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Nintendo To Smartphone Game Makers: You Can Only Gouge Our Players So Much (arstechnica.com)

Posted by BeauHD on from the different-business-models dept.

An anonymous reader quotes a report from Ars Technica: Wall Street Journal reporter Takashi Mochizuki took a Wednesday opportunity to review one game maker's financial reports: CyberAgent Inc, maker of smartphone games like the Nintendo-published Dragalia Lost. This report, published at the end of January, made vague allusions to a single smartphone game dragging the company down. Quoting from the company's own English-language press release: "At the time of the original earnings forecast announcement on October 25, we looked a new game title made a good start [sic]. However, its performance is being slower than we expected as of today." That resulted in a whopping 20-percent drop in revenue expectations in the company's gaming sector, from 50 billion yen to 40 billion. Mochizuki pressed the company to confirm which game that was, and CyberAgent confirmed the game in question was indeed Nintendo's Dragalia Lost.

The company clarified things even further to the WSJ, alleging that Nintendo responded to players' complaints about Dragalia's loot box economy by asking the developer to "adjust the game" to reduce how much a player might spend in the game to progress normally. "Nintendo is not interested in making a large amount of revenue from a single smartphone game," a CyberAgent representative told the WSJ. "If we managed the game alone, we would have made a lot more." When asked by the WSJ, Nintendo's Japanese arm replied with a statement that apparently confirms CyberAgent's allegation. "We discuss various things, not just limited to payments, to deliver high-quality fun to consumers," the Nintendo rep told the WSJ. The report says the reason why Nintendo's revenue goals for its entire smartphone-gaming sector are considered modest compared to other large Japanese publishers may be "because its smartphone games are positioned less to make oodles of cash and more to raise awareness of Nintendo's IP (which Nintendo will soon leverage with theme park attractions and a feature-length film)."

29 comments

  1. So good guy Nintendo by Anonymous Coward · · Score: 1

    Nintendo is preventing these scum of the earth from gouging their customers for all they are worth with predatory monetization and other mobile bullcrap ? I'm 100% fine with it.
    Just because a game is doing "fine" financially because of a couple whales who can't help themselves from gambling their money away with lootbox, doesn't make it successful. Those "games" are basically just slotmachines, not real games.

    1. Re: So good guy Nintendo by Anonymous Coward · · Score: 0

      Whales who play at the urinal and believe they are lucky to get the occasional coupon

  2. Totally lame by Anonymous Coward · · Score: 0

    Always happens to the worst of us

  3. Most game makers can't afford a loss leader by SlaveToTheGrind · · Score: 4, Interesting

    For those of you who made it to the final paragraph where they finally explain why Nintendo is "gouging" less than other game makers, it turns this whole story into a big "so what?"

    The report says the reason why Nintendo's revenue goals for its entire smartphone-gaming sector are considered modest compared to other large Japanese publishers may be "because its smartphone games are positioned less to make oodles of cash and more to raise awareness of Nintendo's IP (which Nintendo will soon leverage with theme park attractions and a feature-length film)."

    So for Nintendo, the benefit flowing from the game is both its own revenue stream and what amounts to advertising for other revenue streams. For all but a handful of game makers, the game itself is the only revenue stream they're going to have.

    1. Re:Most game makers can't afford a loss leader by Anonymous Coward · · Score: 2, Informative

      In this case Nintendo isn't the game maker though. They're concerned that if the company who built the game takes all the players money with microtransactions that they won't be able to buy other "nintendo" products.

    2. Re:Most game makers can't afford a loss leader by Anonymous Coward · · Score: 2, Insightful

      Nintendo gets a cut of every game sold on its own platform. Ergo, games it makes for its own platform amount to having a larger buffer on how much it can "gouge" customers. When it sells on someone else's platform, it's merely competing in the same way other game makers always were. Ie, it's not a "loss leader". It just means they won't "make oodles of cash" for the same number of games sold. It's also pretty absurd to argue that other companies don't do the same and sell on one platform as an effective advertisement to buy other games on other platforms. Really, you're warping the situation a lot more than the reality of it. Nintendo is just, indirectly, spelling out why they wish to continue to be a console maker.

    3. Re: Most game makers can't afford a loss leader by Midnight+Thunder · · Score: 1

      So the solution would be to release a full priced version on a console, without the bullshit micro transactions?

      --
      Jumpstart the tartan drive.
    4. Re:Most game makers can't afford a loss leader by mindwhip · · Score: 2

      Its worse that that. On their own consoles, Nintendo has a pricing policy for digital games on their walled garden store that links the price to physical copies of the game. As the game cards for the switch sell relatively few and cost a lot to produce as they need special fabrication plants that along with licensing fees, they won't achieve a good ROI for the game maker without being priced somewhere above what you could call a budget price bracket. The price of the physical copies is significantly higher than they would otherwise be and difficult to reduce in price during the life of the game. This results in older games, including their download versions, being 'stuck' at an inflated price so don't expect to see downloads of old mainstream games with physical copies drop in price any time soon. And of course Nintendo continues to take a large cut of from development platform licensing, store fees, hardware licences etc. and that's on top of the profit they actually make on the consoles themselves.

      --
      [The Universe] has gone offline.
    5. Re:Most game makers can't afford a loss leader by Anonymous Coward · · Score: 0

      It's interesting you state all this, but it doesn't fully explain to me what more game makers aren't avoiding physical sales entirely. I know for AAA games ~75% of sales are physical. Part of this is no doubt because people still want physical copies and physical copies on all platforms, at least on release, are the same price as digital copies--ergo, resale makes them a better value. The other interesting aspect is that digital prices rarely drop until most/all physical copies are sold, and that often means rather drastic price cuts on the physical price side.

      Nintendo obviously pushes against that sort of thing because their policy is content is content, regardless of the format. I'm curious, though, where this leaves other game makers on systems that use much cheaper to produce discs. Is Sony and Microsoft forcing certain price policies or game disc quotas? What about Wii U games? I know I'd love to have a better grasp on the numbers on exactly where the profit for consoles and games goes, as well as where a lot of the forced losses are.

    6. Re:Most game makers can't afford a loss leader by Anonymous Coward · · Score: 0

      This is the nimber one reason i wont buy Nintendo. They use their copyright monopolies as a wedge to stave off real world market forces.

  4. a CyberAgent representative told the WSJ. by Kernel+Kurtz · · Score: 1

    "If we managed the game alone, we would have made a lot more."

    So just a bad business decision then.

    1. Re:a CyberAgent representative told the WSJ. by Anonymous Coward · · Score: 0

      Not really, Nintendo only has so much time to train good developers. They are then tied up with Mario and Zelda games. Sure, they could put those devs elsewhere to make money on this game, but they'd be hurting on their flagship games. Nintendo outsources because there's only so much talent that they have on staff and how many new devs they can properly train to meet their quality standards.

    2. Re:a CyberAgent representative told the WSJ. by Anonymous Coward · · Score: 0

      it's a bad business decision FOR CYBERAGENT. They think they can piggyback off of Nintendo's IP which has been carefully maintained for decades and make a quick $100m. Well too bad, Nintendo won't let that happen. They can make a little money but Nintendo won't let them taking a steaming shit on Nintendo's legacy.

      If Cyberagent wants to gouge players to within an inch of their lives they can make up their own characters and settings and see how successful they will be.

    3. Re:a CyberAgent representative told the WSJ. by del_diablo · · Score: 1

      I feel this isn't cynical enough.
      In RL space you tend to go for the best and brightest for things like architecture, and then the cheapest lowest mandatory standard for actually building the buildings.
      Occasionally people want to build things that are slightly larger or safer, which leads to buildings that end up standing against the wear of time far better compared to its peers. Building codes vary between nations and states, leading to standards being capable of being evaluated for what they are.
      So in RL space, some more cynical nations like Japan decides its not worth the hassle to shutdown the local economy if earthquakes/tsunami and other natural disasters arrives. While poorer nations like Haiti or Caribbean nations have not had the economy of scale to do the same. High end industrial facilities might think about this, because stops in production tends to be rather costly, especially if it involves waiting for supplies used in active rebuilding efforts.

      For Software, to some degree this is true. Without a good spec the end product isn't that useful. Without good security in network operations, you end up leaking passwords and usernames in .txt files
      For Software i think there is legacy of renown. Think of Photoshop, Mac for audio/video editing, MS Word/Excel, Google and Email, and other such things. There is plenty of crap internal software, but it generally has limited reach because its tied to hardware platforms that might not expand sales because the software component is bad.
      For Video games this is somewhat true as well. Good developer teams are more capable of writing a good spec and making the necessary assumptions to create good software and games, and creating good audiovisual feedback that balances on the right side of polish or jank.
      And Nintendo is a big higher in this chain of values: Since they produce and manufacture the hardware component of the video games, they also have to deal with renown. Quality of devkits for development, number of product sales into demographics for actually selling games, etc.
      The reality is that most games end up with average sales estimates because every new or rare IP has limited marked potential, because it might not be marketed well. So if a game series or brand has each new IP and successive iteration has quality, this creates a marketing feedback loop which doesn't exist for other parts of the marked.

      So Nintendo can't just give out its franchises to mediocre developers, because mediocre developers won't make software that ends up keeping the brand quality.
      Mediocre developers needs to be trained, so they can become great developers, who will not end up bottle necking quality control.
      And because Nintendo is running their platform, they need that quality control of internal production because it boosts sales across the entire platform. Its a very different philosophy than a lot of the video game marked because Nintendo still develops and sells a lot of products, and do a lot of marked research.

    4. Re:a CyberAgent representative told the WSJ. by Cederic · · Score: 1

      So it's not a bad decision for them. They're making a profit through engagement with Nintendo's audience.

      They could profit more in the short term without Nintendo's constraint but long term they'd damage the IP and have to develop and market new ones. If they could do that they would have (and may well be), but there are no circumstances in which working with Nintendo is a bad decision for them.

  5. Game publishers are smoking bad crack these days. by Qbertino · · Score: 4, Insightful

    Jim Sterling - an independent game critic - has been harping on this issue for a few years and it's only gotten worse. The revenue expectations of game publishers are totally bizarre and outlandish. Which is one of the reasons asshole execs are bleeding the AAA industry dry of anything resembling artistic integrity or innovation. ActiBlizz is a husk of former glory days of Blizzard, famous studios get bought up, squeezed for the next open-world-live-service shite and then closed down. Even as revenues are through the roof and higher than ever before people get laid off and/or are still expected to risk their health on some death-march to some large release. At the same time shady tactics for squeezing even more money out of people move AAA publishers towards gambling companies and their shady business. (Star Wars Battlefield anyone?)

    Game publishers are just about the worst right now and Nintendo whining that they "only" make 40 billion as opposed to 50 billion (give me an effing break) doesn't make them look to good either IMHO.

    For all I care AAA publisher execs can go die in a fire, preferably one fired by all the obscene amounts of cash they can't get enough of.
    F*ck this bullsh*t!
    I'm sticking to well-aged titles, last-gen systems and indie studios.

    My 2 cents.

    --
    We suffer more in our imagination than in reality. - Seneca
  6. Re:Game publishers are smoking bad crack these day by Hands+of+Blue · · Score: 2

    ...Nintendo whining that they "only" make 40 billion as opposed to 50 billion (give me an effing break) doesn't make them look to good either IMHO.

    You've misread the article. Nintendo may have published this game, but CyberAgent Inc. are the whining developers here:

    ...Nintendo responded to players' complaints about Dragalia's loot box economy by asking the developer to "adjust the game" to reduce how much a player might spend in the game to progress normally.

    (emphasis mine)

    This is honestly quite refreshing to see.

  7. The Problem by sexconker · · Score: 2

    The problem is that Dragalia is a pretty shitty game. The best thing about it are a hdnful of the music tracks. The gameplay is completely pointless and amounts to nothing but a chore. The story is the most generic and pointless you can imagine. The draw of the game is gambling to buy sexy/cute animu girl characters.

    The problem is that there are so many other games that do it better. Fire Emblem Heroes, for example, is a great game, with a better (but still generic and predictable) story, better animu girls (and guys) that actually rise to waifu (or husbandu) status, and the game gives a lot more for less monetary investment (or none at all).

    Dragalia can't even get its notifications on Android to display in English.

    1. Re:The Problem by Anonymous Coward · · Score: 0

      Because it isn't a game. It's a digital Skinner Box.

  8. Game makers gouging our customers?!? by just+another+AC · · Score: 3, Informative

    Nintendo: "Back off! That's our job! And don't even dare consider using any of our IP under the fair use doctrine"

    1. Re: Game makers gouging our customers?!? by Anonymous Coward · · Score: 0

      Nintendo is ridiculously friendly to fair use. Go to YouTube and search for Zelda videos. There are tens of thousands of the things.

  9. Color me shocked! by Weirsbaski · · Score: 3, Interesting

    Hearing Nintendo complain about gouging surprised me so much that I almost knocked over my Amiibo collection with my $70 Switch controller!

    --

    I am not a sig.
    1. Re:Color me shocked! by mentil · · Score: 2

      Reading your commend made me laugh so hard I fell over onto my collection of UMDs, Memory Sticks, and proprietary Vita charging cables.

      --
      Corruption is convincing someone that the selfless ideal is the same as their selfish ideal.
  10. Re:Game publishers are smoking bad crack these day by Mathinker · · Score: 1

    > I'm sticking to well-aged titles, last-gen systems and indie studios.

    Appropriate for someone whose nick is "Qbertino", I suppose. (Q*bert rocked!)

  11. Penny Arcade said it best! by Anonymous Coward · · Score: 0

    https://www.penny-arcade.com/comic/2019/03/01/calibration.

  12. Re: Game publishers are smoking bad crack these da by Anonymous Coward · · Score: 0

    Star Wars Battle_front_? That game is not the evil loot box monster everyone made it out to be, and people keep repeating the same crap about it without even getting the name right. I miss the random progression system it originally had because everyone's characters had random abilities not the same "best" ones. That was NOT a game that suffered from its loot box implementation. A bunch of assholes got butthurt over not being able to pick the ability unlocks they wanted in the order they wanted them, and started spreading lies about the loot boxes. There is nothing wrong with say an ARPG unlocking secondary abilities in random fashion, and that's all that game did. You didn't need loot boxes to progress or have fun or do well at the game. I knew that game was sabotaged when some coworkers were talking about not getting it purely on rumors they read. Pressed for more details, nada. Asked if it was at least like the previous Battlefront, oh they didnt even play that one. They had lots of misinformation, no facts or experience.

    The problem with AAA games are the mobs of people smearing them online and typical internet echo chamber amplification. People repeating what they heard and verifying nothing. AAA games are like big chain upscale restaurants, you can get better for less... sometimes in some places... but they are consistently good and some people just love to hate them because it's a chain and nothing else. Them going away isn't going to fix any problems for you, and little else has the same mass market appeal.

    That and specifically the "gamer demographic" + internet echo chamber is an astonishingly bad combination.

  13. Re: Game publishers are smoking bad crack these da by Cederic · · Score: 2

    That game is not the evil loot box monster everyone made it out to be

    That's because the backlash was so fucking strong against the attempted exploitation:
    https://www.polygon.com/2017/1...
    https://www.polygon.com/2018/3...

    The problem with AAA games are the mobs of people smearing them online

    Is it fuck. People were begging for Star Wars Battlefront, for Red Dead Redemption, for Anthem. They want an experience, they want high production values, they want fun.

    What many publishers are trying to deliver to them is a microtransaction hell with gameplay compromised to 'encourage' ongoing revenue. No fucking wonder the gamer demographic is responding strongly.