In an event in New York this week, Nintendo had demonstration booths where people could play with its new Wii U, a game console that can be operated with a touch-screen controller. It also introduced Nintendo TV, its new online video service that is intended to make its Wii U competitive with set-top box systems like the Apple TV, Google TV and Roku.
Reggie Fils-Aime, president and chief operating officer of Nintendo of America, sat down to explain the company’s goals with the new television service and Wii U. An edited transcript of the interview follows.
Q.
You introduced the Wii U, the next-generation Wii with a touch-screen controller, last year. What’s new now?
A.
This week we pull it all together. We’re showing more games and unveiling the Nintendo TV service and how we’re approaching the entertainment space. Nintendo TV is the one place that will have all of your video entertainment in one place. If you subscribe to Netflix, Hulu Plus, Amazon Prime plus your cable box — if you’re trying to watch an episode of “Modern Family,” you might have to go to three different places to try to find out what’s available. This service puts it all in one place, so you can literally sort by titles, sort by actors and directors, and the service aggregates all of your viewing options. That’s the Nintendo TV service.
Q.
Why is Nintendo getting into TV?
A.
We’ve found that Nintendo consoles tend to be hooked up to that big screen TV in the center of the living room, and we want people to pick up our GamePad controller as often as possible and interact with our product. We found that video entertainment is a key part of that proposition. Today the Wii is the No. 1 device that connects the TV to the Internet. For us, any time that consumer picks up that GamePad is an opportunity to interact with them. We’ve found that Netflix on Wii, for example, has been a great opportunity to the consumer.
Q.
So you acknowledge, then, that your competition goes beyond game consoles? There’s Amazon, Apple and all these players who make set-top boxes.
A.
We’ve always viewed our competitors in a broader entertainment landscape because we compete for time. I compete for your time minute by minute. Getting a consumer to spend time with us doing a combination of fitness and fun builds our brand and builds our business.
Q.
Nintendo’s earnings have been lower than in past years, and many believe it’s because of mobile games for Apple and Android devices. Do you view those as a threat?
A.
As I said before, our competition is everything from time watching movies to time reading magazines to time surfing the Net and time playing a game on a mobile device. That’s all competitive time that takes away from our opportunity to have a consumer play a game on our device.
So with that as the context, why are Nintendo earnings down? The reason Nintendo earnings are down is the Wii home system is on the downward part of its life cycle, so we’re not selling as many home systems. We were transitioning from the Nintendo DS, which was the best-selling piece of hardware of all time, to the Nintendo 3DS. The Nintendo 3DS for its launch time period didn’t present the consumer value that we needed it to, so we had to reduce the price, and we actually had to reduce the price below its cost.
So that’s why our earnings took a hit last year. As we look to the future, how are we going to build our business back? It’s Wii U, and now that we’re selling more 3DS devices, we’re now actually making money on that.
Q.
The Wii U is basically a tablet. Is that Nintendo’s answer to the competitive mobile market?
A.
The Wii U is not a tablet. It’s a two-screen experience. And so you have this unique GamePad that gives you a different way to have a gaming experience. We’ve got a range of different examples that we can show you. It’s everything from the three of us can be playing the game, and I’m using the GamePad to maybe try and attack you with a space ship. We’ve got an attraction called Metroid where literally I’m playing against the two of you, using a space ship trying to shoot you, you’re shooting up on the ground, so we’re playing the same game but having a fundamentally different experience and that all happens with the GamePad. So it’s a controller with this screen built in that allows us to create content that shows different ways to play together but have fundamentally different experiences.
Q.
But if you’re saying everyone is your competitor in entertainment, then why not just turn that second screen into a general-purpose device like a tablet?
A.
Through our GamePad you’ll be able to surf the Internet — it comes with an Internet browser. You’ll be able to watch video content on it. So it will do many things that a stand-alone tablet can do, but in addition, because it’s connected and it’s integrated, our second screen can do a lot of things that a tablet can’t do.
So as an example with our Nintendo TV service, imagine we’re watching a sports game. The sports game is on the main screen. On my GamePad I’ve got all the up-to-date stats, scores — something happens immediately. It’s immediately on my GamePad. I can tap into social networks, comment on it. I can go further back into the game. All of this is done because my GamePad is seamlessly connected to my TV experience. That’s not something you can do with a smartphone or a tablet — there’s a lag. There’s latency built in because the systems aren’t talking to each other and they’re not connected.
Q.
So in the short term you want to sell some new Wii hardware. What’s the long-term strategy? Are you migrating toward becoming more of a media company as opposed to a game company?
A.
We are becoming more and more an entertainment company. We’ve always been an entertainment company. Our history is making playing cards in Japan. What we recognize is we own that most desired space in the home, and it’s the big screen TV in the living room. We own that because of the games that we offer that are targeted toward multiple players in the household sitting down and having fun together. By owning that big screen TV we can branch out to other services like Nintendo TV and continue to really solidify our footprint.
Q.
Do you foresee a business model where you make more money from digitally distributed content instead of from selling hardware and games?
A.
There will be revenue made from that, but we won’t make the content. Companies will make that content. There will be companies like Netflix and Amazon Prime that aggregate that content. We’re going to make it seamless for the consumer to view it, find it, share it and talk about it. Our goal is to monetize that experience in addition to monetizing the game.
There’s a range of different ways we can monetize. We have a relationship with service providers like Hulu Plus, Netflix and Amazon Prime. In this Nintendo TV network, we’re showing examples where if you’re watching a live TV show and there’s someone wearing a dress, we can highlight that through Amazon, for example, “Hey, you can buy that dress through Amazon.” Is there an opportunity for us to get revenue from that transaction? Sure.
Q.
What are some of the challenges ahead for Nintendo?
A.
In the end, given the way we view the world and the way that we view ourselves as an entertainment company, our biggest challenge is creating content and creating services. Excite people. We were fortunate we were able to do that with the Wii. How do you continue creating that compelling content? Whether it’s games or services, how do we create this ecosystem that gets people excited and talking about it? It’s really tough to do. Android may be the most installed operating system on mobile, but how often do you hear people talking about Android? Get really passionate about it? That’s the biggest challenge.
Q.
Isn’t Nintendo late on forming a robust media ecosystem?
A.
Ecosystems are constantly being created and constantly going away. What we’re trying to do is create the next significant ecosystem. Because the one we created for Nintendo DS was great, but it’s going away. The one we created for Wii was great, but it’s going away. Talk to the people over at Facebook. What’s our next ecosystem? Talk to the people at Zynga. If you just sit on what you’ve created, chances are you’re not going to be around much longer.
