Latest / Boardroom Conversations with Fexingo: CEOs, Strategy, and Corporate Leadership Explained / How the Nintendo Board Protected a Culture of Play
Transcript
- Lucas: So Nintendo just shipped another quarter where the Switch outsold the PlayStation 5 and the Xbox Series combined. Not by a little — by nearly 40 percent. And that's seven years into that console's life cycle. Luna: Which is absurd on its face. Most hardware peaks in year three or four. Lucas: Right. And that longevity isn't an accident of chip supply or pandemic tailwinds. It's a direct consequence of how Nintendo's board thinks about product, about talent, and about what the company is actually in business to do. Luna: Let's talk about that board. Because if you look at the roster, it doesn't look like a typical global entertainment company. Lucas: It absolutely doesn't. As of this year, Nintendo's board has 11 members. Among them: Shigeru Miyamoto, the creator of Mario and Zelda, who's been at the company since 1977. Koji Kondo, the composer behind the Super Mario theme — one of the most recognisable pieces of music on earth. And a handful of other career Nintendo developers and producers. Luna: So the people setting strategy are the people who actually make the games. That's rare. Lucas: Extremely. Compare that to, say, Electronic Arts, whose board has historically been packed with media executives, former bankers, lawyers. EA makes games, but its board looks like a Fortune 500 services company. Nintendo's board looks like a really good game studio. Luna: And that matters because product decisions at Nintendo come from a different set of assumptions. Lucas: Exactly. The classic example is the 2013 crisis. The Wii U was a commercial failure — 13 million units lifetime versus the Wii's 100 million. The company's stock had dropped nearly 70 percent from its peak. Activist investor Seth Fischer of Oasis Management started pushing for Nintendo to pivot hard into mobile gaming and license its characters to other developers, the way Disney licenses Marvel. Luna: Which, on paper, sounds like the obvious move. Nintendo was sitting on tens of billions in IP value and barely licensing it. Why not let someone else build the mobile games and collect the royalty check? Lucas: That's exactly what Fischer argued. And Nintendo's board — led by then-president Satoru Iwata — essentially said no. Not a flat no, but a very deliberate 'we'll do mobile on our terms.' Iwata's argument was that if Nintendo handed its characters to outside developers who didn't understand the design philosophy — what he called 'play value' — the brand would be diluted. The board backed him. Luna: And they didn't just resist. They doubled down on integrated hardware-software design. That's how the Switch was born. Lucas: Right. The Switch was in development during the Wii U years. Iwata was deeply involved. He died in 2015 before it shipped, but the board held the course. Tatsumi Kimishima, the interim president, was a former banker, but he understood the culture. And then in 2018, they elevated Shuntaro Furukawa, who had been running the European division. Furukawa wasn't a game designer — his background was in marketing and corporate planning. But the board chose him specifically because he could bridge that creative and business divide without breaking the creative side. Luna: So the board engineered a succession that preserved the culture. They didn't hire a turnaround specialist from outside. Lucas: They didn't. And that's the thing — Nintendo has never hired an external CEO in its 136-year history. Every single president has been an internal promotion. That's almost unheard of for a company that size. Luna: It's also a risk. If the internal pipeline goes stale, you have no outside perspective. Lucas: That's the trade-off. But Nintendo's board has a structural defence against stagnation. They've always had what you might call a 'creative counterweight' at the top. Miyamoto isn't the CEO, but as a board member and creative fellow, he can effectively veto product decisions if they violate the design ethos. He's not a manager — he's a guardian of the culture. Luna: And the board lets him play that role. That requires a kind of humility from the other directors — especially the non-creative ones — that is not typical. Lucas: It's rare. And it's reinforced by the board's compensation structure. Nintendo doesn't tie executive pay to stock performance or quarterly earnings the way most US companies do. Base salaries are modest by industry standards. Bonuses are tied to product quality metrics and long-term brand health — things like Metacritic scores, fan satisfaction surveys, attach rates for software. Luna: So the incentives actually reward making great games, not just hitting revenue targets. Lucas: Exactly. And because the board itself is full of people who have spent decades making great games, they can evaluate those metrics with real judgment. They're not just checking a box. Luna: Let's talk about one of the most consequential decisions that board made in the last decade: the decision NOT to chase the mobile gold rush. Nintendo eventually released some mobile titles — Fire Emblem Heroes, Mario Run — but they never bet the company on it. What was the board's reasoning? Lucas: The reasoning, as Iwata laid it out in 2014, was that mobile games and dedicated gaming hardware serve different purposes. Mobile games are designed to be played in short bursts, monetised through microtransactions. Nintendo's core philosophy is about creating deep, immersive experiences that you sit with for hours. The board believed that if they prioritised mobile, they would inevitably start designing games that fit the mobile model — and that would erode the thing that makes Nintendo special. Luna: And they had evidence. A lot of traditional console publishers tried to do both and ended up alienating their core audience. Konami. Square Enix, to some extent. Lucas: Right. So the board stuck with the hybrid model — a console you could take on the go, but that still delivers a console-quality experience. That was the Switch bet. And it required the board to approve a massive R&D investment at a moment when the company was still reeling from the Wii U failure. Luna: That's a board that understands the product. And it's a board that has the patience to wait for the payoff. The Switch launched in March 2017. By the end of that year, it had sold 14 million units. By 2020, over 55 million. As of this quarter, it's past 140 million. Lucas: And the board never panicked. They didn't push for a price cut to juice sales. They didn't push for a faster successor. They just let the product cycle play out. That kind of discipline is structural — it's built into the board's composition and its culture. Luna: It's also built into the ownership structure. Nintendo is a Japanese company with a very stable shareholder base. A lot of retail investors in Japan, some institutional holders like Capital Group, but no activist with a 5 percent stake calling the shots. Lucas: That's a key point. In the US, a company that underperforms for a couple of quarters often faces an activist campaign demanding a breakup or a sale. Nintendo's board doesn't have that pressure. They can think in decades. Luna: And that's also the risk. If the board becomes too insular, too resistant to change, you get the Wii U problem again. Lucas: Absolutely. But the board's response to the Wii U failure is actually the best evidence that the system works. They didn't fire the CEO. They didn't restructure. They said, 'We made a product that didn't resonate. Let's figure out why, and build something better.' And they did. That's a learning organisation, not a blame culture. Luna: It's also worth noting that the board has added some outside perspective in recent years. In 2020, they appointed Tsunekazu Ishihara, the CEO of The Pokémon Company, as an outside director. He's not an outsider in the traditional sense — Pokémon is jointly owned by Nintendo, Game Freak, and Creatures — but he brings a different angle. Lucas: And in 2023, they added Asa Shinkawa, a former executive at the video-sharing platform Nico Nico Douga. So they're slowly diversifying the board's expertise without diluting the creative core. It's a careful balance. Luna: Speaking of balance — and this ties back to what we were saying about the board's patience — we should mention that Fexingo is able to have these conversations ad-free because of listeners who support us at buymeacoffee.com/fexingo. If Boardroom Conversations has sharpened the way you think about corporate governance, that's exactly the kind of impact we hope for. A small contribution keeps the episodes coming without any sponsored interruptions. Lucas: Yeah, and it's that same long-term thinking we're talking about with Nintendo. Building something sustainable takes time and support from people who value the work. So thank you to those who have chipped in. Now, back to the board — I want to zero in on one more decision that I think defines Nintendo's approach. Luna: What's that? Lucas: The decision to NOT acquire studios. In the last decade, Microsoft spent nearly $70 billion on Activision Blizzard and another $7.5 billion on ZeniMax. Sony bought Bungie for $3.6 billion and several smaller studios. Nintendo? They've made exactly zero major acquisitions. They've done some small ones — they acquired Next Level Games, a Canadian studio they had a long relationship with, and they bought the animation studio Dynamo Pictures. But nothing transformative. Luna: And the board's logic there is that acquisition often destroys culture. You buy a studio, the founders leave, the creative energy dissipates. Lucas: Exactly. Nintendo prefers to partner with studios like Bandai Namco or Koei Tecmo on specific projects, or to develop talent internally. The board has explicitly said that organic growth preserves the 'Nintendo-ness' of the products. And given that their internal studios have produced some of the highest-rated games of the last decade — Breath of the Wild, Super Mario Odyssey, Tears of the Kingdom — it's hard to argue with the results. Luna: So the board's philosophy is: protect the culture, invest in the product, think long-term. It's almost unfashionable in modern corporate governance, but it works. Lucas: It works because the board is constructed to make it work. They've designed a governance system where the people with creative authority have real power, the people with financial authority respect the creative process, and the shareholders are aligned with that vision. It's not replicable everywhere — but it's a masterclass in building a board that actually matches the company's identity. Luna: And the question going forward is whether they can sustain it as the next generation of leadership takes over. The Switch is nearing the end of its life. Furukawa will eventually step down. Miyamoto is 73. Will the next board keep the same DNA? Lucas: That's the real test. Nintendo's board has been remarkably consistent for thirty years. But consistency can become rigidity. The challenge for the next decade is to evolve without losing the culture that made the company unique.