Consolidation Strategies Emerge For The Big 3 In Gaming: Nintendo Looks Like It Doesn't Want To Play
from the the-inside-game dept
We've been talking a bit about industry consolidation through mergers and acquisitions (M&As) in the video game industry as of late. The impetus for that discussion has been a series of high-profile acquisitions for several notable companies, namely Microsoft and Sony. Microsoft acquired Zenimax for $7 billion and Activision Blizzard King for a bonkers $69 billion recently, while Sony jumped into the game by acquiring Bungie for $3.6 billion. Of interest for these pages is the different approaches these companies have taken with these acquisitions. Microsoft hemmed and hawed about whether it would start building Microsoft exclusivity for products from its acquisitions, eventually landing on very much embracing exclusivity, while Sony took a much more hands-off approach and stated plainly that Bungie games would still be cross-platform. For those of us interested in digital and technology economies and business models, this is interesting stuff.
But there is a name missing here. The traditional "Big 3" in gaming has long been Microsoft, Sony, and Nintendo. Well, if you like real-world experiments when it comes to business strategies, this looks like it's going to get even more fascinating, as Nintendo is making noises about going an entirely different route.
While Xbox and Sony are entering an acquisition arms race, Nintendo isn’t so eager to snap up a slew of game studios. In a recent investors’ meeting, Nintendo president Shuntaro Furukawa was asked about acquiring game companies—a timely question, that’s for sure.
“Our brand was built upon products crafted with dedication by our employees, and having a large number of people who don’t possess Nintendo DNA in our group would not be a plus,” Furukawa replied, as reported by Bloomberg and Reuters.
Now, this shouldn't exactly come as a shock to anyone who knows the industry and how Nintendo operates. Whatever I might want to say in my series of posts about how "Nintendo hates you", the company has also built a successful business in the space that relies on first-party game titles and franchises compared with Sony and Microsoft. Whatever success those others have had, for instance, Microsoft and Sony simply don't have a version of the Super Mario Bros. franchise. Nintendo has several of these: Super Mario Bros., Zelda/Link, Star Fox, etc. So Nintendo has always been less reliant on 3rd party titles compared with its competitors.
But the open question is whether this more insular focus will work in the post-pandemic period where industry consolidation is not just for the video game industry, but for many others. The Harvard Business Review had a study released in 2021 that predicted what many others have as well: the mid- and post-pandemic economic space will be one that heavily incentivizes mergers and acquisitions. Consolidation is the order of the day/year.
So now we have three distinct strategies from the Big 3 of the video game industry: Microsoft will do M&As and try the exclusivity route, Sony will do M&As and be more open and permissive or cross-platform releases, and Nintendo will simply choose largely to not play this game at all.
At its core, Nintendo is not an enterprise built on corporate consolidation. It’s a company that makes hardware and games for said hardware. That is etched in its DNA.
And now we get to sit back and see how that works in a post-pandemic world.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: consolidation, video games
Companies: microsoft, nintendo, sony
Reader Comments
Subscribe: RSS
View by: Time | Thread
At the risk of sounding like a Nintendo fanboi.....
In Nintendo's case, it's worked for over 30 years. Despite changing market conditions, global regulations, and public opinions.
Keep in mind, none of the other Big 3 were even considering video games at the time Nintendo entered the video game market. (Hell, Sony was dragged into it by Nintendo.) Nintendo has also been able to keep their core audience despite inferior hardware and third party support when compared to it's competitors. Don't forget that Nintendo also owns half of the biggest media franchise in the world. (Pokemon at $109 billion. It even out did the house of mouse.)
Yes, Nintendo has it's problems. I've ranted about them here before, often under the very same stories where Techdirt does. This comment doesn't change that fact. However, suggesting that Nintendo being Nintendo could send them down the wrong path is just shortsighted. You should be worrying far more about Sony and Microsoft. If for nothing else but them cannibalising their third party talent pools / IP and making both of them unable to meet market demand as a result.
[ link to this | view in chronology ]
Not a particular surprise. Nintendo have always built themselves on first party titles and in most recent years have opted not to join the same kinds of hardware arms races as the other major manufacturers - for example, while MS and Sony were trying to one-up each other with sheer graphics and processing power, the Wii was essentially 2 GameCubes taped together hardware-wise. Apart from the odd outlier such as Rare, Nintendo do most of their best sellers in-house so it's not surprising they will continue that.
"So now we have three distinct strategies from the Big 3 of the video game industry: Microsoft will do M&As and try the exclusivity route, Sony will do M&As and be more open and permissive or cross-platform releases, and Nintendo will simply choose largely to not play this game at all."
I still maintain that's something of a dumb conclusion to come to based on recent events. Bungie have exactly one title that they publish so it's no surprise that they'll promise to continue making that cross-platform. A part of that is that I don't trust Sony as far as I can throw their home country, and it's a bad idea to take them at their word. But, a big part of the reason why Microsoft has been doing what it's been doing is to play catchup after Sony's previous purchases of the likes of Naughty Dog and Insomniac has led to massive exclusive titles being made, and MS are clearly trying to be a cross-platform as possible with Game Pass even if they're not committing to make everything available as a native title on PS. If Sony are being kinder here, it's only because they won the same arms race last gen.
It's a very bad idea to state that MS are doing something untoward here while giving Sony a free pass just because Destiny 3 will be on all platforms and not one of the next Bethesda games, in my opinion
[ link to this | view in chronology ]
They'll probably end up dragged into it when companies turn their eyes to their second and third party partners like Platinum games or Retro studios and faced with either buying them out entirely or losing them.
[ link to this | view in chronology ]
Re:
Not really; Nintendo's best-selling games have always been in-house. They've already weathered things like SqEnix defecting to Sony. With a franchise like Pokemon securely under their ownership, they can afford to let MS and Sony cannibalize the gaming market in a race to the bottom.
Nintendo sells their own media on other platforms, plus does exclusives on their own platform. They essentially have what the other platforms are trying to emulate.
[ link to this | view in chronology ]
Re: Re:
The Rare games that helped prop up the ailing n64 beg to differ, and even now, they outsource titles like Metroid to developers like Retro who are only part owned by Nintendo, or third party like Mercurysteam. They wouldn't lose Metroid should Microsoft come sniffing around them the way they did with Rare, but they would have to either buy them out or lose the people who made the titles that kept the line alive, and that would affect their bottom line as it's hard to replace a quality studio.
[ link to this | view in chronology ]
Re: Re: Re:
Hate to break it to you but the N64 was not the darling of it's generation, not even in it's home country. (I know, it was my first console. I felt bad too.)
Metroid was and is outsourced because Nintendo doesn't really know what to do with the franchise. It's been on hiatus twice. The first time after Super Metroid on the SNES. (Retro's Metroid Prime was what revived it.) The second time after Metroid Other M on the Wii. (For nothing more than a nostalgia remake of Metroid 2 on the GB and to derail AM2R.) Two out off the last three brand new first party entries (Federation Force, and Other M) failed to appease it's fanbase. The last two good games were the aforementioned Metroid 2 remake and Metroid Dread which had been in development hell since 2005 and only got out though the use of the aforementioned remake's engine. Metroid Prime 4, the only game in the franchise known to be in active development, has been scrapped entirely at least once in addition to changing development teams. Currently it's being worked on by Retro, but as most of the original staff that worked on Prime 1 - 3 left Retro shortly afterwards due to overwork, it remains to be seen if Nintendo's choice of tasking Retro with it was a wise one. (If anything it points to desperation.)
Correct. Rare was only licensed to produce the titles. No ownership rights were transferred.
Wrong. Again, Rare already lost a non-insignificant portion of the staff who worked on the previous titles shortly after said titles released.
The studio that is left is a shell of it's former self, and that's a good thing. Given the reported working conditions they had before.
[ link to this | view in chronology ]
Re: Re: Re: Re:
Yes, the N64 sold poorly, and? A large portion of it's best sellers were Rare developed, so no, Nintendo's best selling titles were not always in house, an entire console generation was propped up by second party games.
Rare being broken doesn't mean Retro, Platinum games and so on are, and it doesn't mean they'd be easily replaced should rivals come sniffing round.
[ link to this | view in chronology ]
Re: Re: Re: Re: Re:
"Yes, the N64 sold poorly, and?"
It's worth mentioning that a large part of the problem with the N64 was the hardware, not the games. They insisted on sticking with cartridges while their competitors had moved to optical drives. This meant that production costs were much higher (and thus games were more expensive), and there were resource limits that disc-based games didn't have (carts were much smaller in terms of storage space).
That doesn't detract from the point that developers like Rare really helped the company out during this phase, it's just worth noting that for many people it wasn't the mere selection of games that caused it to be trampled by Sony in that generation.
[ link to this | view in chronology ]
A big reason is probably the actual game content, and if that is a reasoning Nintendo is following, it is probably best for Nintendo and any potential acquisition targets. Nintendo tends to be pretty "family friendly".
[ link to this | view in chronology ]
Nintendo = Disney?
Nintendo has often been compared to Disney. When you consider the evidence, here is the evidence for the comparison:
-adorable, "cutesy" characters
-critically acclaimed content with rabid fanbase
-draconian enforcement of their IP (though I have seen Disney buckle under PR nightmares, whereas Nintendo would soldier on and not GAF)
That being said, when it comes to Disney's imperial acquisitions of IP, Microsoft is most like Disney. Disney gobbles up any successful studio/IP creator willing to sell to them, and Microsoft does the same for studios. The reason is the same: to build up content for their subscription services (and in Disney's case, movie theaters). Nintendo is content on having already established franchises and making new ones every now and then (like Splatoon and Arms), so they're good. Also, they have gimmicks in the hardware whilst making them not as powerful so as to have cheaper components, so the appeal is for companies to make for Nintendo's hardware such as the Wii (which was built around motion controls) or the Switch (which was a true hybrid system (while concepts like the Switch have been done before like the Turbo Express/Sega Nomad or the other way like the Super Game Boy or the Game Boy Player, The Switch was a Hybrid with 100% of the games made for such a setup)).
[ link to this | view in chronology ]
I should note here that both Microsoft and Sony each own a game franchise that either has shown up or will be showing up on the Switch: Minecraft for Microsoft and MLB: The Show for Sony. (And Minecraft has cross-platform play, to boot.) Nintendo doesn’t need to buy out parts of the gaming industry for itself; on a long enough timeline, the industry will instead voluntarily work with Nintendo.
[ link to this | view in chronology ]
Re:
Not to mention that Banjo-Kazooie (now property of Microsoft) has appeared on the Nintendo Switch Online Nintendo 64 Expansion as well as on Super Smash Bros. Ultimate.
It's almost as if there's sort of an armistice in the console wars if you think about it...
[ link to this | view in chronology ]
Re: Re:
Generally speaking, MS have changed a lot of the way they approach things since the disastrous XBox One launch, and part of that has been them openly courting cross-platform play. The holdout there has generally been Sony, and a lot's been made of them basing a lot of their strategy based on exclusivity, with in fact a major criticism of MS being that they didn't have a lot of exclusive titles apart from Forza and Halo last gen.
That's why I'm generally unconvinced by people losing their crap over MS making an upcoming Bethesda game console exclusive (at least natively, xCloud seems to be on the table still if everyone plays ball) while lauding Sony for saying they won't make Destiny 3 a console exclusive. On both sides these moves seem to be relative departures from their recent histories.
But, since the Wii all sides seem to regard Nintendo as not being a direct competitor in the same way they are with each other, so it's neither surprising to see Nintendo announce they're not taking part in this battle, nor to see that they will allow certain titles to be licensed by them.
We'll see how this plays out long term, but I suspect that Nintendo will continue to operate as a quirky outsider rather than re-enter the race as a 3rd direct competitor.
[ link to this | view in chronology ]
Meh. M&A's need to go entirely. Companies should have to stand or fall completely on their own. Consolidation and monopolization are only a negative for consumers.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
"having a large number of people who don’t possess Nintendo DNA in our group would not be a plus"
I read this as we don't want anyone who might tell us to stop shitting on the customers in house.
[ link to this | view in chronology ]
Nintendo has never reduced its prices of its 1st party titles in as long as I can remember, yet they continue to generate record sales with each new iteration.
If this is what they mean by "DNA", then they're doing something right, as contrast to both Sony and Microsoft which allows games to be released on their respective consoles in an incomplete, broken state just to push sales.
Having played several games on the Switch, it's going to be difficult for either Sony or XBox to prove to me their latest "4K ready" consoles will be ready, or if we'll just see repeated years of services rather than games.
Luigi's Mansion 3 was one of the best games I've played last year.
I can tell you with both Sony and XBox, there isn't a game on either console I'd brag about for the year.
Though, this is likely to change for Sony in a couple of weeks. Horizon: Forbidden West is about to release, and if it's anything like it's predecessor, that's two console making companies who know what they're doing.
XBox? They'll just buy up the competition and screw up gaming as we know it because subscriptions are more important to the company than actually making games is.
Not to rag (much) on the XBox, but it's in 3rd place for a reason and these acquisitions will not change this.
Hell, even after the acquisitions, it's still behind Sony as a publisher.
Going to be interesting, these next few years.
In the meantime, I'm buying used GameCube games.
[ link to this | view in chronology ]
Re:
"XBox? They'll just buy up the competition and screw up gaming as we know it because subscriptions are more important to the company than actually making games is."
Play some of the games at some point, you'd be surprised at how wrong you are. Sony bought up a lot of competition in previous generations, so they have a head start at locking things up. Oh, and if you think Sony isn't working on subscription services to regain some of what it's losing to Game Pass, you're not paying attention.
"In the meantime, I'm buying used GameCube games."
Go ahead, there's some sorely underrated games on that platform.
[ link to this | view in chronology ]
Re: Re:
Another XBox fanboy living in denial.
I OWN an XBox, PlayStation, and Switch as part of the latest generation of consoles. Please don't tell me to "play games". You can head to the XBox subs on Reddit to see many are upset XBox doesn't have games to call its own.
Regardless what people feel about exclusives, the reality is they separate the console makers and their ideologies behind how to distribute games.
Nintendo relies heavily on its first party titles to boost sales. They're successful at this. Here's a list of 2020's top selling games:
https://en.wikipedia.org/wiki/List_of_best-selling_Nintendo_Switch_video_games
See anything specific? That's right. They're ALL first party titles owned by Nintendo. Hell, the first non-Nintendo game starts at 16th place.
Then there's Sony, who doesn't bat around with its exclusives and are proud of them. They should be. In nearly every console "best of" list, their exclusives dominate.
Last of Us, Horizon Zero Dawn, Uncharted, Spiderman, and God of War dominate these lists and there's good reason for them.
What does XBox have? Nothing. Halo, a franchise that hasn't met fans expectations which includes the latest iteration in nearly 10 years. Gears of War 5 was panned by critics and fans. I refused to touch it after GoW 4 was so damn disappointing.
The reviews of GoW5 were so bad, XBox scrubbed most of the reviews on its store front in order to boost the rating. We noticed. Did you?
XBox has been scrambling, and you have to stop being a closed-minded fanboy to see it. 3rd place and has never left this, and now they're pushing buyouts and subscriptions to generate revenue.
Microsoft FUCKED UP royally with XBox One's release, even Tim can agree to. Rather than focus on games, XBox focused on technology, even if we didn't want it.
Now, they're hurting. Sales are down. Read the financial reports, guy. They've been losing money.
So, what better way to generate it than what they've done with their business side: force people into subscriptions, and now the company brags about profits. Yee haw! No wonder car companies want in on this bullshit scheme of a "business" model.
Oh, and one more point: PS Now has been around longer than GamePass, and has offered more games. Recently, Sony's reduced the price and added more of its famed exclusives.
The difference: Sony doesn't go pushing this down our throats every time we log onto the console, spam our email, or push the crap onto the phone app (though Sony's app is truly horrifying).
XBox is pushing an agenda, not pushing games. They're repeating the same shit they did in 2013 with the X1 launch.
If gamers truly cared about accessibility to better game libraries, they should be running from XBox to PlayStation as PS Now is also cheaper.
I provided one link. You can look this latest fact up yourself.
Make no mistake: While still with XBox, its tactics are definitely pushing a line I am not happy with.
XBox can buy out the competition, but they're still not making games.
Get the point and stop being in denial.
[ link to this | view in chronology ]
Re: Re: Re:
"Another XBox fanboy living in denial."
No, I'm just tired of Sony fanboys lying about the quality of games on the platform because they're in love with Sony's exclusives. You people are obsessed with exclusives as if they are the only thing that matters, even though most games are actually cross-platform.
I'm happy with the selection of games I have, my only problem being that I don't have enough time to play everything I want to play. If you prefer Sony's selection that's fine, just don't spout tired bullshit at me.
"Sales are down. Read the financial reports, guy"
OK...
https://www.videogameschronicle.com/news/xbox-posts-record-annual-revenue-as-series- x-s-sales-estimated-at-over-12-million/
Huh.
"Oh, and one more point: PS Now has been around longer than GamePass"
So? If they're the same thing, why is Sony launching a new service to compete with it in Spring 2022?
"Make no mistake: While still with XBox, its tactics are definitely pushing a line I am not happy with."
Maybe it's because I use Game Pass, but I don't see any of the things you're whining about. I'm happy with what I have, I'm just tired of scum lying to me about what I have.
[ link to this | view in chronology ]
Looking forward
Uh, just about nothing?!!
Here’s a kick down the line though; Nintendo is expanding outward.
Nintendo games on Android and IOS. And now with Apple and Microsoft cross compatibility moves, brings those games to PCs and Macs.
Oh, and likely xBox if code snippets are true pointers.
Nintendo has been here twice before.
Both times it sent it’s IP to others. But what if Captain N pulled a Sega? Rather than licensing IP to others to screw it up… they do it themselves?
Nintendo isn’t exactly raking it in on system sales. Break down and tear apart looks show Nintendo makes between $-25 and $50 per unit.
So there’s some ‘why not’ in looking forward.
Nothing, granted, screams that this will happen. But with Nintendo tweaking code for Android and iOS for running on their desktop counterparts—android compatibility and M1– there’s some hope they may go that route.
Mario is blowing up the charts for iOS with Run and Kart.
Who knows?
[ link to this | view in chronology ]
Re: Looking forward
"Nintendo games on Android and IOS"
Erm, that's stretching things somewhat. They've released around 5 games with Nintendo characters, but they haven't really released any ports of the actual games (not counting the Pokemon games which are technically not Nintendo). Some are fun, but releasing an endless runner with a Mario skin doesn't really count as fully embracing the other platform. Also, unless I'm missing something the last iOS game they released was Mario Kart in 2019. Have they released anything in the meantime I've missed? Because if not that seems to be more of an experiment that ran its course rather than a strategy to keep releasing iOS games.
I understand why they use this strategy - they don't want to cannibalise sales for their own handheld platforms that feature actual controllers that enable some different gameplay styles. But, them having a few games in a 2 year period then nothing for 3 years doesn't indicate any move going forward.
"Mario is blowing up the charts for iOS with Run and Kart."
Maybe things are different in your location, but as I look at the iOS chart where I am, Mario Kart is at #13 and Run is not in the top 200. That's not exactly blowing up the charts but even if we count the now-5 year old Mario Run as being a game where everyone who wanted it has downloaded it, how many are actually playing vs. people who played it for 5 mins because it's free and never touched it again?
It would be very interesting if Nintendo go the SEGA route, but I think it's rather unlikely since they're famously the only manufacturer who typically turns a profit on their hardware rather than use it as a loss leader. Even your number suggests they're fully in profit after selling a single game if not before, which most people obviously will do. We'll just have to see if the willingness to work with other platforms as we've seen with cross-play and licensing MS IPs is their future strategy.
[ link to this | view in chronology ]
Re: Re: Looking forward
I have Kart showing as #11.
That’s after a recent update.
Nintendo is in a unique position. Despite being a hardware company the are entirely beholden to ip.
And that ip portfolio is their value as a company.
It’s theory, but for all the wondering around the industry has done Nintendo has consistently been solid.
They wouldn’t be loosing anything hardware wise in selling in-house titles to other platforms.
Even something as minor as cross porting the classics subscription services like eShop would be printing money! They are prepped for it.
[ link to this | view in chronology ]