There has been a lot talk surrounding Iwata’s announcement that Nintendo is adding a third pillar to the company. They are working to produce a Quality of Life device that will focus initially on health, be it mental or physical. At least, that is what the internet would have you believe. Really, Iwata never mentioned it would be a device, but rather it is something you don’t wear. It’s probably something you don’t even use – at least in terms of the typical way we consider ourselves to use something. Like many of you, I was a bit outraged when I heard about and even more confused after I read his statements. However, things have become clear. I have a pretty good idea what this Quality of Life ideal is, and if nothing else, its success is going to be good for their gaming division.
Welcome to Ambient Assisted Living
Do you not know what this is? Are you wondering why I feel this is what they are using? Okay, before we get into what it is, let’s explain how we came to this conclusion. It all starts with the following Flow Chart:
On the surface, this appears to be a load of nothing. It doesn’t seem to be telling us anything other than the obvious, but as it turns out, this flow chart is A-typical of Ambient Assisted Living. Here is how ToTTen Tranz from Beyond3D’s forum community put it:
As someone who’s been working in the area for a couple of years, I can tell you that this is a typical Ambient Assisted Living (AAL) flowchart.
It’s a real and expanding market targeted to an expanding demographic (>65 years old), and it’s supposed to be the next boom in governmental investment of first-world countries. Also, a big proportion of a developed country’s riches is in the 3rd age.
Japan is one of the countries with the oldest population and this is a very big concern for them. It’s not a surprise that a big company exploring AAL is coming from there.
So far, most efforts for establishing a technological AAL ecossystem come mostly from several small companies (mostly startups) dedicated to developing health monitoring systems or small sensors. Everything is so spread and disorganized that there’s been a real struggle to create and/or abide to standards that can assure the connectivity and ease-of-use between devices of single vendors -> and this is a market that is very dependent on ease-of-use because it’s mostly directed to elders.
Nintendo is in a unique position for making this work very well for them:
1 – They’re located in the country that has – by far – the largest dedication/awareness per-capita to AAL than anyone else,
2 – They have worldwide distribution channels.
3 – They have a brand recognition that has already reached all demographics through the Wii and its family-oriented games
4 – They’re very good at designing ergonomic and easy-to-use devices.
Iwata wasn’t wrong when he announced this as a “blue ocean” for them. I think it is.
This is very good news for investors, IMO.
If Nintendo can get to the forefront of this, they are going to make severe bank just off government investment money alone. It’s going to be a lot cheaper for governments over the long haul compared to assisted living homes. Of course, because this hasn’t taken off yet there is no uniformed way to do it. A big company taking it on, like Nintendo, can be the company that sets the standard for how this works. Their entertainment stuff simply promotes healthy living for the elderly. Keeps them active in that home environment. I am by no means an expert on this new wave of technology, but it could be a brilliant move forward.
Nintendo Hasn’t Abandoned Us
I think what many of us worry about is that their focus on this new third pillar means Nintendo will no longer take care of us gamers. Chances are, Nintendo EAD has nothing to do with this new initiative, and it will be accomplished through a new merger with a small company who currently is trying to make such a device. As in, Nintendo will be investing mostly money, not necessarily man power, to make this happen. If it does happen and is a success, it will give Nintendo a constantly flowing revenue streaming from government funding, and allow them to be much riskier moving forward.
Currently with so much reliance on hardware sales (it makes up 60% of their bottom line), there is a lot of risk and the flow of the video game market is unpredictable and unreliable year to year. With this third revenue stream that should keep them always in the green, they can worry less about having to ensure their video game hardware and software is inherently profitable and worry more about taking risks or making the games/platforms they want to make, without fear they can’t price it or market it correctly. Money won’t be as big of an object as it is now.
The Wii U and 3DS aren’t going anywhere, and Nintendo will have another console cycle after them and probably another after that. Nintendo is betting big on the new third pillar, but they are assuredly about to open their check book to get more games and more support. The point is, this was an investors meeting, and something like a new third pillar is something investors need to know about. We’ll have more gaming related stuff at GDC and E3. Oh, and for those wondering – now may be the time to invest in Nintendo stock. If this takes off, it may double or triple in value within 10 years.
Everything is going to be okay. Nintendo isn’t doomed and they didn’t forget about us. They just see an opportunity to have a permanent revenue draw and they are going for it. What is good for them is good for us, if we like Nintendo products that is.