Exploring Nintendo's Stance on Generative AI | 31/07/24

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Announcements

We have a bunch of announcements to make this week, both with regards to AI and Games related projects, but also a small shift in the format of the newsletter.

Newsletter Format

I’m pleased to say that after kicking off the newsletter at the start of 2024, it has had a really positive response and I’m grateful to everyone who has reached out - be it online or in person - to give their feedback on what I’m doing here. Now more than ever I feel we need to have meaningful, accessible and informative material discussing AI within the games industry. This is rather uncharted territory for me, given my material is often standalone and self contained (see the decade of YouTube videos I’ve produced) so your perspectives on this are indeed of immense value.

The AI and Games Newsletter will remain as it is from an editorial standpoint. I use this platform to dig into the goings on of the industry, to point towards relevant materials (books, articles, events), as well as share a lot of my own work across numerous platforms, be it the AI and Games YouTube channels, the Branching Factor podcast, or my speaking engagements.

The one thing that will change is the cadence. Writing a weekly newsletter has proven to be challenging. Particularly if I wish to deliver it at the quality bar that I like to hit across all of my work. As such, the AI and Games Newsletter will move towards a fortnightly/bi-weekly/bi-monthly publication (insert which means ‘every two weeks’ for you here).

However, there will still be weekly publications on the site. I like to maintain a weekly presence here, and that can come in a number of forms. We already have the monthly newsletter for sponsors - which details the upcoming topics that will appear across all of the AI and Games platforms. But also, starting in August will be the Sponsor Digest: a breakdown of stories I’ve been reading, books and research papers that caught my interest, the games I am playing and answering questions directly from the audience. If you have a question you want to raise the inaugural issue, leave a comment below!

Sponsor Newsletter - July 2024

Tommy Thompson

Jul 5

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So to quickly summarise:

The AI and Games Newsletter, starting today, will be published every two weeks.
Sponsors on Substack & Patreon will have two bonus publications a month:
- Monthly Newsletter: Updates on all upcoming content.
- Monthly Digest [NEW]: Relevant reading, gaming and more.

AI and Games Announcements

Okay, now we also have the regular announcements of AI and Games stuffs:

Last week GamesIndustry.biz announced their HR Summit event running on September 18th 2024. I’ll be there to discuss the potentials and pitfalls of AI in the games industry but from a HR perspective.
Plus the following week I’ll be speaking at the NEXUS conference in Dublin, Ireland which runs September 25th to 26th.
I’m back collaborating with professional training company Gamaste to deliver sessions on the use of Large Language Models (LLMs) for game designers. These sessions will run in October and you can pre-register here.

AI in the News

So of course while I was offline, there was a bunch of interesting stories bouncing around. I plan to return to some of these in the coming weeks as feature stories, but for now here’s a quick summary:

Artificial Agency raises $16 million in startup funding [GamesIndustry.biz]: Edmonton-based Artificial Agency, founded by a group of ex DeepMind researchers, have raised a good chunk of cash towards the development of their AI-powered behaviour engine. There’s little known about this engine at this time, given the company literally only emerged from stealth mode about two weeks ago, but it looks like it’s keen to explore specific deep learning and generative AI technologies. Something to keep an eye on for sure…

The Scraping of YouTube Videos for Generative AI Training [Proof News]: A publicly available dataset of subtitles from over 175,000 videos has been analysed by Proof News. The big story here is that none of these creators received any warning or compensation for the use of their material. Their copyrighted material has been stolen for use as a training set. Why is this relevant to us? Because several of my videos are in that training set. I will be returning to this for sure.
Video Game Voice Actors Strike Over AI [Aftermath]: After over 18 months of discussion with prominent games studios, SAG-AFTRA called for video game voice actors and performers to strike on July 26th. While the current negotiations have largely went smoothly in most areas, the big issue that has lead to strike action is that studios have been unwilling to provide protections over the use of AI to synthesise and replace voice actors. Workers can now strike at companies including Activision, EA, Insomniac Games, Take-Two, and WB Games.

The Big Story: Nintendo’s Stance on Generative AI in 2024

Within hours of my logging for a bit of a break in July, came the story from Vikki Blake at GamesIndustry.biz, detailing comments made by Nintendo president Shuntaro Furukawa on generative AI at an investor Q&A. To quote the article:

"In the game industry, AI-like technology has long been used to control enemy character movements, so game development and AI technology have always been closely related," Furukawa said, as translated by Tweak Town.
"Generative AI, which has been a hot topic in recent years, can be more creative, but we also recognise that it has issues with intellectual property rights.
"Our company has decades of know-how in creating optimal gaming experiences for our customers. While we are flexible in responding to technological developments, we hope to continue to deliver value that is unique to us and cannot be created through technology alone."

I wanted to unpack this some more, given it is in many respects not surprising. Perhaps critically, Furukawa’s comments are not necessarily a reaction to the current state of generative AI, but rather an opportunity to better understand how Nintendo operates within the industry, and their attitudes towards technology within the field.

Nintendo Vs Technology

It’s important to frame this not as an assessment of generative AI in particular, but rather how Nintendo observes technology trends. For anyone who has been in and around games for a while, the idea that Nintendo isn’t keen to jump on a specific bandwagon is old news.

Metroid Prime 4' Gets a Release Date After Years of Troubled Development | WIRED — Nintendo seldom move fast in any direction. Patience and persistence is the secret to their success.

You can see this in every facet of their development pipeline, from the tools that they adopt, the hardware that they manufacture, to even the business trends in the market that they embrace. It is what makes them stand out as unique in many respects. At the time of writing, Nintendo is the 5th most lucrative publicly trading games company in the world, with revenues in the 2023/2024FY surpassing $11.6 billion, When you compare how Nintendo operates vs more successful businesses - NetEase Games, Microsoft Gaming, Tencent Interactive Entertainment and Sony Interactive Entertainment - you note that they don’t adhere to the same rules as their contemporaries:

Nintendo typically produce hardware less performant than Sony (PlayStation) and Microsoft (Xbox). Focussing on more cost-effective manufacturing, not relying on consoles as a loss-leader, and typically release multiple updated SKU’s throughout the console lifecycle.
Nintendo’s focus is on delivering their intellectual property to customers via their dedicated hardware. Meaning a lower emphasis on mobile markets compared to Tencent and NetEase, as well as not releasing their titles on PC much like Sony and Microsoft.
Nintendo typically operate with a more traditional approach to software publishing. Revenue is accrued largely from one-off software sales, rather than continued monetisation of existing titles through downloadable content (DLC) or embracing ‘free-to-play’ and ’live service’ business models.
Nintendo have also largely ignored major tech trends of recent years such as Virtual Reality (VR), Augmented Reality (AR) and Web3/Cryptocurrency/Non-Fungible Tokens (NFTs).

This is often as admirable as it is frustrating for anyone who engages with Nintendo’s products. The ‘Nintendo tax’ levied on consumers who wish to play their latest titles - given they seldom drop below recommended retail price (RRP), and are almost exclusively on the companies dedicated hardware.

The company’s intellectual property is often treated as sacrosanct, with agonising wait times between releases of core franchises. The recentl news of Metroid Prime 4: Beyond having a 2025 release date is great news for those who saw the original announcement in 2017. But it will be coming to market 18 years after the previous entry in the franchise: Metroid Prime 3: Corruption was released two hardware generations ago on the Wii console. Plus the well documented year-long delay to The Legend of Zelda: Tears of the Kingdom was to ensure it reached a level of quality that the company was happy with.

Meanwhile anyone who has played Nintendo with any online capability will know that their integration of these features is often clumsy and ill-fitting. It has taken until the current generation of hardware, the Nintendo Switch, for online gameplay in franchises such as Mario Kart and Splatoon to feel even remotely close to the quality-of-life features that titles on Sony and Xbox platforms have benefited from since the PlayStation 3 and Xbox 360 era 10-15 years ago.

Nintendo don’t act like any other games publisher on the market, and it’s often the key to their success. The real reason for that, is that Nintendo aren’t an electronics company that make games [Sony]. They’re not a software services company that make games [Microsoft]. They’re not even a traditional games company [Electronic Arts, Ubisoft]. They are, at their heart, something entirely different.

Nintendo are a toy company whose primary business is video games.

Nintendo the Toy Maker

A quick history lesson for those unfamiliar with the background of the Japanese gaming giant: Nintendo Koppai was founded in 1889 by Fusajiro Yamauchi originally with the intent to produce and ship playing cards. The company’s emphasis on card games continue through into the early 20th century, with it becoming the largest manufacturer of playing cards in Japan during the 1930s.

The company later began to transition into toys, with a number of toy playsets and board games being released in the 1950’s and 1960’s alongside their traditional card game offerings. All of this occurring as Nintendo became a public, but still family owned, business - in fact the company’s legal name from 1951 to 1963 was ‘Nintendo Playing Card Co. Ltd.’. The company transitioned gradually into electronics in the 1970s, with their first hardware being the ‘Color TV-Game 15’ (below) in 1977, with the Nintendo Famicom (or NES in the west) cementing their status in gaming in the early 1980s.

undefined — Nintendo’s first console: the ‘Color TV-Game 15’ from 1977

Now I raise all of this because the company’s history has a huge influence on how it operates. During the early 2000s the company had significant commercial success with hardware projects such as the Nintendo DS and Nintendo Wii; two projects led by the late Satoru Iwata. Iwata-san’s appointment as fourth president of Nintendo from 2002 until his death in 2015 was significant not just for the success he brought to the company, or his early-career as a programmer on games like Balloon Fight on the NES in the 1980s, but critically he was the first president in the company’s history who was not related to the Yamauchi family.

Despite coming from outside the family, the trust in Iwata-san was not misplaced given his outlook retained the traditional values of the business. Nintendo’s focus is on building products for children and families. We can see this in how it approaches hardware and software. Their focus on releasing the ‘Switch Lite’ model for children and larger households over a ‘Switch Pro’ model. Meanwhile franchises such as Splatoon show Nintendo are willing to explore popular trends such as online shooters but on their own terms.

At the end of the day, if the decision is going to prove popular with that target audience of kids and their parents, in a way that will bring players together, then you can bet that will be more important than placating investors.

A Misplaced Desire for Change

I think one of Nintendo’s biggest ‘problems that aren’t really problems’ is that it’s a company whose success comes not just from their focus on children, but that many adults - including the parents - have grown up with them and continue to be fans. As such, there is often this perception of Nintendo being out of touch, antiquated, or failing to keep up with the needs of its consumers. When in truth it’s really that many of their core consumers are no longer their target audience; they just don’t realise it.

Nintendo Labo Gets a Cheap VR Kit | WIRED — Anyone still got their cardboard cut outs for the Nintendo Switch’s Labo VR Kit?

It’s why things like a ‘Switch Pro’, which might include the likes of 5G data connectivity, a beefed-up GPU and a 4K display are either de-emphasised or simply never happen. It’s why outside of spurious toys like Labo, you won’t see a Nintendo VR headset (let’s not talk about the Virtual Boy huh?). It’s why season passes and aggressive monetisation of online games like Splatoon 3 never materialise. These might make sense to an investor, or even to an adult who is a fan of Nintendo’s output, but they’re not what Nintendo values.

This summarises the big ‘N’s approach to technology: it needs to be cost-effective, understood and reliable such that it can be sold to kids, and their parents, without risk. Online gaming has its problems with toxic communities, hence Nintendo release limited voice chat on their platforms. VR is both an issue for younger people as their eyesight develops, but is also a solitary experience that denies family’s being able to sit down and play together. Hence Labo VR Kit is a limited experience that also has kids sit and fold the cardboard with their parents. Powerful 4K gaming devices can be expensive to manufacture, but they also rely on expensive TV’s to display them, so Nintendo doubles-down on hardware in a portable form factor. This works well on two fronts, given it’s not only better suited to children, but it also follows gaming trends of younger generations who use portable devices like tablets and smartphones. Plus it is better suited to their home turf of Japan: where homes are often smaller and more conservative versus their American equivalents.

Now you’ll have noticed that I haven’t really discussed generative AI throughout this issue, even though it was the instigator for this topic. But what I have highlighted instead, is why it won’t be adopted by Nintendo anytime soon. It’s too new a technology, and there is no shared consensus on how it can be applied in game productions. If these issues were addressed, then Nintendo will begin to consider its adoption more seriously.

So while we can expect many a AAA studio and publisher to continue to explore this technology, it will be a few years yet before Nintendo even consider it as a realistic possibility for their own productions.

Wrapping Up

And so with that it’s time to wrap it up for this issue of the newsletter. Thank you all for sticking around and continuing to support my work, and we’ll be back next week with the August Digest for supporters.

Special thanks once again to our sponsors Scenario, find out more about their AI tools at: https://www.scenario.com/

Thank you for reading AI and Games. This post is public so feel free to share it.

Riccardo Vocca

Jul 31

I am absolutely fascinated by how the video game industry is relating and will approach GenAI. This issue begins to report interesting positions taken by Nintendo, which not only need to be analyzed in my opinion for technological and strategic expectations, but also commercial ones, and how consumers may react to these choices of the big producers. Thanks for sharing.

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