Nintendo’s Half-Hearted Microtransaction Strategy Upsets Gamers and Investors

Nintendo (NASDAQOTH: NTDOY  ) president Satoru Iwata recently made a surprising announcement during the company's latest investor conference regarding the company's mobile development and microtransactions business strategy, and it's a disturbing revelation for gamers fed up with the idea of DLCs, microtransactions, and pay-to-win business models.

During a presentation of a new 3DS game called Rusty's Real Deal Baseball, the company highlighted a new take on microtransactions -- price haggling. Half of the game, where the player plays the role of the batter, is free.

Does this look like fun to you? Nintendo thinks so. (Source: Shacknews.com)

However, gamers who want to play the other modes, which feature umpire and ball-catching modes, have to pay an additional $4. Yet that price isn't fixed -- gamers can talk to Rusty or offer him in-game items to "significantly" lower the price. In other words, gamers can work toward a better deal or pay a fixed price to avoid the hassle.

I have no idea why Nintendo thinks this experiment is a good idea. Microtransactions are widely hated by gamers, and adding a haggling element to them seems needlessly insulting. Moreover, it seems like a hypocritical half-step toward launching free-to-play games, which Iwata had just mocked earlier this month as being "free to start."

Tumbling down the slippery slope
Yet Rusty's Real Deal Baseball isn't Nintendo's first game to feature microtransactions.

Square Enix's Bravely Default, a full-priced $50 3DS game that was released in the U.S. earlier this month, surprisingly includes $1.50 microtransactions. In the game, players can slow or freeze time using "Sleep Points" for extra powerful attacks. To store sleep points, gamers have to leave their 3DS in sleep mode. However, $1.50 allows users to buy more points instantly. It's the exact same strategy that Zynga (NASDAQ: ZNGA  ) employs with Farmville and other social/mobile games.

Bravely Default. (Source: Technologytell.com)

However, the obvious difference is that games like Farmville are free to play, while Bravely Default already costs $50.

Square Enix has already been harshly criticized for its use of microtransactions. Final Fantasy: All the Bravest, an Apple (NASDAQ: AAPL  ) iOS and Google (NASDAQ: GOOGL  ) Android title, received a dismal Metascore of 25% on review aggregator site Metacritic, due to its overuse of expensive microtransactions in the game.

Unfortunately, instead of walling the 3DS off from these types of games, Nintendo loosened its rules two years ago and guaranteed that "trustworthy" developers would be able to add approved microtransactions to their games.

Needlessly tarnishing the Nintendo brand
Yet Nintendo doesn't even need microtransactions to boost software sales. Last year, sales of 3DS titles jumped 45% year-over-year to 16 million. U.S. sales of 3DS games in January 2014 rose 6% year-over-year.

This means that gamers are still willing to pay $40 to $50 for a new 3DS game as long as it's a quality title. The top three best-selling games on the 3DS -- Pokemon X/Y (10.3 million units), Super Mario 3D Land (9.3 million units), and Mario Kart 7 (9.3 million units) -- don't include any kind of additional in-game transactions.

Pokemon X/Y. (Source: Technobuffalo.com)

Nintendo and many of its 3DS developers are erroneously comparing 3DS titles to mobile games. That comparison doesn't hold up. As I discussed in a previous article, very few mobile games cost more than $7, and most of them are either free or cost less than $2. The idea is that casual gamers will play these titles for free, while more hardcore gamers will pay more money to progress faster.

Unfortunately, that tiered pricing system cripples games. Whereas gamers could previously pay $40 and enjoy a full experience, they are now forced to wait to restore "energy" simply so the developer can ask them if they want to pay for a quick refill. It's insulting and shatters the flow of the game -- it's like being let in to watch a movie for free, only to have the movie paused for 30 minutes every 15 minutes as the usher walks up and down the aisles with a collection plate to restart the film.

Nintendo has made it clear that it doesn't intend to sell software on rival hardware, and that it doesn't intend to release mobile games. However, it has allowed one of the most hated elements of modern games into its system, and that could tarnish Nintendo's established reputation for releasing self-contained quality games.

Are more microtransactions on the way?
Nintendo also recently revealed that its first free-to-play 3DS title for Western audiences, Steel Diver: Sub Wars, would include microtransactions.

However, Nintendo investors expressed dismay that the game didn't really include microtransactions in the traditional sense of the word -- it was really just a demo that encouraged gamers to spend $10 to unlock the premium version of the game.

The news didn't please investors or gamers.

Investors expected a submarine collecting game that peddles better submarines to players via microtransactions, while gamers disliked the fact that it was a bizarre half-step between a demo and a full-featured game.

Many of the same criticisms were levied against Rusty's Real Deal Baseball. Stockholder Kenneth Wagner notably stated, "The point of free-to-play games is to get the people who like them to spend thousands of dollars. You don't make the game cheaper for them -- that's just throwing away money."

The bottom line
In closing, Nintendo has pointlessly jumped into the arena of microtransactions and DLCs without thinking things through. Sales of 3DS games are healthy, and the 3DS is still the best-selling console of the current generation with 42.9 million units sold worldwide.

Adding microtransactions and DLCs simply puts Nintendo in the same category as Sony (NYSE: SNE  ) and Microsoft (NASDAQ: MSFT  ) , and not in a good way -- both companies have been harshly criticized for introducing nearly game-breaking microtransaction systems in Gran Turismo 6 and Forza 5, respectively.

While it's true that Nintendo needs a new strategy to offset its respective 70% and 25% reductions in Wii U and 3DS sales in 2014, pursuing microtransactions could cause the company to lose gamers rather than win them over.

What do you think, fellow gamers? Is Nintendo playing with fire with its half-hearted microtransactions strategy? Let me know your thoughts in the comments section below!

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 17, 2014, at 6:30 PM, SuntanIronMan wrote:

    There is also Pokemon Bank. Technically it isn't an in-game transaction, but an outside service that connects to Pokenon X or Pokemon Y for a recurring monthly fee. So even the best selling 3DS game has micro-transactions of a sort.

  • Report this Comment On February 18, 2014, at 11:25 AM, targeyone wrote:

    My god, you're criticizing Nintendo because Square Enix included micros in a Square Enix game, where Square Enix decided to price it at full, and then Square Enix decided to add micros on top.

    Then criticize Nintendo for doing free-to-play in a way it should be done (free portion can be enjoyed as is, pay once for the full game) rather than milk the consumer for infinite cash just so said consumer can actually enjoy the game. (all the while asserting that gamers hate micros)

    Sqaure Enix's game is the only fully-priced game on a Nintendo system to feature micros. The idea that gamers will pay for a full game, then pay for micros on top of that is Square Enix's. Where is your article criticizing them?

  • Report this Comment On February 18, 2014, at 11:26 AM, targeyone wrote:

    @SuntanIronMan It's a yearly fee of $5. Hardly in the same field as other micros.

  • Report this Comment On February 18, 2014, at 12:14 PM, Arroyoshi wrote:

    First of all a 3DS game is $40. Second you people have been claiming that the 3DS has been a failure because it didn't meet Nintendo's projections. Now that it suits your needs to scrutinize them you say the 3DS has been extremely successful without microtransactions. I do agree that the inclusion of microtransactions in a full priced game like Bravely Default is unnecessary, but you can't blame Nintendo for a third party developer's mistake, just play the gmae without them. Boom problem solved. The mocrotransactions are not required and you still get to play the full game.

  • Report this Comment On February 18, 2014, at 2:26 PM, TMFSunLion wrote:

    I'm not attacking Nintendo for Square Enix's behavior. I'm just saying that it was silly to go half-way when they didn't even need to go down the microtransaction road...

  • Report this Comment On February 18, 2014, at 2:38 PM, targeyone wrote:

    But you are:

    "Nintendo and many of its 3DS developers are erroneously comparing 3DS titles to mobile games....Whereas gamers could previously pay $40 and enjoy a full experience, they are now forced to wait to restore "energy" simply so the developer can ask them if they want to pay for a quick refill. "

    You cite "Nintendo" and "many of its 3DS developers". But Square Enix has been the only one to do this on a Nintendo platform. When has Square Enix ever counted as either Nintendo or "many" of its 3DS developers?

    Nintendo has shown no intention of pursuing Square Enix's, or their competitor's, greedy strategy with meaningless microtransactions.

    They have simply provided extended demos to allow potential customers to sample the product before purchasing.

  • Report this Comment On February 18, 2014, at 4:57 PM, zma1013 wrote:

    Square Enix is not Nintendo. Don't use a different company's business practices to back up your claims against Nintendo. It's just wrong.

  • Report this Comment On February 19, 2014, at 5:24 AM, Ylem122 wrote:

    I find that micro transactions and pay to win only become a problem when developers have to alter the game so as to maintain the value of the micro transactions and pay to win options in that it negatively impacts people who choose not to use the micro transactions or pay to win options.

    A great example of this is diablo 3's auction house, for those who don't know the diablo 3 auction house is a pay to win feature in diablo 3, in the auction house you can use gold you collect in the game to bid on items. you can also use real money to buy gold and you can also use real money to buy the items directly.

    The problem with this is, if great items are dropping for every character every few mins, the auction house is going to get flooded with the best of the best, and their value is going to drop beyond the point of a healthy market. So the Blizzard developers nerfed the living day lights out of how frequently good items drop so that the auction house wouldn't get flooded.

    The problem with this being that, if you wernt using the auction house the game was horrible, you would have to put in thousands of hours to get a single item that would make you excited.

    If a Micro transaction in no way impacts the game for people who don't want to use them, such as in Bravery Default, I really don't see a problem with them being there.

    also

    "players can slow or freeze time using "Sleep Points" for extra powerful attacks."

    sleep points just let you attack out of turn, it dosnt make your attacks extra powerful or anything like that. The game is a turn based game, so if its not your turn, you can use sleep points and make it your turn.

  • Report this Comment On February 19, 2014, at 12:17 PM, BHGamer wrote:

    any microtransaction in a full price commercial console release is ridiculous. Even for Android, I would rather pay full price for a game than microtransactions and I often stay away from them with one excpetion, a pinball game where I can choose to buy new tables as they are released. I won't even play Plants vs Zombies 2 because there's not an option to pay a price for the full game like the original. But to then pay $39.99 or more for a console/3ds game, and not just Nintendo, but for Sony, and Microsoft as well, only to have annoying microtransations mixed in is unacceptable.

  • Report this Comment On February 19, 2014, at 1:20 PM, virgilcole wrote:

    This article brings to mind the iOS games "Injustice: Gods Among Us", and "Batman: Arkham Origins"

    These are just two of the gmaes that require waiting for energy, or buying more to continue playing.

    These games kill any enjoyment that could possibly be had, and I would gladly pay full price for a full, quality game, rather than have to keep paying for a low price (or free) micro transaction game that is basically a demo.

    So that is why I download hacked files that unlock all the "in game" currency that is needed for any game that I want to play that employs this type of strategy.

    Don't reward game makers for bad behavior.

  • Report this Comment On February 19, 2014, at 4:01 PM, Dan91x wrote:

    I hope anyone reading this article does not take it for any type of truth. I don't see how you can claim, "while gamers disliked the fact that it was a bizarre half-step between a demo and a full-featured game." Which gamers are you talking about? and how many did you ask that have actually played it. Did you even listen to any information about it. The non-pay version of SubWars is the "FULL" game without the additional subs and a few additional things. Nintendo even stated a good player who plays the free version can even compete with those who pay the full price they just have to put more effort and skill into it. And as many others have already stated most of your other statements are false and misleading. Please Mr. Leo Sun, do research, play the games you talk about and above all report factual statements. I am really happy to see Nintendo Making F2P games the way they Should be made. Now make quality articles the way they should be. Thank you.

  • Report this Comment On February 19, 2014, at 6:52 PM, TheCaptainHowdy wrote:

    Does this site have anything to ever say nice about Nintendo? Do they not give you enough free stuff like MS and Sony?

    I love the free Sub Wars, and only have been playing the free version! Also I have been enjoying Rusty's Baseball for a couple months now on my Japanese 3DS, very fun short play game much like some Android games, but BETTER!

  • Report this Comment On February 19, 2014, at 7:13 PM, TheCaptainHowdy wrote:

    Also Bravely Default is $40 not $50.... unless you bought the Limited Edition.

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