Nintendo on rising dev costs, Switch experience will help in the future
During Nintendo’s financial results briefing and Corporate Management Policy Briefing this week, the company was asked about rising development costs, which has become a bit of an issue within the games industry. A few people weighed in here – namely Shigeru Miyamoto, senior managing executive officer Shinya Takahashi, senior executive officer Ko Shiota, and president Shuntaro Furukawa.
A few different things were shared here, and they were all quite interesting. Miyamoto started out by talking about how Nintendo’s “research and development expenses have been increasing each year.” At the same time, he stressed that what the company creates is more important than development costs.
Other notable comments came from Shiota. Nintendo has gained experience with Switch, and the decision to combine consoles and handhelds and “maintaining a similar basis for development environments in the future” means this “should lead to a reduction in research and development costs over time.” But Shiota was also emphasizing creativity and new ideas as well.
Here’s the full rundown on Nintendo discussing development costs:
Miyamoto: Our research and development expenses have been increasing each year. Since our scale of development has grown, a corresponding increase in costs is, in some respects, inevitable. However, our belief is that what we create is more important than the amount spent on development. We continue refining our products until we are confident that we have created something that our consumers will be satisfied with. With that in mind, what is important is to find ideas that are worth honing, and this has not changed since the era of Nintendo Entertainment System. Everyone has different interests, so we cannot make sweeping statements about what ideas are worth pursuing. However, one thing we are sure about is that it should be something which has not existed in the past. The more you polish something that has never existed before, the more value it brings. We believe that it is important to nurture developers who take this unique concept to heart, allocate funds to development if necessary, and release games only after we are confident in the product – and repeat this process over and over again.
On the other hand, in the entertainment business it is possible to create appealing products based on intriguing ideas, without incurring significant costs. Children’s toys are a prime example of this. We believe that not all products require large costs. Even in the case of video games, with the current technology it is possible to create fun games with a small number of developers in a short period of time. We believe it is important not to lose sight of this perspective.
Takahashi: I believe unique titles that are small in scale, but worth polishing can be created by expanding on the ideas of a small number of developers, rather than spending large sums of money on every game. While overall research and development costs are rising, there are certain products for which expenses remain relatively stable, depending on our approach.
Moreover, the development software and environments for Nintendo Switch have significantly evolved compared to those of previous hardware, which provides various methods to mitigate cost increases. We have established an environment that uses these advancements where Nintendo’s unique producers can create games.
Shitoa: From a hardware and system perspective, we believe it is important to provide an environment that enables game developers to work efficiently. As explained in today’s presentation, the merging of home consoles and handheld systems allowed us to integrate what previously were two separate software development environments. Because we are already familiar with Nintendo Switch, maintaining a similar basis for development environments in the future will allow us to carry over the experience we have already built, which should lead to a reduction in research and development costs over time.
I believe that the most important thing for Nintendo is how we create new ideas. Bigger budgets do not necessarily equate to better ideas, so we hope to continue to focus on a process where teams of hardware and software developers share ideas to create interesting things.
Furukawa: In order to create very Nintendo products which integrate hardware and software, we must invest in the development environment. Investments in the development environment, such as the spending for the Corporate Headquarters Development Center, Building No. 2 (tentative name) described in today’s presentation, are a key initiative in our utilization of cash on hand.
Nintendo announced its Corporate Headquarters Development Center, Building No. 2 in April 2022. Originally planned to finish construction by 2027, it now appears that it could be 2028 or later.
