Is Nintendo Missing Out on Video?

Nintendo America President and COO Reggie Fils-Aime recently told CNBC that the company isn’t even close to releasing a second-generation Wii console. Consumers don’t want HD as much as they want a compelling experience, he argued, and more than 26 million Wii owners seem to support that statement. Fils-Aime was interviewed by CNBC about the launch of Netflix VOD on the Wii, and, pressed on the issue by CNBC’s Maria Bartiromo, had to come up with a good reason why Wii owners won’t be able to watch any HD video with the console anytime soon.

Fils-Aime’s answer must have made Netflix CEO Reed Hastings, who was tele-present for the on-screen interview as well, cringe. “The vast majority of content available on Netflix is not HD content,” the Nintendo exec explained, adding that Wii consumers aren’t losing anything without HD. It’s true that Netflix’s HD VOD catalog is small, but it’s growing. The company told us that it’s currently streaming around 1,000 titles in 720p. Add to this the fact that even for SD titles, devices like Sony’s PS3 or the Roku box allow far higher bitrates, and it becomes clear there’s little room to grow for Nintendo in the world of connected devices.

The mere fact that Nintendo is now touting the Wii as an entertainment device capable of watching Netflix streams shows how much the world of online entertainment has changed since the Wii’s introduction in 2006. Nintendo made the trail-blazing decision back then to essentially rely on last-generation console technology and enhance it with the unique capabilities of the Wiimote.

Less tech plus more fun, combined with a much cheaper price tag than devices introduced by the competition: That recipe worked for Nintendo, and the Wii quickly became the best-selling console worldwide. Meanwhile, Sony struggled to convince folks to plunk down $500 for the PS3, despite integrating a Blu-ray drive. Apparently people cared less about HD video than they did about playing tennis with their Wii look-alikes.

However, online video has exploded in the years since. Microsoft and Sony have been embracing the change, bringing video downloads and streaming services to their consoles, with the Xbox 360 now even expanding to live video streaming. Nintendo, on the other hand, has been slow to react. It initially only planed to bring Wii-specific, family friendly-content to the console. And when it finally did start to explore regular VOD, it restricted its partnership with CinemaNow to Japan, leaving it to outsiders like the BCC to push the boundaries of what’s possible on the console.

The Beeb did succeed in bringing its hugely popular iPlayer to the Wii, but during this process it quickly became apparent that the Wii’s lack of HD wasn’t the only factor that made it less than desirable as a newteevee gadget. The console’s browser is stuck with an old version of Flash that makes it impossible to access videos on many sites. And not only does the hardware not play HD video, it’s also incapable of rendering anything with a bitrate beyond 700kbps.

Just as a comparison: Netflix streams its SD movies to the Roku box with up to 2200 kbps, while HD streams are delivered with 3600kbps. Mind you, the SD Roku box retails at $79, and the HD version just costs $20 more. That just shows that Nintendo could easily make a console capable of playing HD video without driving up the price tag of the device.

However, Nintendo has made the strategic decision against an HD upgrade of the Wii. Fils-Aime told CNBC that his company wanted to wait until it had totally exhausted all the possibilities of the existing Wii before releasing a new model with lots of new features. That makes sense for the gaming market — but it could inevitably mean that the Wii will lose out on the very audience that made it so successful: Casual consumers that are interested in things other than all-nighters with the latest first-person shooter.

Read more about the worlds of game consoles and video streaming coming together in our GigaOm Pro Connected Consumer Quarterly Wrap-Up (subscription required.)

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