George HarrisonBIZ: Have you shown these products to publishers and gotten some feedback? I'd imagine, especially with the Wii Balance Board, that it has all sorts of applications.
GH: The Zapper's been shown to the publishers and you've heard this morning that Resident Evil from Capcom and Call of Duty [from Activision] are going to take advantage of it. The Board itself really hasn't been shown to anyone outside of Nintendo, so this is really the first time we've unveiled it to the world and we'll see what kind of game ideas they can come up with but I don't think any of them are going to appear this holiday. The Board itself will be sold with the Wii Fit product initially and maybe later on will be sold alone.
BIZ: Do you have any pricing in mind that you can talk about?
GH: Clearly it will be more than just a piece of software because the board will be included, but they've got to get the real cost of the board down itself.
BIZ: I'd imagine with the third-party response, especially from companies like EA with something like SSX or Tony Hawk with skateboarding, I'm sure that Balance Board could be utilized pretty well by those products.
GH: Yeah, they were only able to show a few examples this morning, not only the aerobic and the exercise and the step kinds of things but there were some other things in there that involved skiing and ski jumping, that type of thing, so there's some fun games on there, like the one where you're on the balance board doing the hula-hoop on the board and trying to see how many you can catch and keep going.
BIZ: You've been with Nintendo for a long time, and the company was really at the top of its game in the early '90s, then went into a little bit of a lull where it wasn't quite as dominant with N64 and GameCube. Now, it would appear that you've gotten your swagger back, so to speak. So how would you compare Nintendo now to the Nintendo of the late '80s and early '90s?
GH: Well, I think in some ways, certainly in the late '80s it's very similar to where we are now. We were really groundbreaking with Atari come and gone and then all of a sudden the Nintendo NES arrived and it really was groundbreaking. People had really not seen games like Mario before and actually there were many people, not just not just teenagers playing, but we probably stayed too long with what we do well in the '90s and tastes began to change a little bit here in the U.S. as you saw and that gave an opening to people like Sony and ultimately to Microsoft. In some ways, it was liberating because we realized we don't want to and don't feel we can go head-to-head because we're not making Grand Theft Auto, we're not making games like that, it's not what Nintendo does. It caused us to think differently and look at this expanded audience and try to say, "You know what? There are a lot of people that don't play games. Let's go try to figure out what they like and how we can get them involved." And that involved the changing of the interface, how you actually interact with the game, from the DS stylus to the Zapper to the Wheel for Mario Kart, and then the nature of the games, the development type games like the brain games and things. A few years ago, people would not even have considered them to be video games and would have never even thought to make them for our systems.
BIZ: Everyone knows the story of how Nintendo almost partnered with Sony, but it didn't happen and then Sony made the PlayStation. Do you ever wonder how this industry might be different if Sony and Nintendo had come together on a CD-based console?
GH: Well ironically, that was just as I was arriving at Nintendo, March 1992. That very first show, I think it was a CES show in May or June, is when we decided at the last moment to pull the plug on that relationship, but I didn't know enough at that point to really understand the reasons why or even the implications. But I think in the end, we're better off working independently. Even having to work outside to develop our hardware, we've shown that we can develop hardware profitably and retain control of the innovation that we like to do in the software area.
BIZ: Let's talk a little bit about WiiWare. The Wii is finally going to be getting some original downloadable titles in addition to all the classics you have on the Virtual Console, and of course it seems somewhat similar to Xbox Live Arcade and PlayStation Network. How in your view will WiiWare differentiate itself from the PlayStation Network offerings and the Xbox Live Arcade offerings?
GH: What I've seen so far on Xbox Live Arcade, they've poured out a lot of PC casual type games, things that you can already see on Pogo and other types of things. We're hoping that WiiWare will open up the opportunity to really do some new ideas, and people that might not have the biggest budgets or can't always get the attention of publishers to get a retail distribution of their product can try out some ideas. Things that we've tried recently like Electroplankton, a music based game which we showed a year ago I think at E3, probably wasn't really a big enough idea to go to retail; we tried to sell it just online but it was kind of difficult. So I think there's got to be an outlet where those kinds of games can test the audience and see if there's any type of traction there. So we're hoping that it will spawn a whole new level of creativity.
BIZ: Is there a reason why it's taking so long? It's not scheduled to start until early next year, so it's a long wait.
GH: Well, actually in June, we unveiled the existence of it and we provided the tools at a developers conference. So it'll take some time but it may not take until 2008. I've seen a couple of ideas that had already been generated even before we went public. Whether or not those are going to be ready to go, I don't really know.
BIZ: So you're saying there's an actual possibility that the WiiWare could launch?
GH: Yeah, it really depends on the developers. If they have their games ready and they are of appropriate quality, there's nothing to stop them from launching before the end of the year. It's just the fact that we only recently gave out the development tools and all the development specifications and most people have not even started yet.
BIZ: This is probably a question you've been asked many times, but it seems to me that there is a noticeable difference between the hardcore and casual focus on the Wii and I realize that Nintendo is trying to broaden the audience, and certainly the hardcore gamers are going to want the Marios and Zeldas and Metriods, but I still feel that those experiences are few and far between and even the third-parties are looking more to the casual sector on Wii because they know that's where the big opportunity is. It seems to me that hardcore gamers might start looking more for those other experiences on competing platforms, PS3 and Xbox 360. Is this a trend that worries you at all, that the Wii might be pinned too much as a casual system?
GH: Well, we don't want it to be and we tried to show this morning that there are a whole variety of games that were great for the existing gamer and the hardcore gamer, and that included everything from the games that used a Zapper like Resident Evil and Call of Duty but also things like Madden Football from EA, which can be a different experience [on Wii]. We know there's going to be some purists that we're going to lose and they might be first to focus on the absolute last detail of perfect graphics and if they're willing to pay five, six hundred dollars for a PlayStation 3 then more luck to them. But we do believe in products like Madden Football, for example. There are a lot of people that love football that have been locked out of playing it because maybe it's become too complicated over time – the controller was too complicated. We're hoping now with the Wii Remote control scheme and the family play mode where you don't have to control every aspect of what's going on, you can get in and play and enjoy yourself. Many more football fans should be able to get involved in Madden as a result of the Wii.
BIZ: Speaking of the five, six hundred dollars, what did you think of the recent price cut down to $499 and the reintroduction of the $599 PS3 with Motorstorm and a bigger hard drive? If you put yourself in Sony's shoes, is that something that you think is the right decision?
GH: I don't think they had any choice. It's pretty soon after launch to be dropping your price, but I'm pretty sure they had to do it. They had to start momentum in some form, but we don't think it's something that'll hurt us. It doesn't really affect us, since they're still far enough away. And it is a bit of a shell game; you're priced at $499 and you reintroduce a new model at $599. Which one's going to be in best supply in the marketplace? Hard to say.
BIZ: The file size has always been a restriction on Xbox Live Arcade and they finally increased it from 50MB to 150MB. Are there going to be any file size restrictions on WiiWare?
GH: There are, and I don't know off the top of my head what that is, but the idea is to try to have it be of a modest size that a developer can do without huge amounts of resources. So we did set a limit but I don't know what that is today.
BIZ: Is there any thought of possibly offering an external hard drive peripheral? If this service takes off and people are going to have a lot of games on their console that they're going to want to store, the internal memory of the Wii might not be enough, so is there a possibility that Nintendo will launch a hard drive?
GH: I'm not sure whether we would launch it or not. Other people have talked about it and certainly memory management is something that consumers want to think about, whether it's just Virtual Console games, so at this point we haven't got anything we're prepared to say about it.
BIZ: Regarding the whole sales and marketing department, but the last thing we heard was that they're going to be moving into new offices in the Bay Area and New York City and that was on track to take place for September. One, is that still on track for September and two, what are your thoughts on how this move will affect Nintendo of America?
GH: It is still on track for September. We've got the two office locations identified in midtown Manhattan and Redwood City. It's going to be disruptive in the short term, but we believe in the long run, we're better off to be, in the case of the marketing group, in the San Francisco area not only in the midst of many of our third-party publishers but also that's really the hotbed of innovation in marketing, whether it's Google or YouTube or others. So we think the long-term benefits outweigh the short-term disruption to all of us.
BIZ: It seems that Japan calls the shots for Nintendo. I was wondering, was this a Nintendo of America decision, or did they actually dictate the move, decide that it would be better for the sales and marketing team to be in San Francisco and New York?
GH: It was discussed with our management, which on our side would be the President, Reggie, and our Chairman, Mr. Kimishima, so it was discussed in great detail, because there was sensitivity as to what it might mean. But we felt that this was a good time to do it; business is very, very strong and as a result we felt, "You know what? Let's get it done and try to get it done quickly," which is why we chose and aggressive date of September.
BIZ: And what about the rumor that you, Beth Llwellyn and Perrin Kaplan would all be leaving? I mean, I certainly respect your privacy and if you don't want to answer you don't have to, but can you confirm whether you're staying with Nintendo or not?
GH: I think I'll take you up on your offer of not answering. [laughs] We're not going to talk this week about individuals. I'm involved in making the transition happen because Reggie's the President and will stay in Redmond, and we're getting underway with a big recruiting effort because, not surprisingly, a variety of people are not going to make the move. So in September I'll be working long and hard in San Francisco opening the office and hopefully welcoming and orienting new employees.
BIZ: I interviewed Perrin during D.I.C.E. and we talked a bit about how Nintendo likes to revise its handhelds. I asked her if this revision model was applicable to console hardware like the Wii as well, and she said, "Sure. You'll see the ways in which we do that." That seemed like a strong hint that Nintendo will revise the current Wii hardware. Is a new model planned?
GH: It's interesting, console hardware has always historically been on a sort of fixed, sequential pattern almost every five to six years and it takes you about five years to develop a new piece of console hardware. The handhelds and portables, like Game Boy and now DS, we've always been continuously innovating, and whenever we feel like it's time or have an upgrade, we'll do it, whether it's an improved screen for the handheld or slimmed down like the DS Lite – those types of things. So it's not out of the question on Wii, but we're not even to our second holiday yet, so it's kind of premature to talk about any revisions to the hardware itself.
BIZ: At one point, Nintendo referred to the DS as a "third pillar" and I think it's actually been a while since it's used that term, but there's been so much focus on the DS since it's been so phenomenally successful that it sort of makes us forget about the Game Boy. What I'd like to know is: what's Nintendo's strategy with those separate product lines? Is there a strategy to bring Game Boy back and still have the DS when you finally do bring the next version out? How do you balance those product lines?
GH: The Game Boy Advance as it exists today, like any platform, really survives based on the software and as developers begin to move their new software efforts away from the Game Boy and move it over to DS, fewer titles come out. So this year in our marketing, you really won't see much push in against Game Boy itself, so it will seek its own level. It's hard to say whether in the future we would ever bring back the Game Boy trademark. It was a big risk for us to actually pass on it and call the new product Nintendo DS, but it was part of Mr. Iwata's philosophy that if we're going to make a radical difference and try to reach a new audience we have to change the name. Obviously, we got a lot more radical when we chose Wii for a name, but we felt like if you had always thought video games were not for you and we named it the new Game Boy DS, you still would have not considered it. So we had to make a break, even though we had one of the greatest trademarks in the history of the industry.
BIZ: So you're saying there actually is the possibility that name has been retired, so to speak?
GH: Well, we only control the name, so the only question will be if there's a good, independent idea outside of Nintendo DS to use it.
[PR rep: Time for one more...]
BIZ: I wanted to get your thoughts on Microsoft's warranty extension and all the problems that they've had with their Xbox 360 hardware. Most would you say that they did the right thing in extending that warranty and saying there's something wrong but at the same time, but at the same time they won't say exactly what is wrong. How would you evaluate what's happened over there?
GH: Two things. I think their desire to be first and have a year head start on PlayStation – because at that point I think they were discounting us – caused them to rush into this, and so this rush to be out there a year in advance really set them up for the hardware problems that they're having now. They had to finally acknowledge it because ultimately when people are replacing or getting repairs on one, two, three of their Xbox 360s, eventually other consumers and the mass market's not going to buy into the proposition, so they had to reassure the market however they could. But it's a stunning admission; it's more than a billion dollars! That's huge on a business that already looses money for Microsoft. But I don't think they had a choice but to own up to it.
BIZ: Thanks a lot for your time, George.
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