3DS – A Broken Business Model

I don’t usually comment on business-related news, but this article is completely wrong in more ways than one.

The problem isn’t so much that the 3DS won’t be a unique gaming experience, it’s that the device, and with it, the gaming experience, is built around an antiquated business model popularized over 20 years ago by Nintendo and the Gameboy. With the Gameboy, Nintendo created a model centered around the release of a new generation of hardware every five years or so and by the sales of expensive software titles over the life of the device.

I guess the author of this article missed the fact that the Nintendo DS is the top-selling handheld console of all time, with some 128.89 million units sold (see the financial highlights PDF). The net loss reported last quarter has nothing to do with an “antiquated business model” – it’s simply an indicator that the DS is reaching the end of its lifespan, something that is quite natural in the console industry. It’s a perfect time to launch a new product like the 3DS which, judging by the response at this year’s E3, will be phenomenally successful.

That model worked in the past, but not in today’s market. The app-store model has unleashed a wave of innovative new games (36 thousand at last count) from hungry developers looking to free themselves from the long, expensive and highly restricted development cycles associated with traditional console gaming. In comparison, Nintendo’s process is the mobile game software equivalent of the Soviet Union: too much control, artificially inflated prices, too little choice.

This choice quote is infinitely more absurd than the first one. Of the 36 thousand “innovative new games”, a minuscule percentage can actually be described as innovative. And while standard pricing ranging from $1 to $2 may be successful for some developers, to claim that DS and future 3DS games are doomed because of Nintendo’s business model would be a blatant lie.

I’m not even going to touch the “too little choice” argument.