what I've been thinking and plan to do better then I.

I could list multiple sources I've spoken to about looking at purchasing a Wii U but why would i bother when you clearly know every thought and reason i have.

If you Recall i purchased a Wii , In your mind you would never have expected me to do that.

Do not claim to speak for me or know my thoughts or reasoning behind my actions because you have no idea.


Posted by 
 on: 12/22/16, 01:29:09
@Joshwaahh

Yes you bought a Wii. And you sold it a week later.

You know I'm not exactly doing you a disservice here when I describe you as someone not overly interested in Nintendo systems.

But hey, keep protesting. It's nothing if not amusing.


Posted by 
 on: 12/22/16, 01:34:47  - Edited by 
 on: 12/22/16, 01:35:51
The only person who seems to have an issue with me here is you.


Posted by 
 on: 12/22/16, 01:38:13
@Joshwaahh

You sold a Wii a week later? Ahhh, dude, why? Theres some awesome stuff on that system.


Posted by 
 on: 12/22/16, 01:46:41
Interesting. I didn't mention an issue.


Posted by 
 on: 12/22/16, 01:46:59
@Shadowlink.

Nintendo not caring what potential customers think would pretty much be the worst business strategy they can have.


Posted by 
 on: 12/22/16, 01:47:58
@Shadowlink

The day I made my first post you call me up pissed off and annoyed asking what was I doing, your going to get banned, something along those lines.

If that isn't you having an issue with me then I don't know what is.

@Mr_Mustache

It was not a week later is was 2-3 months, Shadowlink didn't even know I owned a Wii till after I had purchased it and sold it.

I purchased it with the intention of using it like a light gun gaming setup, as some of the games i purchased came with the rifle case that you used with the wii remote but found the accuracy severely lacking compared to what I was expecting,

I had fun with Wii Sports but the games I purchased the system for did not perform to my expectations.


Edited: Cleaned up messy tags


Posted by 
 on: 12/22/16, 01:56:40  - Edited by 
 on: 12/22/16, 01:59:51
@Joshwaahh

My my, aren't we holding a grudge.

And I stand by that. If the bulk of your contribution to the site is constantly moaning about Nintendo's perceived shortcomings, I can categorically state that people here will get tired of it pretty quickly.

But again I'll note, I made no mention of that here. So it's interesting that you bring it up now.


Posted by 
 on: 12/22/16, 02:07:30  - Edited by 
 on: 12/22/16, 02:12:28
@Shadowlink

I'm not holding a grudge, I'm simply stating facts of events that have happened.


This is a community forum, No I'm currently not Nintendo biggest fan nor have I claimed to be.

I'm a Gamer I want all 3 of the console makers to do well and have a healthy competition and a diverse range of products.


Posted by 
 on: 12/22/16, 02:16:25
@Joshwaahh

Well, still..why in the world would you sell after 3 months, even? Wii Sports was your only real run-in? Oy. What other games did you buy? Plenty of light-gun style games were released well after you sold it, I'm thinking; House of the Dead, Cabella's games, etc. I thought Trauma Center offered an especially different way to play games that we haven't before, was that one of the ones you got? Maybe you should go back and buy your old one, haha.

The Wii U; the "map in the lap" is something that'll take a lot of getting used to for the future with that feature absent. I think it'll still be present in the Switch a little bit, but not having to go to a sub-screen has changed SO MANY games for me. Its a shame we didn't get a proper Metroid on the Wii U, because going back to the map CONSTANTLY on Prime 3 is my least favorite part of that game. Speaking of which, did you play Prime 3? (The games I've mentioned aren't even my favorite on they system; my top 5 were Monster Hunter Tri, Fire Emblem, Punch-Out!!, Muramasa, and a bunch of others games all tied at 9.3 for me -- I don't dole out 10's. Play any of those at all?) Monster Hunter 3U on the Wii U is the only 10 I've ever given out, and it somehow made Monster Hunter Tri even better. Its crazy, for me, to think about that even being a possibility. And I think that if non-Wii U players gave that game a REAL shot, it would cruise to the top of their lists, too.

And messy tags are no fun, good on ya.


Posted by 
 on: 12/22/16, 02:32:58
@Mr_Mustache

It may have been out of frustration I can't really remember, I believe i picked up the Mario Kart pack for $188.00 or there abouts

I had a handful of games Cabella's rings a bell, I honestly can't remember as I didn't have it for very long, I got it at the end of its life span.

Motion controls just went for me,

Wii Sports was great for the motion controls.


Posted by 
 on: 12/22/16, 02:49:17
@Joshwaahh

You should give Trauma Center a whirl..somehow.


Posted by 
 on: 12/22/16, 03:08:55
@Mr_Mustache

If I ever get the chance I will but unless Shadowlink owns it i doubt that will happen.


Posted by 
 on: 12/22/16, 03:12:13
@Joshwaahh

Welp, Christmas is right around the corner.


Posted by 
 on: 12/22/16, 03:21:03
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