Why It's Still Not Game Over For Nintendo

Posted: Jan 17 2014, 3:51pm CST | by


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Why It's Still Not Game Over For Nintendo
Photo Credit: Forbes

News remain grim for Nintendo's Wii U video game console, and this has led to renewed speculation over the Japanese company’s future as a hardware manufacturer.

The bad news is in the numbers. Nintendo slashed Wii U sales projections down from 9 million to 2.8 million units and 3DS projections down from 18 million to 13.5 million units for FY14 (April 2013 – March 2014.) The slash in projections for the Wii U in particular isn’t surprising, even if a 69% drop is deeply troubling.

Even the holiday boost was lackluster in spite of the launch of Super Mario 3D World which, along with a new 3DS Zelda game, received the highest aggregate review scores of any games in December. In the end, the Wii U fared worse in its second holiday season than during launch, something that bodes very ill for the system.

But it’s not all doom and gloom for Nintendo. The 3DS handheld system was the number one selling console for the 2013 calendar year, moving 11.5 million units, and shows no signs of slowing next year even if it isn’t hitting overly lofty sales projections.

Even with the rise of mobile phones and tablets, Nintendo has shown that it can succeed in the handheld market. And unlike mobile games, Nintendo charges full retail for its 3DS software and, for its numerous first-party titles, pockets all of the profits from those sales.

Beyond diluting the brand, Nintendo risks losing this level of per-unit profitability with a move to mobile. In the short-term, bringing Mario to iPhone or Xbox One may very well lead to more sales for the company. But in the long-term Nintendo would lose the very thing that makes it unique: a combined hardware and software brand that has no real counterpart across the industry. And Nintendo has the cash on hand to weather a Wii U disaster and come up with something better.

Mario on the iPhone could easily cannibalize the 3DS market, and I’m dubious that the transition to mobile would be a benefit to Nintendo’s brand, trading high-quality large-scale productions for bite-size touchscreen gaming and, one imagines, micro-transactions. The in-app purchase market is fickle at best, and there’s certainly no guarantee that Nintendo could make the leap.

In the near-term, Nintendo does have a problem on its hands with the Wii U. As much as I enjoy the console personally, I think it’s safe to say that Nintendo has missed in a very big way. There will be no repeat of the Wii’s success. The casual gamer still exists, but they’ve largely moved on to the much more casual smartphone/tablet market.

But the casual gamer isn’t Nintendo’s only demographic, or at least it doesn’t have to be. Nintendo can still appeal to the “core” gamer without abandoning kids and families. That means going beyond Mario, not simply spreading Mario out over myriad other devices.

I wrote previously that the Wii U may be a lost cause, and that Nintendo ought to get to work on a successor as quickly as possible—whether that’s a new, more powerful home console or a handheld/home hybrid. Interestingly, Nintendo has increased its R&D budget, which may indicate work is being done in that capacity already.

The number one reason Nintendo ought to stay in the hardware market is the profitability and quality of its first-party games. But Nintendo needs to do more to bring third parties to the table also.

Reports from third-party developers who worked on early Wii U titles are pretty astonishing, revealing a company that prioritized a silent console with a small footprint over a machine with reasonable hardware specs, and a team attempting to develop an online network that hadn’t even used Xbox Live or PSN for comparison purposes.

It isn’t that Nintendo lacks vision—certainly the Wii U was an attempt at something innovative. Rather, Nintendo has failed to anticipate the need to stay competitive from a technical standpoint, once again rendering third party support less than stellar. Gamers don’t care if their console is small and quiet if it doesn’t have any games, and the Wii U catalog, while filled with a handful of real gems, remains surprisingly thin.

Of course, it doesn’t have to be this way. Now that Nintendo has made the leap from SD to HD and has a feasible online network in place, the company could release a successor to the Wii U that not only competed with Sony and Microsoft in terms of hardware specs, but made third party participation simpler, more streamlined and, one hopes, more profitable.

Nintendo doesn’t need to ape the competition, either. Its focus on family-friendly titles, platformers, and first-party IPs is welcome. Nintendo doesn’t need to get into the business of first-person military shooters. It should, however, make its consoles an attractive option for third-party first-person military shooters.

Perhaps I’m wrong. Perhaps Nintendo would benefit greatly from entering the smartphone market, or transforming into a software company and releasing Mario on PS4 and Xbox One.

But I worry that this would ultimately weaken Nintendo’s position in the market rather than strengthen it, and weaken the industry as a whole by removing an important competitor from the console business.

Investors may be balking at Nintendo’s short-term forecast, but the success of the recent next-gen console launches shows that there is still money to be made in the console market.

A home console with sales matching the 3DS would allay most worries, in any case, and there’s no reason whatsoever that Nintendo couldn’t achieve that. Maybe not with the Wii U, but one failed console does not spell the end of one of the industry’s most successful businesses.

If Nintendo can learn from the mistakes of the Wii U they can get back in the game. The 3DS certainly illustrates that success for Nintendo is well within its grasp, in spite of all the new competition from mobile, next-gen rivals, and whatever else the future holds.

Follow me on Twitter or FacebookRead my Forbes blog here.

Source: Forbes

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