How Nintendo Steals Your Money

Being home alone at night is the worst. I mean, not for me. I’m 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.

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

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There’s the Master Quest bonus disk, perched right next to its sister, The Legend of Zelda: Collector’s Edition, on my game shelf. In my entertainment center, stored deep within the Wii U’s bowels as pure data, is the Virtual Console port. I’ve 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.

…alright, I lied, it’s not signed by Miyamoto. But it’s still cool.

A lot of people get mad about this sort of shameless full-priced re-releasing. Take Super Mario Bros., for instance. It’s 30 years old, it’s 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 they’re doing at all!?” these people ask. “If this game was a dollar, maybe two dollars, I’d 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 doesn’t care what they think, and seeing how they just got 10 million downloads in one day with Super Mario Run, they’re not going to anytime soon.

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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, you’ve 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 isn’t 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 players’ unique tastes, we’re going to see a lot of talented developers leave to go make money in a career that actually pays them for them their work.

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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 you’re 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 who’s 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 enemy’s 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 don’t 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 “Screw this, I’m not dying today,” and escape with their lives, letting the enemy soldiers take the ships.

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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 wouldn’t have even attacked you in the following months; but, by giving in, you made yourself exploitable.

AAA publishers don’t seem to understand this.

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Their strategy for pricing games is a lot like a naval commander who can’t keep a threat: they’ll 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 don’t 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, I’ll 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 today’s 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 Assassin’s Creed.

Nintendo understands something that these other publishers don’t: the long game matters. We buy Nintendo games at full price because we don’t have a choice; they aren’t going to be on sale for an 85% discount four times a year. In a lot of cases, they won’t even see a $20 price drop for nearly half a decade.

But let’s be honest with ourselves: Super Mario Run isn’t 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 don’t think you can separate this point from Nintendo’s 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 hasn’t been annualized. Mario doesn’t have game-breaking bugs or 17GB patches. When a Zelda game comes out, it’s 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 wouldn’t even be surprised if this isn’t the most profitable way to sell a game. It could very well be that these guys are sabotaging their own success for the greater good—but they’re 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 don’t 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 don’t, 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, I’d 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 that’s been around for 130 years. They know what they’re doing.

…usually.

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