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Nintendo's Third Pillar: How Nintendo Plans to Improve Your Quality of Life

So What is Nintendo Building?

by James Jones - February 21, 2014, 4:14 pm PST

In the third article examining Nintendo's Quality of Life platform we attempt to answer life's ultimate question: what's Nintendo up to?

Editor's note: this is the third article examining Nintendo's Quality of Life "platform." It is an attempt to reach some kind of general conclusion as to what they are planning. Of the three articles, this one is the most engaged in informed prediction, and thus potentially the most inaccurate. Ultimately, until Nintendo shows exactly what they are producing, it will remain impossible to provide informed commentary.

Nintendo's decision to begin a "Quality of Live" business division is not what one would expect from a company so deeply invested in (also "exploitative of") its last thirty years as a gaming company. Consequently, any expansion of their business (barring conservative forays into related fields while using their existing brands) is a major departure for them. There's little doubt that this new focus is a long-term response to changing dynamics in the gaming industry.

As little as they say they fear mobile games, they are no doubt aware on the potential corrosive effect it could have on the bottom line of their handheld division. While official statements and presentations are never short on adjectives to describe why their offerings supercede what is currently achievable on mobile devices, the simple reality is that people play those games and don't care that a richer experience is available elsewhere. The success of an incredibly primitive games like Flappy Bird (basically a wholesale recreation of a Flash game using, ironically, Nintendo assets), which at the peak of its popularity allegedly generated $50,000 from ad revenue each day, is a clear indication that people play these games in their free time. Additionally, the Wii U's struggles are manifest.

Companies reach a certain point where diversification becomes vital. Diversification protects from market volatility, it encourages new (potentially rapid) growth, and allows creation of new offerings that do not diminish the value of current offerings through dilution.

Nintendo's move to diversify their offerings is no doubt a targeted approach to create a new business model that allows it to pursue maximal profit margins and/or growth. By starting with a fresh product and a new field, Nintendo is not constrained by expectation or market norms (not that they ever seem particularly worried about them). The perk for Nintendo, and indeed the risk, is that as long as they sell a single "unit" (whatever constitutes such a thing), they've increased their market share. The obvious downside is that regardless of what they ultimately produce, it more than likely has an established competitor. Succinctly, a successful product should trigger significant revenue growth without negative impact on their existing business.

That said, Nintendo's board of directors are not starry-eyed idealists, wistfully hoping that the "Nintendo brand" on any industry will instantly return them to the Diarchy of the DS and Wii. Although staffed by long-term Nintendo loyalists, the board represents a broad cross-section of the company. Directors of sales, marketing, hardware manufacture, and hardware design were all involved in what must have been a board-level decision -- companies do not launch new "strategic focuses" on the whim of the Chief Executive. They are well positioned to recognize the costs and risks inherent in creating a new "platform."

Iwata was unambiguous about why they are not dissuaded by competition; Nintendo views itself as unique at providing hardware and software that engages users in compelling ways. Nintendo will succeed because the product they are developing will engage users through synergy of both software and hardware, in a way only they can.

It's a bold claim, but it again makes clear their intent to produce a physical product that interacts with software they intend to develop. So, finally, the question is: what are they making?

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As covered in the previous article, there are numerous indicators that seem to confirm the hardware component of this Quality of Life platform will be portable. Additionally, Iwata's "non-wearable" comment seems to rule out products like the Fitbit. Thirdly, this product needs to be viewed in the context of the "strategic advantage." This thing will need to run "engaging" software, which means it must have a display to function independently (and portably). Lastly, the "platform" is not dedicated to fitness; Brain Age-style products were explicitly mentioned as being in Nintendo's future plans.

With those factors in mind, it becomes a question of form factor and cost-efficacy (as are all things with Nintendo). Small, lightweight, and durable are all prerequisites to achieve portability. No dimension can impede storage in a bag, so it needs to be fairly thin. These parameters undoubtedly move the mind towards a tablet-style device, and indeed that would satisfy the requirement that it run software.

Again, this forces a reexamination as to why Nintendo feels the need to develop their own physical device. They clearly do feel this way, despite the proliferation of devices with the exact same form factor. The Pew Research Center's Internet Project estimates that 43% of US homes have either a tablet or dedicated e-reader. Additionally, 55% of Americans have a smartphone they already carry on their person. Clearly, Nintendo COULD release a service for these devices and instantly achieve access to a large number of users. This does require they have an approach for the fragmentation of the smartphone and tablet markets, although that's surely a less significant hurdle than developing their own platform. It would also potentially require they cut the platform holder in on revenue they generated, which for Nintendo would be a sharp contrast from the pay-to-play platform holder business model they helped create with the NES/Famicom.

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So, why do it? An instructive example could be found with online-bookseller turned everything-purveyor Amazon. In 2011 Amazon faced a dilemma; they had found they could significantly undercut competitor's margins selling eBooks for their Kindle eBook readers and via apps available on Apple and Android platforms. However, their Kindle devices used e-Ink, and therefore could not render anything in color. The rise of the tablet as a viable platform for not only reading books but doing an assortment of things the Kindle could not (watch video, browse the internet, stream music, run applications, etc) threatened their lucrative business model. They had already developed a bookstore application for Android and Apple, and as Amazon transitioned into a service-based company they undoubtedly could have produced applications for their then nascent video offerings. And indeed, they did. However, they recognized an inherent value in producing a device that does all the things a tablet does do, but controlling all the ways inside. Their plan, now known as the Kindle Fire, saw them build a solid tablet running a proprietary version of the Android operating system (Fire OS) with Amazon-based applications replacing all the standard Android applications, including the App Store. In so doing, Amazon not only cut out having to pay a platform holder any royalties or a cut of their digital sales, they also created an environment where you were walled into their service, building a sort of forced-loyalty to all things Amazon.

When Iwata speaks to building consumer engagement, this would be the gold standard. Amazon has sold over 7 million Kindle Fire units, and these are ultimately future Amazon customers, if only because they need to be to use their device. Unified account systems really become a prerequisite. The potential to "game-ify" the experiences they offer may well provide some exposure for their dedicated game platforms, but that of course supposes this device would be a success.

A Nintendo QoL tablet would probably come loaded with a base version of the Health Awareness software they intend to roll out with this new initiative. It would have an eShop, where they could launch new products. It would likely use both Miiverse and Miis. Miiverse would be used as Nintendo's primary means of communicating with consumers. It would likely not use subscription based services, but more likely would make money through the sale of constantly-releasing add-ons to existing software - a business model they've been exploring recently on the 3DS eShop.

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There is an option that also makes sense. As mentioned in the previous article, Iwata pointed to Nintendo's history of turning "something ordinary" into something engaging. He explicitly mentioned multiple small devices such as the Pokemon Pikachu and Game & Watch. While their Quality of Life isn't likely to be Pokemon Pikachu 2, it's still a potentially revealing comparison. Nintendo has a long history producing inexpensive electric toys; prior to their entry in the video game industry it was one of their major initiatives. The 3DS explores the idea of getting use of a small electronic device while on the move with StreetPass. Iwata's own words and Nintendo's recent history could be informative.

In this case, the "platform" is a family of small, specialized, devices that use a unified account. Imagine a Pokemon Pikachu-like device that offers some gameplay itself but also syncs data to allow additional gameplay functionality across a family of devices or on Miiverse or a dedicated website. Each device purchased expands the capabilities of the devices already owned and allows more access to the broader "platform." Each product in the line is its own gateway to every other product.

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There are multiple perks to a suite of inexpensive devices is that Nintendo could continually produce new units as costs to design, produce, and transport would be significantly lower than anything more complex.This allows a pricing strategy that would render each unique device in the impulse purchase price range. It also allows Nintendo to easily write off any one device, as it would merely be a single component in a much broader initiative.

The downside for Nintendo would be the relatively low profit margin. In this form factor each new product requires designing and building new devices, shipping those devices to stores, marketing them, and giving retailers their "cut" of the sale. While it would be much lower than the tablet possibility explored above, it lacks the highly profitable digital shop. Additionally, it's not clear that a series of small electronic devices will have staying power. It seems the kind of product that may be susceptible to being a fad. It's would also be important that this product line not come off as toys, lest that limit the receptiveness of the "Blue Ocean" target audience.

A third possibility is that all of Iwata's bluster about the synergy of hardware and software was targeted just towards the analysts who are busy hyperventilating about how Nintendo should focus their games division on mobile software. It is entirely possible that Nintendo could be preparing to launch a series of software products on other manufacturers' mobile platforms. This does instantly provide Nintendo access to a large number of consumers, but this option is most easy discounted because Nintendo would have to find a way to draw attention to themselves in the hugely crowded App Store marketplace AND provide a cut of their revenue to the platform holder. Given that Nintendo already has their own digital marketplace and finally has a proper account system, this seems a significant step back. It would require much less investment from Nintendo, but they have invested significant personal prestige on the argument that Nintendo's future is not on others' platforms. As a matter of pride and personal conviction it would be extremely difficult for those same executives to launch a new platform on others' devices now, and would undercut the argument in the future.

Granted, these three are just predictions based on Nintendo's own words, inference, and history. It's utterly impossible to know what Nintendo is planning until they're ready to release more information. It's worth nothing that, unlike both 3DS and Wii U, no information about this "New Platform" leaked prior to its announcement, despite other components (such as their VERY LIMITED use of mobile devices) being partially leaked to the media in advance. It's entirely possible they are still formulating strategy, and indeed there's likely still quite a lot of time for any offering to evolve.

Iwata promised more information on the "Quality of Life" platform this year, with a launch next year. Expect Nintendo to launch the first wave of their QoL platform in early 2015, to monopolize on the annual cycle of the sale of health products: gym memberships, diet programs, and workout equipment corresponding to the small window at the beginning of the year while people still take their New Year's resolutions seriously. Additional information about the platform will likely be be late this year as consumer electronics in general, rather than video game systems in particular, tend to be announced very close to release in order to capitalize on initial buzz generated by the announcement.

So there it is; Nintendo is producing a small, physical product, that runs engaging software that focuses on topics like health and mental acuity. If that sounds an awful lot like the Blue Ocean marketing for the DSi XL, there's a reason - "Quality of Life" is this decade's "Touch Generations."

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Talkback

BlackNMild2k1February 03, 2014

Nintendo, as usual is late to the party, but better late than never.

They should have jumped on this back in 2009 when Wii Fit, Wii Sports & Wii Play were sweeping the nation and hospitals, rehab institutes & retirement communities were snapping up Wii's specifically for this software, which is what led to people buying this for their parents and grand parents which now meant everyone was truly playing video games together.
Starting this QoL at the tail end if that craze would have been the perfect time to start this new venture, but like I said better late than never.

CericFebruary 03, 2014

Wii Fit Gym.

I thought of this why reading the article it makes since.

So you have an ID going into a Gym.  Lets say for ease its RFID.  You setup a profile.  Get your vital stats loaded and then you work out.  A custom exercise plan specified to your requirements is made.  I Wii Fit trainer is their to help you digitally.  They recommend you start with the Bike.  You hop on the bike and the bike knows what you should be doing so it sets itself up for you and you start you work out.  Now your done with the bike.  The trainer gives you encouragement then hops to your next workout location.  They go over what you should be doing.

In the end a True digital Personal Trainer that has all the equipment to do its job well.  All ran by a set of interconnected devices.

BlackNMild2k1February 03, 2014

Nintendo had a patent for a bike pedal device.

they have the balance board.

It would be awesome if they opened a prototype gym NintendGym with a bunch of interconnected hardware (stair climbers, treadmills, elypticals, weight machines, etc etc) that worked with a RFID worn in a "smart" watch that would double as a pedometer and vitality sensor.
It carries your info with you from machine to machine, displaying your "Personal" trainer on the screen attached to each set of equipment who is watching you using cameras also attached to the equipment. It would be a Gym of the future that could sync with your @home version of NintenGym software for those that want to do more at home.

EnnerFebruary 03, 2014

Interesting article. Looking forward to future ones.

Ian SaneFebruary 03, 2014

My fear is that this is no third pillar at all but is Nintendo giving up, like I felt they did with the Wii.  The Gamecube was supposed to be their comeback from the N64 but they flubbed it terribly.  That was when I realized that Nintendo was not some brilliant company that had made one big mistake but that they were legitimately incompetent and out-of-touch and had no idea why the N64 had the problems it did.  Their reaction to the Gamecube's failure was to quit.  They would give up on the traditional gaming audience and focus on a new one.  They saw the situation as hopeless, instead of stepping back and looking at what THEY did to turn off core gamers.

Well now the casuals have lost interest as well and the Wii pretty much poisoned the core market for good and they're failing again and don't understand why again (or are in denial) so they're quitting again.  They can't cut it on consoles and don't realize why (or won't admit why) but they know that Wii Fit was successful so maybe they can find a new audience again with health stuff.  Nintendo doesn't admit mistakes or make any real effort to correct them.  No, they just give up when their stupid ideas bite them in the ass and search for a new audience.  And eventually it won't work and they'll have to finally shape up, after 18 years and counting of running away from their problems, or DIE.

BlackNMild2k1February 03, 2014

Wu Tang Financial says "You got to diversify your portfolio"

That is exactly what Nintendo is doing, and they should have done it sooner.
The Health, Fitness and Physical activity craze that made the Wii successful should have rang their dinner bell sooner. There was a whole wide market out there that got involved because it allowed then to be physically involved. Nintendo didn't do enough to keep them engaged when they were attentive, so the Wii fad died.
This is Nintendo going back to 2009 to do now what they should have done then, and that was branch off into a different market that will give that same casual "blue ocean" audience a home with Nintendo and in-roads back to the core business of videogames.

I don't know exactly where Iwata plans to go with the idea, but I think trying to build up to something like that NintendGym is a good place to start.
I know lots of people (myself included) that would love to work out more, and anything that made it fun, interactive and/or competitive only helps to get you started and stick with it.
I think there is definitely a market out there for what Iwata wants, I just hope he knows how to go after it properly.

broodwarsFebruary 03, 2014

Look, so long as Nintendo gets their head in the game (so to speak) and starts really pushing for new ideas; new franchises; & the establishment of new studios with fresh talent in the gaming space...they can do all the stupid peripheral fitness stuff they want. I really don't know what to make of this "Quality of Life" stuff, but so long as it doesn't interfere with my games the way motion controls did on the Wii, whatever.

pandaradoxFebruary 03, 2014

Dear God, please let this be a Net Navi. Bring on Summer Wars!

HyawattaFebruary 03, 2014

Can anyone list out each of the games associated with Health, Education, and Lifestyle on the Interaction With Games slide?

ShyGuyFebruary 03, 2014

Quote from: Hyawatta

Can anyone list out each of the games associated with Health, Education, and Lifestyle on the Interaction With Games slide?

From what I can see...

Row 1, Health: Wii Fit U, Brain Training, and not sure

Row 2, Education: Wii Music, Art Academy, and not sure

Row 3, Lifestyle: not sure, not sure and Personal Trainer Cooking

One of the not sure titles is probably the Flash Focus vision title.

DonkeyBilly KongFebruary 03, 2014

What sprang to mind was a device similar in size to the 2DS that would have software with a personality that evolves with you... a device that you could build a connection with.  Checking in with it daily would allow you to input stats such as weight, as well as wirelessly pairing with devices like the vitality sensor.  It would get to know your habits and make observations or recommendations about diet, exercise, sun exposure, etc.  It might also surprise you with a digital gift when you are feeling sad or uninspired, or suggest that you check in on someone else in your circle who is struggling.  I could see a device like that catching on with a wide range of people.


An area that could be really interesting for Nintendo to get into would be toys.  They did some cool stuff historically, and I wonder what they might come up with.

Quote from: ShyGuy

Quote from: Hyawatta

Can anyone list out each of the games associated with Health, Education, and Lifestyle on the Interaction With Games slide?

From what I can see...

Row 1, Health: Wii Fit U, Brain Training, and not sure

Row 2, Education: Wii Music, Art Academy, and not sure

Row 3, Lifestyle: not sure, not sure and Personal Trainer Cooking

One of the not sure titles is probably the Flash Focus vision title.

I believe an English version of the slide had Personal Trainer Walking on it.

syn4aptikDave Mellert, Associate EditorFebruary 04, 2014

Anecdote, n=1, just IMHO, etc. but...


I am a very active person and would work out and run whether I have a device or not. But I got a Misfit Shine for Christmas and love this thing more than I should. I think it's because I am a scientist. The ability to graph my own personal data and follow my own activity and sleep habits is just too compelling.


On the other hand, I have some friends that were not active, then they got into Fitocracy (game-ified exercise social network). Now they are workout fanatics to the point where I am more than a little tired of seeing shirtless pictures of my friend on Facebook.


If Nintendo gets into this game, I am sure they'll make some money on it. It's a thing :)

OblivionFebruary 04, 2014

I love Fitocracy.

Black JackalFebruary 04, 2014

Imagine if they began this venture at the peak of the wii and wii fit craze. It would only make sense to have software support for this on the wii u and 3ds to help move units.

Black JackalFebruary 04, 2014

Quote from: broodwars

Look, so long as Nintendo gets their head in the game (so to speak) and starts really pushing for new ideas; new franchises; & the establishment of new studios with fresh talent in the gaming space...they can do all the stupid peripheral fitness stuff they want. I really don't know what to make of this "Quality of Life" stuff, but so long as it doesn't interfere with my games the way motion controls did on the Wii, whatever.

It would be interesting and beneficial to us but Nintendo is so conservative they are hesitant to put out a game with a new character ie: putting kirby as the main character in Kirby's epic yarn. It was originally going to star a character called Fluff.

smallsharkbigbiteFebruary 06, 2014

I know I'm in the minority here, but I wonder if the physical component of this will be a tablet that interacts with a Wii Fit board, Wii U pro controller, Wii Fit Meter, and other fitness devices.  They sell the tablet under the QOL marketing and connect the eshop and some of the Wii U accessories to it to allow for gaming.  Then if it's a success, they pull out of consoles and focus on this.  Remember the DS was the third pillar to the GBA?  It wasn't, it was a replacement?  Oh, well I guess that third pillar talk doesn't really mean anything.

smallsharkbigbiteFebruary 06, 2014

Sorry a continuation of that thought. Nintendo operates under a fatally flawed software model for consoles. By that I mean sony/microsoft have thousands of titles in their libraries. Without better 3rd part support (which Nintendo won't commit to) there is no way nintendo can bring that many games to market even with acquisitions. I think acquisitions nintendo would consider would be eithet ebook software providers or emovie providers. That to me seems to be the biggest gap for nintendo if they were to develop a tablet. They could even use it under their QOL umbrella since exercising the mind and relaxing are important.

Ian SaneFebruary 06, 2014

I agree that "third pillar" could be just their way of not damaging an existing brand if the Quality of Life thing flops.  Clearly there was never any real intention of having the DS co-exist as a third product line with the GBA and Gamecube.  They just called it a third pillar so that if it failed it did not damage the Game Boy brand.

Though in this case a product that just focuses on health apps does have a clear separate purpose and target market so it would make sense to be a third pillar.  The DS was far too similar to the GBA to come across as a unique product line.

pandaradoxFebruary 06, 2014

If you give everyone a far more personal Mii (themed, something you'd be proud to show off), then this could be insane... like Tamagotchi+pokemon level.  Literally like Oz from Summer Wars.  Streetpass is still relatively successful and having this avatar serve as a liason between all your systems (The rumored NFC application for WiiU, Streetpass-esque connectivity of 3DS, and wifi spots everywhere). 


Nintendo sees their devices as toys, why not embrace that in a way that Sony and Microsoft couldn't?  You make it classy enough to catch the adults and young adults but fun enough to catch the kids too and this could provide an amazing segue into Nintendo gaming.  Everyone just wave their QoL device over the gamepad to log their character in.  Having your 3DS sync with the device allows for a more personalized experience while providing a possible "Key" to accessing your 3DS.  It's a perfect time for it to pair with Smash Brothers too.  Much like what the wiimote was supposed to do. 


Maybe it's time for the VMU to return.  :p

smallsharkbigbiteFebruary 06, 2014

@Ian - I agree I could be wrong.  I just think some of the ques they've given is they either have no solution for video games or think it's not profitable enough.  The video games discussion was basically status quo small adjustments.... but QOL will make everyone happy and alot of money so everyone should be excited.


I'd be really surprised if the Wii Fit board and Wii Fit meter didn't interact with the new hardware in some fashion and the eshop under the new unified O/S approach.  As such, I don't think it would be that tough to allow the Wii U pro controller to work with it.  Now that the Wii U has a touchscreen, I'd be surprised if they ever dropped touchscreens from future hardware.  I just think, depending on how they bring it out, the hardware will probably not be altogether that different than the Wii U.  Tablet that interacts with a TV and has a bunch of blutooth accessory compatibility.  Nintendo knows they still have to sell Mario, which they could do in QOL setting under the marketing of engaging the mind, playing with others, and relaxation from other fitness activities.  I think all future hardware Nintendo develops will have Mario games in some fashion. 

Black JackalFebruary 06, 2014

Quote from: pandaradox

If you give everyone a far more personal Mii (themed, something you'd be proud to show off), then this could be insane... like Tamagotchi+pokemon level.  Literally like Oz from Summer Wars.  Streetpass is still relatively successful and having this avatar serve as a liason between all your systems (The rumored NFC application for WiiU, Streetpass-esque connectivity of 3DS, and wifi spots everywhere). 


Nintendo sees their devices as toys, why not embrace that in a way that Sony and Microsoft couldn't?  You make it classy enough to catch the adults and young adults but fun enough to catch the kids too and this could provide an amazing segue into Nintendo gaming.  Everyone just wave their QoL device over the gamepad to log their character in.  Having your 3DS sync with the device allows for a more personalized experience while providing a possible "Key" to accessing your 3DS.  It's a perfect time for it to pair with Smash Brothers too.  Much like what the wiimote was supposed to do. 


Maybe it's time for the VMU to return.  :p

You are brilliant. The Avatar and being able to have it interact with your devices. Imagine being able to take your saves and controller settings to your friends house to play smash bros seamlessly. I can tell you there wouldnt be a person at a smash bros tournament without one.

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