Reggie Fils-Aime, head of Nintendo's North American unit, last week that Nintendo was "intrigued" by the iPhone as a gaming device, but dismissed the App Store model that Apple has built. "We want to give our customers high-quality, innovative and captivating entertainment," he was quoted as saying. "A storefront with 10,000 pieces of content doesn't do that."
Nintendo's president, Satoru Iwata, also played down the threat of smartphones, that mobile phone games had been around for years and Nintendo had still managed to stay on top.
Certainly, Nintendo's numbers look impressive. NPD reported that 563,000 DS units were sold in March, more than three times the level of sales for the competing Play Station Portable from Sony, and even more than sales of the PS3 and Xbox 360 consoles combined.
But the iPhone and iPod Touch have been , too, boosted by a marketing blitz that highlights the App Store and games. People are buying iPhones, and buying games to play on them.
Nintendo's response seems to be to pretend the iPhone doesn't exist. When asked whether the company sees the iPhone platform as a competitor, Denise Kaigler, vice president of corporate affairs for Nintendo of America, sent the following response to the Standard:
When asked about the differentiators between the iPhone and DS, Kaigler responded:
Normally I don't include such huge, boilerplate marketing quotes, but I wanted to draw attention to the fact that Kaigler didn't even mention the iPhone by name.
However, analyst Wanda Meloni of indicated that both Nintendo and Sony have plenty to worry about. Meloni projects that the iPhone/iPod Touch will have an installed base of 43 million units by the end of this year. That's almost as much as the Sony PSP, and about a third of Nintendo's reach with the DS and DSi.
Not only are there a lot of gamers and potential gamers with an iPhone and iPod Touch, but Apple buyers are also the biggest purchasers of mobile apps, Meloni says. The easy iTunes-based payment mechanism gives developers a huge incentive to develop for the iPhone/iPod Touch. Meloni adds that many developers are skilled veterans of the big game design houses who have been laid off in the past year, programmers who can crank out a new game and get it into Apple's App Store in a matter of weeks.
To be sure, Meloni warns that Apple's platform has some major disadvantages. One is the oft-mentioned complaint that apps are difficult for users to discover, unless Apple highlights the app or it gets lots of sales, which drives it to the top of the App Store rankings. The other potential problem is a recent update to the iPhone OS which peer-to-peer play for multiplayer games, in-game purchases, and interoperability with multiple external devices. While those will boost gameplay and lead to some exciting titles, they also carry a drawback to developers.
"What it means for developers is that their development costs will be going up," Meloni told the Standard. "Currently, it can take an iPhone game developer about 2-4 weeks, sometimes less, to get an app out, with development costs being minimal." That could change if additional features have to be built out and tested for each game, diminishing the lure of the iPhone relative to other platforms.
For now, though, Nintendo execs would be kidding themselves to ignore the threat the iPhone poses. Nintendo has a strong product with the DS and DSi, but Apple's portable platform has opened up the gaming market in ways that industry heavyweights are only now beginning to appreciate.