There's No Doubt Anymore. Apple Has Spooked Nintendo.S

Nintendo's top people don't use the word Apple. They don't say iPhone or iTunes, not voluntarily, not if they can avoid it. And maybe that's because when they've been lamenting the problems with the "value" of games lately — they like that word better than "price" — they don't just mean Apple.

They might also mean Facebook, Android or any of the other places where people can play games without spending $30 on a Nintendo DS cartridge or $50 on a Wii disc.

Nintendo is concerned about how people value video games, a concern that sounds like code for being quite anxious that more and more people are enjoying really cheap games, some of which might be as fun as a Mario.

"I feel our business is dividing in a way that will threaten the continued employment of those of us who create games for a living," Nintendo's president Satoru Iwata said last week while speaking to thousands of game creators for the keynote of the 2011 Game Developers Conference.

He drew a contrast between the creators of dedicated hardware, the companies like Nintendo (and Sony and Microsoft) that build a games machine in order to get games in people's hands and those who build machines that just happen to play free and 99-cent games.

"The value of video game software does not matter to them."

"The value of video game software does not matter to them."

Iwata made his speech in San Francisco's Moscone Center. Across Howard Street, right out the front door from Iwata, on the other side of crosswalk, just off the curb where TV news vans were parked, Steve Jobs was showing an audience of his own the iPad 2.

Everyone knew who Iwata was talking about.

There's No Doubt Anymore. Apple Has Spooked Nintendo.

Nintendo people, including Reggie Fils-Aime, president of the company's American division, discouraged me from making too much out of the keynote speech face-off. Nintendo was invited and, if Apple was counter-programming, that was a question for Apple.

But it sure seemed like Nintendo was counter-arguing the vision of cheap gaming popular on Facebook and on the kind of machines Steve Jobs holds high on stage.

"I would not single out any particular company or any particular application store," Fils-Aime told me during an interview following Iwata's remarks, after I asked if iTunes was the source of Nintendo's complaint. "But certainly it seems like, when content is being created and made available for free, that it is devaluing content, and is potentially devaluing the expectation of consumers for what content should be."

It wasn't too long ago that Brain Age and Nintendogs were the rage. And then there was Wii Sports. Those were Nintendo games on Nintendo machines and Nintendo was the company the news vans had started to drive toward. The hottest explosion in gaming now, though, is on iTunes and on Facebook. There's the biggest buzz, in places that don't carry the Nintendo logo, where FarmVille and Doodle Jump are a joy. Nintendo's got something to say about all that, and that something, not surprisingly, is that these new markets that they're not really a part of, are trouble.

A year ago Fils-Aime had downplayed to Kotaku Apple's ability to eat away at Nintendo's gaming audience. It's hard to quantify if that has changed, but a year ago, EA wasn't making Dead Space spin-offs on the iPad and hugely-successful, free, non-Mario kart-racing games weren't lining up for a new start on the iPhone.

"As an industry that creates this content, it's in our interest to keep the value of the content high and not allow it to be devalued over time."

Nintendo has sounded alarm bells before, most recently while it was struggling against the PlayStation 2 with its Nintendo GameCube. Back then, Iwata warned that a slump in Japanese gaming would spread to America and that change was needed. Whether his worry was self-serving or not, his prediction that a dramatic change in gaming hardware was needed proved correct and the Wii became the unlikeliest hit in gaming history.

Outside of Iwata's speech and prior to my conversation with Fils-Aime, the buzz I heard on Howard street was that Nintendo sounded threatened by Apple and Facebook. I heard it from reporters and game developers who flow through Howard Street's sidewalks like so much salmon during Game Developers' Conference.

Nintendo's position was that free and cheap games are hard to sell, hard to profit on and can hurt game developers. Hurt game developers can't make games which is bad for gamers. But maybe, I proposed to Fils-Aime, all that was really going on was that Nintendo's businessmen didn't like that their customers could find cheaper games elsewhere. Why would that be a wrong interpretation? "I've heard from a lot of developers who say, you know what, these people are right," he told me. "We do need to keep the value of our content at an appropriate level. Otherwise what we risk as an industry is investing time, money and energy to create something that no one has value for."

Fils-Aime and Iwata make exceptions. They don't dismiss all free or cheap games. Both have lavished praise on Angry Birds, for example, Iwata labeling it in the same "must have" category he puts Grand Theft Auto, Sonic The Hedgehog, Tetris and Zelda. Fils-Aime has called that game, which sells for 99 cents, "under-priced."

There's No Doubt Anymore. Apple Has Spooked Nintendo.

"What's important is that the value of the content be high and be maintained," said Fils-Aime, telling me a "high-value" game could cost $1, $5 or $50. "As an industry that creates this content, it's in our interest to keep the value of the content high and not allow it to be devalued over time."

Nintendo sounds like a company that doesn't want an iTunes.

It sounds like a company that doesn't want a flood of cheap games, though I noted to Fils-Aime that the Wii also suffered the perception of being flooded with low-quality games from a broad array of developers.

"Nintendo cannot play a role of limiting in any way the content that's available for our platform," he said, as our conversation turned into one about the defunct Nintendo Seal of Quality which Fils-Aime implied wasn't enforceable anymore due to legal challenges. I'm not sure it's as simple as that. The company does limit who can make games for it platforms and does not allow adults-only-rated games on its machine. But Fils-Aime emphasizes that his company wants the best games on its machine. The implication is that makers of certain other machines on which people play cheap and free games, don't.

What to make of Nintendo's complaint them? There does seem to be merit to the idea that it's hard for game creators to turn profits if their games are sold inexpensively on iTunes, but it's not clear that the current way games are sold on machines like the Wii and DS are void of hazards that could keep a talented game creator from profiting.

There's No Doubt Anymore. Apple Has Spooked Nintendo.

One conclusion, though, is that Nintendo, which will launch its 3DS in North America at the end of the month with games that cost about $40, is not against free games. They sold a downloadable one called Photo Dojo last year for their DSi. "We were convinced that as soon as consumers had that game and had that experience, that they'd share it and talk about it and it would be something that consumers would want," Fils-Aime said. "That strategy has worked. From the day that we stopped making it available for free, we've actually sold more than what we had initially made available for free. So, strategically, it's looking at each piece of content and deciding what's the best way to have consumers experience the content and maintain its value over time."

It's not that Nintendo is against free games, but it sure seems like it's against the way gaming works in the world of Facebook and the world of Apple.