Unintimidated By Apple, Nintendo's Boss Says The World Still Needs Dedicated Gaming HandheldsS

Nintendo president Satoru Iwata can tell you when Nintendo would stop making its own handheld systems. He can tell you, hypothetically, when a line of machines that has gone from Game Boy to DS to 3DS would end and Nintendo's games would appear on the hardware made by other companies instead.

Last week in San Francisco, he told me when that could happen. (Hint: do not hold your breath.)

"I think that if we are able to provide experiences on handheld devices that consumers cannot get on another device, then we will continue creating software and hardware going forward, and if it comes to a point when we're not able to do that, I think, yeah, you will see portable handheld gaming devices go the way of the Dodo, I guess."

Iwata and I spoke for about 45 minutes last week, his answers translated from Japanese to English during a chat that wound up being one-third dedicated to the future of dedicated handhelds.

The CEO of Nintendo is a relaxed and cheerful man, frequent to laugh and calmly confident in the future of his company, despite the public doubts that seem to return every few years like especially bad hurricane seasons. These days, Nintendo is on the verge of releasing a new console, a transition that is precarious for even the strongest players in the gaming console war (see Sony's miserable transition from the dominant PlayStation 2 to the embattled PlayStation 3, for example). But the future of Nintendo's home console business might be a less pressing issue than Nintendo's continued prospects for making dedicated handheld platforms.

Iwata on the logic of smartphones displacing dedicated handheld gaming machines: "I don't think that opinion is completely nonsensical."

It is in handheld gaming that Nintendo has been dominant like no gaming hardware company in history. Its Game Boy had no serious rival; same for its Game Boy Advance. Sony gained a foothold against Nintendo with its PlayStation Portable, but the Nintendo DS was nevertheless a monster hit (more than 130 million of them sold worldwide, as of late June). The 3DS, launched in America in early 2011, has had greater struggles, its price cut by a third just a few months after launch and a consistent swirl of questions that maybe Nintendo should just put Super Mario Bros. on the iPhone and call it day. After all, Apple's the hot company and Nintendo's, well… isn't the line that smartphone gaming is up and dedicated handheld gaming is in deep, deep trouble?

The entirety of what you might need to know about how Satoru Iwata feels about the supposed threat of Apple and iOS gaming is that, during our interview last week, Iwata read 3DS sales figures to me off of a MacBook Air, which was plugged into a white iPhone, presumably his. When a gaming reporter goes to a showcase for, say, a Wii game or an Xbox game, Nintendo and Microsoft show their games on non-Sony TVs. They don't let you see hardware from supposed rivals. But there was Iwata, sitting around the corner of a table from me, laptop flipped open, Apple icon presented toward me.

Nintendo's Latest and Greatest: The 3DS XL Nintendo's newest portable machine, the 3DS XL, came out in America this past weekend. It's a good machine (I gave it a very positive review.) "With the addition of the 3DS XL we're looking at expanding the overall lifecycle of the 3DS as a platform," Iwata said, noting that consumers began asking for a larger 3DS right after the original unit launched. "Up until recently it really wasn't possible for us to provide a bigger screen to consumers at a reasonable cost, and I think we've been impacted by the progress in terms of LCD screen technology." Iwata says the 3DS XL is the best device Nintendo can give gamers at a reasonable cost right now. It probably won't be the last. While it seems a safe bet, based on Nintendo's past that this isn't the last 3DS iteration, it seems clear Nintendo is not going to go even bigger: "I think that would create some portability issues," he said. "Even if we could have … provided a bigger screen I don't think we would have." No 3DSXXL for you. The 3DS XL is big enough.

Iwata didn't let the presence of an Apple laptop and the iPhone do all of his talking. He never said the words "Apple" or "iPhone" or "Android," but when I pointed to my iPhone that was recording our interview and began asking him about why some people think that device is the future of portable gaming, he knew exactly what I was talking about. He knows people wonder about the long-term viability of dedicated gaming handhelds. He cited the arguments himself and proposed that there are people who argue that the period of gaming handhelds "has passed us by" due to the popularity of gaming on "a device that you're always going to be carrying with you at all times"—a phone. He knows that logic is what produces the doubts. "I don't think that opinion is completely nonsensical," he said.

Iwata has been running Nintendo since the latter days of the Game Boy Advance, so in explaining Nintendo's persistence to make its own portable hardware for its own machines, he goes back to when he started. "I was asked during the Game Boy Advance period by folks who said, 'Hey, now you're able to play games on mobile phones so maybe the time of the handheld is done,' he said. He was beginning what amounted to an approximately 16-minute counter-argument for the dedicated handheld and, specifically, for the 3DS. "Because we understood that, that's what drove us to create the Nintendo DS. And I believe we were able to offer on the Nintendo DS an experience that you could not get on phones that were available at the same time … after the DS that kind of slowly faded into the background. That being said, with more smartphones and more tablets being on the market now and becoming very popular this conversation has risen again. Obviously it's a fact that smartphone technology is advancing very quickly and the things you can do on a smartphone are much different than what you could do on a regular cellphone back in the day."

Iwata said that Nintendo had an advantage of creating its own software and hardware and could best integrate the two. (Apple and Google, the makers of Android do not make their own games for their phones, a contrast Iwata didn't state but was easily inferred.) Iwata said that the 3DS basically had to be as exceptional as a phone, maybe even cooler: "It's just like in the day of the GBA our challenge was to provide experiences you could not have on a cellphone at that time. In the same way, we have to look at the Nintendo 3DS and other platforms in our future as being able to do the same thing in terms of what smartphones can provide as well."

Unintimidated By Apple, Nintendo's Boss Says The World Still Needs Dedicated Gaming HandheldsS

I had heard and read much of Iwata's argument for Nintendo's continued relevance in making handheld gaming hardware before, but I had to share a few personal anecdotes with him: one of my niece whose long-time curiosity about my old Nintendo DS had seemingly been displaced by her enjoyment of free games she played on a hand-me-down iPod Touch from her mom; another about my own observations that people on the New York City subways I ride each day seem to play DSes and PSPs less and yet are consistently playing the likes of Angry Birds or Temple Run on their phones every day. I asked Iwata what he thought was going on there. And, as he began to talk about Nintendo's ability to offer deep games, I asked if he thought that was the domain of Nintendo or even of dedicated handhelds. His answer put us on a different track.

"I think a lot of this discussion is based on the premise that the handheld gaming device market is shrinking or vanishing and I don't think that is true and I'd like to address that," he said. He turned to his MacBook Air as he began to cite some stats.

"Something that [Nintendo of America president] Reggie [Fils-Aime] said at E3 was that the Nintendo 3DS hardware was selling more or faster than the DS, and I think that's something.. that a lot of people are aware of. But something that Reggie also said is that the 3DS software sales were exceeding DS software sales." (Fils-Aime had told an audience at the E3 gaming show in June that the 3DS had sold 10.5 million physical games in its first 14 months, more than the DS had sold in the same period of time.)

Iwata: "Previously we had to think, ok, 'How are we competing with Sony?, How are we competing with Microsoft?, How do we compete with all the other software titles and all the other publishers out there?' That environment has changed."

"I think this is proof that even though we see an increase in smartphones and tablets and whatnot and there's obviously a huge flood of games in the market, I think the software sales that Reggie alluded to and pointed out really prove that these people, even with this flood of free games and whatnot for these portable devices—[these] non-game-centric devices—are not keeping people from purchasing software for dedicated hardware."

Iwata was on a roll. As I noted, his answer was long and it was clear he wanted to get as much of this out in the open as possible. He continued:

"As of last week, 3DS sales in Japan reached seven million, and that's the 77th week post-launch. If we look at DS and DS Lite which people were saying, ‘oh my gosh this thing is selling like hotcakes, it's crazy!' it reached the seven million mark at week 72. And for the Nintendo DS that was two Christmases. For the 3DS it's only been one Christmas. And we also had a large earthquake in Japan. And of course now there's a smartphone boom in Japan, we're right in the middle of it. [Note from Stephen: The Nintendo 3DS has sold 19 million units worldwide since launch, as of late June.]

Unintimidated By Apple, Nintendo's Boss Says The World Still Needs Dedicated Gaming HandheldsS

"I'm not saying there aren't people out there who aren't going to purchase a dedicated handheld device based on the availability and the fun factor in their smartphones. The examples you gave are factual. I'm not saying that that's not true. I do want to say that there are still people buying our devices and that is also factual.

"I don't think there's not a bright future for handheld devices but I understand that the competition, again with the rise of smart devices is different, and I do recognize that.

"Previously we had to think, ok, 'How are we competing with Sony?, How are we competing with Microsoft?, How do we compete with all the other software titles and all the other publishers out there?' That environment has changed. And the games available for smartphones, I'm not saying that none of these are interesting, rich or fun experiences, because I know that there are some. And one way we can ensure that there's a market for handheld gaming devices is by continuing to bring out entertaining and engaging software that will provide users experiences that they cannot get on these other devices."

Through translation, that was much, not all of Iwata's 16-minute assertion of the validity of the dedicated gaming handheld. It was eye-opening, because it did not conform with the critique from some quarters that Nintendo's head is in the sand and that it does not appreciate the threat of cheap, downloadable iOS and Android games. But it was also short on specifics of how Nintendo would set itself apart in a world that seems more gaga over the next iPhone than over, say, the 3DS' glass-free 3D.

In the quarter-hour we spent on this topic, Iwata didn't make what I expected to be an easy comparison between his company's portable gaming machines and those of Apple and other top mobile players: the presence on the 3DS of buttons and control pads. He didn't go there. He did, however, go to another intriguing topic, one that might be related and may signal where Nintendo actually sees meaningful difference between the handheld experiences it provides and those on smartphones:

Iwata: "I think that consumers who are willing to pay money for a gaming experience are looking for something that is more rich."

"I think within games you have two needs that people fill. One is the time-filler need. The other is that it's a very important time for me and I want to have a rich experience. Those are two separate needs, I think." His implication was that Nintendo handheld gaming satisfied the latter need in a way that smartphone gaming typically did not.

"The other thing is how much are consumers willing to pay to play. I think that consumers who are willing to pay money for a gaming experience are looking for something that is more rich and are willing to spend some of that valuable time on that experience. I believe that as environments change and as the world progresses we're going to have different ways in which people want to spend their time. That being said, I don't think we're going to see the desire to have, again, rich and deep sort of gaming experiences... we're not going to see that vanish. That's not going to go away."