Nintendo: Beginning of the End?

After more than half a century as a leader in the video game industry, Nintendo is in trouble. Revenue has fallen in fiscal year 2014, and stakeholders have been getting antsy over Nintendo’s recent string of blunders. The Japanese conglomerate let its weaknesses grow, failing to address even the most prominent issues, until they grew too big to ignore. Now, the company faces some hard choices, and needs to take a good look at the hole they dug themselves deep into. Have they learned from their mistakes? And what were those errors in judgement, anyway?

An evolution of Nintendo controllers (Source)

In 2012, Nintendo launched their new handheld console, the Wii U. Opening sales were dismal, but not unexpected: Nintendo’s 2011 console, the 3DS, required a significant price drop (from $249 to $169) and the release of a beloved franchise game, Pokemon X and Y, to gain momentum. By 2014, the 3DS sold 43.33 million units, and 12 million copies of Pokemon X and Y. Nintendo assumed that with new games added to the repertoire, more consumers would flock to the Wii U. The reality was much more grave.

At the beginning, the Wii U made no impact with the consumers. Most people assumed it was a new controller for the Wii, not a standalone console. The Wii U received criticism for the technology more so than the lack of launch games. In an attempt to make the device as quiet as possible, Nintendo engineers sacrificed CPU power in order to limit the need for cooling fans, which made the Wii U struggle to process games made for the Xbox 360 and Playstation 3. Nintendo thought that adding online modes, the Miiverse and other tools would make up for the lack of power in the machine, forgetting that consumers buy consoles for gaming first and foremost. The features the team stuffed into the Wii U were redundant and not innovative, considering the other consoles had long established similar features. A day-one patch was required to make half the features function properly, revealing how under-cooked the software was by the time the OEM’s began producing the Wii U. All of this could have been forgiven if Nintendo’s timing would’ve been better: by the time the Wii U came out, Sony and Microsoft already announced their next-gen consoles. Consumers were eager to wait for more details about the new consoles, knowing they were going to have faster CPUs and better graphics cards, enabling a more encompassing and impressive gaming experience. This also created conflict for third-party game developers, who had to decide how to utilize their limited resources: should they convert an existing game for a struggling handheld console, or develop a new game for the next-gen consoles? Most third-party developers chose the latter, and backed out of the Wii U market.

Stock prices the day Nintendo disclosed a loss of $750m in revenue (Source)

By January 2014, the Wii sold only a fraction of what was forecast – barely 3
million units out of what should have been 9 million. Nintendo executives took pay cuts. Stock prices fell. Apologies were made on the shareholder’s quarterly report. The only way to save the console was to release fan-favorite games that would garner interest. While Nintendo first-party studios began their work on a new Legend of Zelda and a Mario Kart 8, the marketing department searched far and wide for third-party developers for the Wii U. It’s important to note that Nintendo has always had a third-party problem. With extraneous “quality control”, limited support for developers, outdated dev tools, it’s no wonder Nintendo has driven away plenty of studios. Even the Wii, one of the best selling consoles of all time, clocking in at 101 million units sold, had a limited amount of games developed for it. Part of the problem for the Wii was that marketing positioned the platform as a fitness tool more so than a gaming tool. The majority of the top selling games for the Wii are fitness related. Even more disconcerting is that the highest selling game, Wii Sports sold a substantial number more units than the next game, by a margin of 50 million copies. That means most people bought a Wii and Wii Sports and stopped buying, and if they did buy, it was Nintendo’s first-party games. Third-party developers barely made any money on the greatest selling console of all time – and that’s quite a feat. Nintendo realized this was a problem, and tried to recruit more third-party developers for the Wii U. It didn’t work.

The difference between now-obsolete PS3 and Wii U graphics for Batman: Arkham Asylum (Source)

An anonymous article surfaced in January 2014, detailing the toils of working with Nintendo to make a Wii U game. The game dev who authored the article explained how tone-deaf the management was and how little support Nintendo gave the studio. The most jarring moment was when the author recalls a meeting with some of Nintendo’s developers to discuss the online feature the Wii U was going to debut. “At some point in this conversation we were informed that it was no good referencing [Xbox] Live and PSN as nobody in [Nintendo’s] development teams used those systems so could we provide more detailed explanations for them?” Not being familiar with a competitor’s online systems that you’re trying to emulate is mind boggling. The misgivings of Nintendo being out of touch with reality seemed confirmed.

Wii U’s Pro controller, for the not-so-casual gamer (Source)

Another example of Nintendo’s failure comes in their attempt to shift their target demographic. The advent of the Wii was brought on by marketing genius: here was a platform for people who just wanted to have fun with the family, who were alienated by Sony and Microsoft’s appeasement of hardcore gamers, who just wanted to have casual fun. The plan worked. With the Wii U, Nintendo attempted to emulate the same experience, targeting non-traditional gamers and families, while adding in features they thought would garner a gamer crowd. Adding in Call of Duty, Mass Effect, and other major third-party games that favorites of hardcore gamers only confused the public more. Why would a hardcore gamer play a graphics-heavy, CPU-intensive game on a Wii U, a product barely comparable to “current-gen” consoles? And why would Nintendo sell a standalone “Pro” controller for the Wii U that is blatantly similar to Xbox’s? There is nothing worse than making a product attempting to appeal to everyone – it ends up appealing to no one but a specific niche market. Non-traditional and family gamers have a Wii and have mobile devices for handheld games, so no one would really need a Wii U, and hardcore gamers would rarely want to play games on a smaller screen when they have only a while to wait for the next-gen consoles.

Wii’s top selling games, all first-party games (Source)

The 3DS targeted a different segment of the market, the same segment Nintendo’s previous handhelds, like Gameboys, targeted. However, because children’s eyes are allegedly not developed enough to stand 3D for long periods of time, Nintendo warned the 3DS was not for young children. Enter the newly-released 2DS, a flat, underpowered console that plays 3DS games without a 3D toggle. It was a questionable decision on Nintendo’s part – instead of putting in more money into marketing the Wii U, a console that won’t strain a child’s eyes, they create a new console. On the other hand, it’s understandable, because consumers want to play more DS games than Wii U. And yet, after the release of Mario Kart 8 on the Wii U, sales for the failed console have skyrocketed 200%. Consumers buy Nintendo consoles so that they can play Nintendo games, which is both a blessing and a curse.

Games starring (not featuring) Mario (Source)

A lot of current gamers grew up on Nintendo games, from Mario to Pokemon. Nostalgia reigns supreme when talking about Nintendo’s famous franchises, and, to a degree, it’s probably nostalgia that is keeping Nintendo out of the red financially. One of the greater criticisms of Nintendo as a whole is the rehashing of their intellectual property, creating the same kinds of games with the same characters with similar mechanics. Side-scrolling platformers are fun, but are they a sustainable business model? Mario, Donkey Kong, Yoshi, and Kirby plague Nintendo’s releases annually. In 2012, 6 Mario-featuring games were released. In 2013, the number rose to 9. 2014 has seen 6 Mario games so far. The only original game announced at Nintendo’s E3 conference has been Splatoon. Other years have been just as meager with offering new IPs. In order to boost Wii U sales, Nintendo remade Legend of Zelda: The Wind Waker, a 10 year old game that most people would replay for nostalgia’s sake. The common counterargument is that many studios rehash their IPs, such as Ubisoft’s Assassin’s Creed, Rockstar’s Grand Theft Auto or Square Enix’s Final Fantasy. The difference, though, is that games like Assassin’s Creed or Grand Theft Auto have not been produced for as long and as extensively as, say, Mario games. Ubisoft also produces unique IPs, from the stylistic WWI-themed Valiant Hearts, to open-world racer The Crew, to the Just Dance series. Unlike Nintendo, Ubisoft does not need to slap on the same set of characters on every game in order to reach sales goals. And Square Enix’s Final Fantasy has always had changing mechanics of gameplay, going from turn-based to live-turn-based to live combat. Square Enix has even dabbled in MMORPG twice, testing their IP in new formats, which Nintendo fails to do in a grand scheme of things.

Nintendo’s loss of focus is well-reflected in the Wii U. Despite being able to hold themselves in the black for the past few decades, their options are running out as they find themselves deeper in a hole they dug for themselves. How much longer can they ride on the coattails of past glory? And will they pull themselves together before it’s too late?


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