Nintendo and DeNA may develop a new business model for mobile games

Nintendo, which has traditionally produced paid games for consoles and handhelds, is partnering with DeNA to make mobile games, a market where free-to-play is the dominant business model. But the two companies may go in a different direction entirely, said Nintendo CEO Satoru Iwata during an investor Q&A last week.

Iwata doesn’t even like to use the term “free-to-play,” because he feels the phrase gives a “degree of insincerity to consumers,” he said in an interview with Time. Instead, he believes so-called free-to-play titles could more accurately be described as “free-to-start.”

Even so, during the investor Q&A, Iwata didn’t rule out the possibility of releasing free-to-play games. But he noted, “Nintendo does not want our IP to be used in any scenarios that consumers might think we have taken it a bit far or question whether the content is suitable for children.” The makers of free-to-play games, and marketplace owners such as Apple and Google, have taken heat from customers unaware of the pitfalls of in-app purchases. Last year, both Apple and Google agreed to pay millions of dollars in settlements of complaints brought by the U.S. Federal Trade Commission regarding in-app purchases made by children without their parents’ knowledge.

“The Nintendo brand encompasses more than 30-years’ worth [sic] of accumulated trust that parents can feel safe letting their children play with our products — an asset that is very precious to Nintendo,” said Iwata in the Q&A. “We want to maintain this consumer trust and would not want to damage it in any way.”

Iwata noted during the Q&A that Nintendo and DeNA will come to a “mutual agreement” regarding a business model for their games. He told Time that he’s wary of the free-to-play option because he’s concerned about the “high possibility for the value to be greatly reduced as the history of the music industry has shown.” Still, that’s undeniably the way to reach the highest number of players, which is the main goal for Nintendo in making mobile games.

“While we want to consider how to encourage as many people as possible to accept our offerings, Nintendo, on the other hand, is a bit of a contrarian,” said Iwata during the Q&A. “More specifically, while others may be tempted to follow in the footsteps of other successful companies, we are not interested at all.

“We will take a variety of approaches by repeatedly discussing with [DeNA president and CEO] Mr. Moriyasu such things as where there is room for improvement and whether we can create a brand-new business model. I thought it would be premature for me to share my aspirations, so I did not include them in my presentation, but it would be great if the two companies could jointly invent a brand-new business model.”

Nintendo and DeNA plan to release their first mobile game by the end of 2015.

Verge Video: The best iPhone games