Iwata: Nintendo Eyeing Kindle's Free Internet Model For DS

Nintendo president Satoru Iwata is expressing interest in the business model Amazon uses for its Kindle e-reader -- where internet service is included without cost -- as a possible solution for its handhelds. "I'm interested because it's a new business model in which the user doesn't bear the communications cost," Iwata said at a recent analyst briefing, as reported by the Financial Times. Kindle users pay for the device itself, but the 3G internet service by which they download new digital books is included in the initial cost. Nintendo's DSi currently lets users download games, but they must provide their own wireless internet connection or use a hotspot to get online. With DSi Ware in particular, Nintendo is believed to be making its own strides into the accessible-anywhere downloadable small apps market that has seen wildfire success on Apple's iPhone and other smartphones that do not require a wireless connection to get online. On iPhone and similar hardware, however, the service costs are often prohibitive to many users. "Only people who can pay thousands of yen a month [in mobile phone subscriptions] can be iPhone customers. That doesn't fit Nintendo customers because we make amusement products," Iwata said. "In reality, if we did this it would increase the cost of the hardware, and customers would complain about Nintendo putting prices up, but it is one option for the future." Declining hardware sales are currently posing a challenge to Nintendo's continuing growth. The company recently lowered its profit forecasts for the rest of the fiscal year primarily on a steep drop over the course of the last several months in Wii sales, but the unveiling of the DSi has apparently failed to reinvigorate a portable platform many analysts speculate has reached saturation. The DSi also faces some of the same retailer resistance as has Sony's download-only PSP Go, as many retailers fear a hardware trend toward digital distribution will threaten their income from packaged goods sales. At the same analyst briefing, however, Iwata said he feels it will take "quite a long time" for the games business to leave packaged software behind. In what may be an attempt to address lower-than-anticipated sales of its handheld, Nintendo also recently announced that later this month, it will launch a larger version of the DSi, the LL ("XL" in the West, where it will launch next year) with a bigger screen intended for multimedia users. The company routinely uses hardware refreshes to invigorate its revenues when needed.