What Nintendo needs isn't smartphones, but surprise

The industry's top company only succeeds when it does the unexpected

Nintendo blew it. That much is clear, and even Satoru Iwata doesn't debate it - Nintendo blew it. The financials could be much worse, but the unit sales? Way, way below targets, and in the case of Wii U, way below sustainability. Nintendo blew it! Shout it from the rooftops, if you can find space on a rooftop next to all the people who are already shouting it, with altogether too much peculiar jubilance in their snide, told-you-so voices.

Nintendo blew it. Blew what, though? That's a tougher question. The company's year has been a lot more complex than anyone is giving it credit for. In 2013, Nintendo was proud owner of the best-selling console in every major territory worldwide, and launched an enviable range of first-party software titles that sold over a million copies each - more than any other publisher out there. The company retained its crown as the biggest platform holder and the biggest software publisher in the business.

Yet, Nintendo blew it, because it also had a platform that utterly under-performed even the most conservative of estimates - a console that, on its current trajectory, is set to undershoot the low bar set by the GameCube and become the firm's worst performing home console ever. Moreover, Nintendo blew it in a subtle but crucially important way - with startling incompetence for a company of its size, the firm predicted sales figures for both the 3DS and the Wii U which were absolutely ludicrous and then failed to revise them as the year carried on, meaning that even the solidly performing 3DS has undershot its targets, while the Wii U looks even worse than it ought to (which is pretty bad to begin with).

"Nintendo's stock didn't tumble too badly after it revised its guidance, largely since nobody with a clue actually thought the firm was going to hit its targets anyway"

This latter aspect has made the coverage of Nintendo's situation even more negative than it would already have been (and there are plenty of people waiting to pile onto the company at the slightest provocation), since it covers up the success of the 3DS and its software line-up - seriously, 3DS has had an amazing year for software and is now set up with a library that effectively secures the console's future - in a heavy smearing of corporate incompetence. It has also, understandably, deeply annoyed shareholders, because they rely on companies making accurate predictions to figure out whether or not to pick up stock in a firm. That said, Nintendo's stock didn't tumble too badly after it revised its guidance, largely since nobody with a clue actually thought the firm was going to hit its targets anyway. Incidentally, the company's stock price is about 50% higher today than it was 12 months ago, in line with the rise in the Nikkei 225 index - which means that Japanese investors, at least, are rating the company as broadly neutral rather than actually negative.

Still, Nintendo blew it, and that means lots of people are making angry noises. Iwata must go, say some; Nintendo must exit hardware, say others; time for Mario on smartphones, say still others. The owners of all of those voices are going to be disappointed - not least, I believe, because very few of them actually understand Nintendo as a company or the Japanese corporate environment in which it operates. They don't understand that activist shareholders don't mean a tuppenny damn to a company whose shares are largely held by a combination of the founding family, the senior staff and (more significantly still) the complex web of interrelated share- and debt-holdings that connects Nintendo with Japanese banks and other corporations, none of whom have the slightest concern in being "activist" except in the most extreme of circumstances. An earnings miss? Pah! Japanese corporations routinely missed annual earnings every year for decades after the Asian Financial Crisis of the early 1990s, but shareholder pressure to change top management never materialised then, and it won't materialise now. Iwata is secure until he does something sufficiently wrong to have a taint of scandal around it, and that's deeply unlikely to happen.

Exiting hardware? Absolutely no chance. Nintendo's primary view of itself is as a toy company and its core business model is selling hardware (generally profitably) and then selling software that runs on that hardware (extremely profitably). The synergy between the company's hardware side and its software side is legendary, as is the extent to which each Nintendo platform is designed with the requirements of planned first-party software in mind. For that reason alone, it's likely that the Wii U will eventually have a clutch of startlingly excellent games, matching last year's critically acclaimed Super Mario 3D World in quality - although whether that will actually do anything to resuscitate sales is another question entirely. The point is that this approach isn't going to change; the inertia behind Nintendo as a hardware company is immense, and moreover, despite this year's earnings miss, it's largely working. Nintendo is, pretty much every year, the largest and most successful game software company in the world. Would it retain that crown on someone else's hardware? If you rush to answer "yes!" to that question, either your crystal ball gazing skills are excellent or you haven't thought about it hard enough; I don't think there is a good answer to that question right now, and I know Nintendo will be eyeing Sega's post-hardware decline and thinking about its own potential fortunes as one-among-many on a smartphone app store. Right now, Nintendo has around 40 million 3DS owners who are keenly anticipating future first-party releases from the company - keenly enough that they start to agitate and make noise if there's ever a gap in the release schedule. Would that be true on iOS, or Android, or even on a competitor's console platform?

"one of the company's failings, in some regards, is that it still doesn't really have a global outlook, with Nintendo of America and Nintendo Europe being rather stunted"

How about a limited engagement with smartphones, then, even if they wouldn't make the leap entirely? That's plausible. Nintendo's primary point of reference for its product decisions is Japan - one of the company's failings, in some regards, is that it still doesn't really have a global outlook, with Nintendo of America and (even more so) Nintendo Europe being rather stunted local offshoots whose actual contribution to the firm's planning and success is pretty obviously minimal. In Japan, smartphone games are a huge sector, and interestingly, there's seemingly more of a market for premium-priced games than there is in the west, where free-to-play is increasingly the only show in town (although premium-priced games are carving out an interesting niche there too). There is, I believe, some potential for Nintendo to start putting Virtual Console titles on smartphones, perhaps initially through a tie-up with one of Japan's carriers. However, I'd expect this roll-out to be slow and careful, with Nintendo incredibly mindful of the possibility of damaging its core brands by launching Mario or Zelda games tainted by emulation problems or crap touchscreen controls. Still - it could happen, and is by far the most likely of the "demands" being made of the firm to actually be met in some limited form.

If Iwata isn't going to go (he's not), Nintendo isn't going to exit hardware (they're not) and the company's future isn't on smartphones (it's not, although some cautious toes in that water may be seen in time), then what is Nintendo's reaction to its present situation going to be?

I've stated this before, but it bears repeating - Nintendo has incredibly, insanely deep pockets. The firm has set aside a vast war chest over the course of its successful years, and it can easily ride out even the complete failure of a console platform, supporting that platform sufficiently to satisfy consumers while quietly working on a replacement. That's what Satoru Iwata told me Nintendo would do if the Wii failed completely - they'd make something else and try that instead - and I see no reason why that logic would have changed. If anything, the firm's financial position is even stronger now than it was then.

What will Nintendo make? There's a lot of speculation around that, but most of it is evolutionary. A faster, more powerful DS / 3DS style handheld. A Nintendo tablet, capable of handheld gaming and being hooked up to a TV. A full-spec next-gen console built to rival the PS4. All of these are options for the company - the tablet computer one is even an interesting one, combining as it does the handheld market (which Nintendo always dominates) with the home console market (where it's hit and miss). However, they all miss the crucial ingredient which Nintendo actually requires to bring itself back to success - surprise.

"Nintendo needs the element of surprise. It surprised the hell out of everyone with the DS, it surprised everyone with the Wii"

Nintendo needs the element of surprise. It surprised the hell out of everyone with the DS, a daft, stupid idea for a handheld console that everyone expected to be trounced by the much more comprehensible PSP. It surprised everyone with the Wii, a weird, tiny, underpowered system with a controller that looked nothing like we expected - so odd that it led me to rather bluntly ask Iwata what he planned to do if everyone hated it and the system flopped, hence his comment above. The DS is the best-selling console in history (or at least, tied for that honour with the PS2); the Wii trounced the Xbox 360 and PS3 in the last generation of hardware. Nintendo does exceptionally well when it surprises people. It creates a clear gap between itself and the competition and makes "the Nintendo Difference" into more than just a silly slogan. Even those who own a more "mainstream" console end up wanting a Nintendo one too, because it's so interesting and different, while those from outside the core gamer market find themselves intrigued by the very peculiarity and curiosity of the devices and their software.

3DS and Wii U fail the surprise test. They're practically indistinguishable from their predecessors, both in appearance and in branding. 3DS suffered terribly from being mistaken for a new version of the original DS hardware; the Wii U, I suspect, is doing even worse, with many consumers not realising that it's a new console entirely and not a new controller for the Wii. There's been a disastrous failure of communication, branding and marketing, which has compounded the more basic error - assuming that the success of the Wii meant people wanted more of that kind of thing. Nintendo's strength is providing people will surprises, things that look daft to begin with and then turn out to be precisely what we always wanted and never realised. If it's to successfully come back from its present mess, it needs to do so by surprising us, not by following along the dull path analysts would now demand of it.

That, I earnestly hope, is what the company is working hard on in Kyoto right now. I don't want Nintendo to abandon the Wii U, and I don't think that will happen. The installed base is small, but big enough to be worth caring about, and the console still has the makings of a profitable platform, albeit a niche one. However, alongside continued support for the Wii U (and hopefully, a drastic change in marketing and branding), Nintendo is hopefully also working on something else; something more important and simply more Nintendo; its next big surprise.

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Latest comments (33)

Good article. However, you're basically saying that Nintendo needs to the following: Get into a position where they don't need third party support to be successful. Having a string of Wii-like outliers is not likely, nor would it be sustainable. With the way big publishers have taken over the full-price market and the rate mid-core, smaller studios have closed down or gone mobile only, you can't afford to not have third parties on board.
With the increased complexity of development, I don't think Nintendo can sustain a string of hits to carry their consoles on first-party title merits alone. The full-price game market is, more than ever, dependent of blockbuster multiplatform titles.

Edited 1 times. Last edit by Felix Leyendecker on 24th January 2014 11:32am

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Gwyn Howell Developer 5 years ago
Excellent article. There's been loads of "this is what nintendo needs to do" style articles written recently and this one is probably the best of the lot. Quitting the hardware business? Putting Mario on smart phones? Sick of hearing people constantly throw these so called solutions around. I agree that Nintendo needs to see out the Wii U. They absolutely need to sort they abysmal marketing efforts out, particularly here in the UK. Then, as you correctly identified, they need to hit the industry with something that no-one sees coming - the nintendo difference, so to speak. Virtual reality, or augmented reality, or yet another crazy different controller - none of these will work, as we already see them all coming. I have no idea what the answer is - it's one of the most difficult things to do. But you can bet for sure that Iwata and co are working on it, if they haven't figured it out already. The future is an fascinating one no matter which way you look at it.
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John Kara Consultant 5 years ago
Desperation gives birth to innovation and invention. Pretty sure that Nintendo will produce a game shifter and draw much media attention at E3.
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Show all comments (33)
Nick Ferguson Games Account Manager, Amazon Web Services5 years ago
"However, you're basically saying that Nintendo needs to the following: Get into a position where they don't need third party support to be successful."

Nintendo have never needed third party support to be successful. In fact, their 3P support has been relatively weak since the 16-bit era.
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Nick Ferguson Games Account Manager, Amazon Web Services5 years ago
Oh, and: Great article, Rob. I pretty much agree with it 100%. I was the only person at EA Canada working on Nintendo DS games when the rest of the (100+ person) handheld team was focused on PSP development, so I remember EXACTLY what most industry people expected the result of DS vs PSP to be.

Edited 1 times. Last edit by Nick Ferguson on 24th January 2014 4:20pm

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@Nick: It hasn't always worked out for them, though. Right now they are hurting for it.
Hoping for a smash-hit that massively expands the userbase outside the core gamer demographic isn't a sustainable long-term strategy. Having solid third-party support would allow them to find a middle ground between stellar success and utter failure.
If they deliver duds a few times in a row, it's basically a lost generation of kids that never grew up with nintendo games and won't continue buying their products.
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Rick Lopez Illustrator, Graphic Designer 5 years ago
Boy was I tired of all these articles and posts with nothing more to say than Nintendo should be on cel phones and that they should buy oculus rift. But Im still rooting for them and am pretty optimistic that they will find a solution. There business model is one were they keep themselves relatively small and able to keep most of the money they make in the bank. The have leg room to figure things out for a few generations. As far as third party support. I owned all Nintendo consoles and after the SNES, third party wasnt that much of a big deal. What i would like to see Nintendo do, is consolidate hardware features. I have no interest in playing 3DS games in a home console. The nature of mobile and home games is very differant. Fire Emblem works on a portable, because its similar to a chess or puzzle game. But a game like mass effect or metal gear requir long hours of playtime and concentration. Not that Fire Emlem hasnt sucked me in. Ive so far clocked in 70 hours on that 3DS game. However when i mean consolidate hardware features is give the 3DS a full set of buttons so it can also function as a game pad. In fact the controller itself can be a a 3DS packed in with the home console. Your able to play games home or on the go. And features like the touch screen, controller, Dual screen gaming, eSHOP, AR applications and portability could be consolidated. And each console will have its own sets of games, because the 3DS will have two screens. The virtual console can be an application that can be installed on android and iOS phones. People pirate those games a great deal, why not have all your eSHOP purchases extend to mobile devices? It doesnt necessarily put Nintendos games on celphones. You purchase everything through Nintendo harware and the premium expirience is there. The virtual console aplication will be free or just 5$. You can also log into the eSHOP from any device, make purchases, view trailers ect. from any device... and make it all as accesible as a youtube video. Game functions can also spread across devices. In fact they can even allow the occulus rift to work in someway with the new console, enabling Nintendos own games to function through any virtual reality headset. In fact they can allow game developers to make games for there consoles while extending game funtionalities to other devices. Like I can have an RPG, where I can customize my characters and engage in text based relationships with characters or gather information in a town, and I can get home and play the combat and story portions of the game. And the parts I can play mobile I can also play in the home version. But instead of written text and handrawn characters I can expirience them in fully voiced audio and 3D graphics, fit for a HD TV. This would work for a game like mass effect in which i spent alot of time in the citidel and normandy, just striking conversations with characters, shopping, playing mini games in casinos, customizing characters etc. In turn these functions can extend to celphones and other devices.

Im just speaking based on what they ALREADY have. However rumors are circulating around about something called the Nintendo Fusion...

But Nintendo has a few killer apps and I know many people havent purchased a WiiU cause they are simply waiting on smash bros. and supermario kart. I do acknowlage Nintendo is in a bind, but the game isnt over for them, not by a longshot. My killer apps are X and Fire Emblem X Shin Megami Tensei. Bayonetta 2 looks awsome too. So i wouldnt count Nintendo out yet.
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Klaus Preisinger Freelance Writing 5 years ago
Was the NES surprising?
No, it just had good games and decent power. The only ones surprised were the cult of the "computer games crash of 1984", which mainly consisted of managers not wanting to believe that people do not want to play shitty overpriced games and instead started a myth of people having lost interest in games, because then they would not be the ones to blame. Meanwhile Nintendo made money selling games which were distinctly not shitty by contemporary standards.

Was the Super Nintendo surprising?
No, it had the fanciest graphics (256 colors) at the time and 3rd party support with more must play games than ever.

Was the N64 surprising?
No, it had 3D, just as expected and it had good first party games. The controller was the first clunky version of what is now expected from a controller. It was a novelty, but it made sense! Since the N64 cartridges could not compete with CDs and 3rd party support was thin.

Was the Gamecube surprising?
No, it did exactly what you'd expected it to do. Be as powerful as a PS2, have 3rd party games and some DVD discs and improve on the rest as well. It still went nowhere, since the PS2 butchered everything at that time. 3rd party support for the Wii also was not as great as to put Nintendo in a competitive spot in all markets.

Was the Wii surprising?
Yes, but not in a positive way. Nintendo certainly wasn't aiming for people to go past the PS and Xbox section of stores to the place where Wii games were lying around. Again they had a novelty controller, but this time it did not make sense to people and was considered broken by the core gamers. But by god did Nintendo know whom to sell this to. Then Nintendo had another controller and leveraged that. Then even more companies made even more plastic controllers, guitars and drawing boards, until somebody discovered the emperor naked around the time the vitality sensor was announced.

Was the WiiU surprising.
Yes, but not in a good way. The WiiU is the novelty encore controller with the key difference that nobody knows who this thing is aimed at. It does not really make sense and so far Nintendo failed to find people and games for whom this controller makes sense instead. Current TV commercials featuring Steffani Graf and Andre Agassi certainly do not feature the new controller, but rather the old ones. Which is all you need to know.

Meanwhile on the DS systems, Nintendo has something Sony does not have, which is games, games, games, more games, more games and some more games for good measure.
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Jeff Kleist Writer, Marketing, Licensing 5 years ago

Excellent analysis. The NES also had a bully pulpit, applying legal in Jaoan/illegal here tactics to stop retailers from carrying the competition. Nintendo started to stumble when they could no longer hold the third parties livelihood in the palm of their hand. And there was a lot of bad blood from that.mthats continued to curdle.

For what it's worth, the plastic guitar thing was great and worked, but the novelty wore off for most people. It was revolutionary, but Activision killed it dead milking the cow to death sadly.

And I do know who the WiiU controller is aimed at:Japanese children in apartments. Often times the entire family sleeps in the living room with a single household TV. This lets little Akira play while mommy and daddy watch the news. One of Nintendos biggest problems is that they're stuck in 1992, where one size fit all. That hasn't been the case for many, many moons now.
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Greg Wilcox Creator, Destroy All Fanboys! 5 years ago
Well, add "surprising" to games and it's an even better equation. Nintendo needs to get out more unique new IP like Eternal Darkness (which was a surprise because it was an M-rated game from a fine dev team) as well as non-mascot games that have appear outside the family crowd. Sure, Mario and Zelda and other stalwarts are automatic sales to millions, but there is a fatigue that seems to be settling in were you see reviews that at some point have "Yes, it's another Mario game..." in them before getting to the usual glowing praise.
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Richard Vaught Studying B.A. in Game Design, University of Advancing Technology5 years ago
I love it when westerners bag on Nintendo. It shows their complete ignorance of the Eastern Mindset. Nintendo works because it plays a long, long, long game. It has the cash reserves to handles slow start ups, and knows beyond a shadow of a doubt that they will produce, in the long term, a first party library that is slam full on surefire hits. I actually find it unfortunate that other platforms are not taking their approach.

The western mindset wants quick cash. They are enamored with the concept of overnight billionaires and easy money. Nintendo has historically resisted the trend to mass produce crap games, favoring quality over quantity. For them, it means that their consoles are generally slower to take off but have a longer and more consistent life cycle. The fact that so many games from the NES, SNES, N64, GB, GBA, GC, DS, and 3DS are still being played despite advances in hardware are key indicators of the fact that there approach works in the long term.
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Klaus Preisinger Freelance Writing 5 years ago

You make it sound as if all games not made by Nintendo were badly tossed together turds. But the reality of the current gaming market is that no customer needs to exchange quality for more quantity. The market as is can deliver amazing quality in huge quantities. Just not on a WiiU, which might cause Nintendo some problems.

I am also not so sure about the "longer [...] lifecycle" of Nintendo. Their hardware cycles were NES 7 years, SNES 6 years, N64 5 years, Gamecube 5 years, Wii 6 years. That is shorter than their competition. We have certainly not seen a five year console cycle from Sony yet. Once a new hardware is out, Nintendo cuts support for the old one faster than Microsoft dropped the original Xbox. While the core franchise games usually are at least good, Nintendo certainly knows how to pull off a cash grab. The entire Wii generation was one novelty stunt after another. Wii Fit and Brain Trainer are not long term, those are fast turnaround games applying the trend of "gamification of everything" to a new demographic before the competition is ready to do the same. Nintendo practically championed this and a few years later you look in your garage and realize there was nothing long term about standing on a plastic board.

Nintendo is certainly unique in its philosophy which seems to be centered around the notion of being utterly self contained. This is a Nintendo mindset, not an eastern mindset. Look no further than Sony to see how a company tries to be the polar opposite in the way it is reaching out, because they know that their hardware needs more great games to survive on the market than Sony can produce. Last time I checked Sony was not the home of shovelware, the studios they own produce some of the highest quality games ever made. Across all industries in Japan, you will find many companies enjoying great success on the notion of finding world wide partners and earning money together by creating products together.

Nobody is disputing that Nintendo has enough strength to compete with anybody on hardware and software. They are more than a match for Sony and Microsoft. Trouble for Nintendo is that Sony and Microsoft do not just rely on their own strength but have created these large collectives of publishers around them, lending them even more strength. And this combined collective strength is the thing putting Nintendo home consoles under huge pressure. Nintendo has resisted this pressure for 20 years now! Which is a crazy amount of time and there have always been little cracks here and there. The WiiU adoption rate of consumers being the latest one. Considering the past 30 years of Nintendo consoles, this is not to be taken lightly.
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Sasha Yelesin Student 5 years ago
On the point about the Japanese children, I think it's equally relevant here in the States. Parents can play a game while this kids watch Sesame Street, so it works both ways. With the PS4 or Xbone, after that long day at work you might still have to wait until after younger kids go to sleep before you can launch that big bad action game you love.

Speaking of being aimed at stuff, the Wii U can be set up as a universal remote, meaning you can pick which TV channel you want to watch and it'll go straight there. And it's basically Smart Glass with the tablet built into the controller. For Microsoft these are bullet points on the back of the box trying to make them look innovative and fresh. Why Nintendo isn't going "we do that for $200 less" is a mystery to me.

Edited 1 times. Last edit by Sasha Yelesin on 24th January 2014 10:44pm

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Nicholas Pantazis Senior Editor, VGChartz Ltd5 years ago
@ Klaus Actually, I think you could make a solid argument that there are VERY few non-Nintendo games that aren't released as buggy, incomplete messes, or at the very least few games released without incredibly shady, abusive, and distracting pricing schemes. Look at the entire Xbox One and PS4 launch lineups. Everything EA has released for the past two years. Call of Duty literally reskinning cutscenes from old games. Ubisoft's Assassin's Creed totally lost as to how to move forward.

There are very few exceptions like GTAV, Bioshock infinite, and The Last of Us in a given year as complete, universally well-received, and polished products. Indeed I bet if you totaled up all games that meet that "Nintendo standard" in 2014, you'd find Nintendo still made more than all other publishers combined. You know that the Wii U has more 1080p @ 60fps games than the Xbox One and PS4 combined? And yes, they're all made by Nintendo. There really is a level of quality that the rest of the industry RARELY competes on in Nintendo games. They may not be to everyone's tastes, but they are the most finely, precisely, and skillfully tuned works in gaming.

Edited 1 times. Last edit by Nicholas Pantazis on 24th January 2014 11:59pm

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Sasha Yelesin Student 5 years ago

Totally agree. I just heard Tomb Raider Definitive Edition only runs at 30fps 1080p on Xbone, which I think is kind of ridiculous because it doesn't seem like much of a step up from the 360. And you can argue that GTA V belongs in the top paragraph based on the rocky launch of the multiplayer.

And yeah, there are tons of great looking and smoothly running games on the Wii U. And there is a good amount. Sure, when you compare the library of the Wii to the Wii U there a huge drop off in number of titles released for the system, but the quality is there. The Wii was full of shovel ware, cash grabs, and garbage, making it difficult to find the outstanding games like Muramasa, No More Heroes, etc. that should have been big sellers. Same thing when comparing the DS to the 3DS. Less games, but they're higher quality.
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Jeff Kleist Writer, Marketing, Licensing 5 years ago
@Nicholas that's pretty easy when the games are of such low complexityEnter the Matrix ran at 080i on the original Xbox Nintendo has never been known for complex AI routines or hardcore textures. So your comparison is very much apples and oranges. Remember also that while many games will claim 1080, they're upscaling internally.
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Roland Austinat roland austinat media productions|consulting, IDG, Computec, Spiegel Online5 years ago
Thanks for a voice of sanity here, Rob. I'm 100 percent with you and interestingly enough even wrote a similar column Friday morning in Handelsblatt, behind a paywall at the moment.

Nintendo is the company that
- turns 125 this fall
- created the analogue stick
- created force feedback controllers
- dabbled in 3D way too early (Virtua Boy) but still kept going
- created a handheld with two screens - "how can that ever work!", yeah, right
- owned the motion control games business
- created a 3D display that doesn't need glasses

I'm not afraid that Nintendo will drop out of the hardware market anytime soon. However, I'm concerned that Nintendo doesn't really know how to market itself and its products.

Granted, I don't watch live TV so I couldn't tell you about any Nintendo TV ads here in the US, but I was surprised to learn that "Wii Fit U" has already been out since November, including a pedometer that measures actual height differences, too. For $65 - take that, Fitbit. Alas, no marketing. And this is just one example. How is it over in Europe, does Nintendo fill the airwaves?
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Nick Burcombe CEO & Co Founder, Playrise Digital Ltd.5 years ago
Not sure I agree with that - look at what happened with Atari. Nintendo needs to find a way of becoming more relevant in today's market. I know so many peoples whose 6-12 year old kids werent asking 3DS (or 2DS) this Christmas - but Nexus 7' name. Says quite a lot about changes in attitudes amongst their core audience.
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Klaus Preisinger Freelance Writing 5 years ago

It is easy to list Nintendo's hardware achievements, but it is more important to look at the financial impact of those innovations. Except for the motion control, Nintendo did not capitalize much on their hardware innovations. Usually Sony and MS caught up with them fast, e.g. analogue sticks with rumble. And the DS series succeeded despite its two screens, not necessarily because of them. Same can be said about the 3D in the 3DS. Already we can see how the 2DS marches towards the WiiU controller.

But do not just look at the hardware side, look especially hard on the software side. In 2007 we saw the way video games are being sold explode. Before, there were mostly closed platforms and a system of paying your way into an oligarchic system of publisher nepotism. Suddenly, Apple, Google and Facebook opened the floodgates and changed the way we look at how games are ought to be published on a platform digitally. Since 2008 there has been a revolution of independent and smaller scale games. Slots and curation are heavily under fire to go extinct and with them the two tools of the oligarchy. Today, we have companies outgrossing console publishers on mobile devices and PCs, to the point where consoles are under a thread of being marginalized and losing a good part of their target demographic.

Steam were the first ones to react to the self-publishing revolution, Sony wants to react with the PS4, MIcrosoft was heavily under fire for not including this open market approach in their XBO announcement. And Nintendo? They do enough crowd pleasing so nobody can say they weren't doing anything, but they are certainly not leveraging this gaming culture in such a way that it becomes a factor driving the decision to buy a Nintendo platform.

Between 2006 and 2010, Nintendo made huge strides in whom they are selling games and hardware to. But they were deep asleep when it came to whose software is sold how to anybody else who used to be their potential customer. That has cut them off a portion of the market they are struggling to reclaim on their own.


Bug Free Nintendo game?
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Daniel Hughes Studying PhD Literary Modernism, Bangor University5 years ago
I'm not sure if they need a surprise, but the things they failed to provide with Wii U and 3DS at launch are factors they should nail:

1) Low entry price
2) Plenty of software
3) Big name Nintendo brands from day one

I think Nintendo need to invest their way out of this, and that should include:

1) Regional subsidiaries, particularly NoE/NoA, becoming more than regional marketing and distribution posts. They need to be centers of development, publishing and partnerships with third parties in their respective regions. Nintendo's Japan-centric attitude will work sometimes, because some of the ideas they generate are universal in appeal, but Nintendo should not rely on Japanese studios to provide the overwhelming majority of their big hits. It's led to a boom and bust home console model, and a Japan-centric portable model, that's clearly no longer sustainable.
2) Even greater investment in development resources. Coincides with point one. Nintendo's Japanese resources are more expansive than ever, yet Western development resources have dwindled down to Next Level and Retro, who each turn out perhaps one game every three years--a far cry from Rare, which was essentially a second EAD. There should be EAD North America, and EAD Europe, and talented, out of work teams like Sony's Liverpool Studio should be snapped up by Nintendo. Equally, further partnerships or acquisitions in Japan should not be ruled out, especially if manpower heavy companies like Sega and Capcom continue to struggle. A constant stream of retail and digital releases must be ensured. Development resources Nintendo can control should be prioritised for expansion to avoid the manpower issues which have plagued Wii U. Expansion is necessary Nintendo cannot rely on third parties...
3) ...and third parties cannot rely on Nintendo currently. Nintendo must do more to gain the support of third parties and external developers, but not in an attempt to compete head on with Microsoft and Sony. Emphasise co-development and partnerships to gain more exclusive software to fill out the software schedule. No matter the size of the install base, third parties will largely not see returns equivalent to those they seen on PlayStation and Xbox, on which third parties are the majority presence in the market.
4) Cross-platform, networked services tied to a universal account. Allow people to buy into a Nintendo ecosystem accessed through proprietary Nintendo hardware, not limited to the one machine per cycle mentality of the past. A cross-platform subscription Virtual Console would be a good start. Grant access to hundreds of retro titles at once, and move it to a streaming service. In the mean time, limit users to a certain number of downloads per month, but ensure that a vast, multiple-system library is available.

There are structural problems at Nintendo that will prevent them from surprising us, and I believe investing in internal and external development, more capable regional subsidiaries, and a stronger Nintendo Network that acts as an incentive to buy into a Nintendo ecosystem, should be priorities in the coming years. Structural problems and conservative management prevented Nintendo from capitalising on the Wii and DS and has led to the collapse of the House of Mii. I've used this analogy before, but the House of Mario alone isn't strong enough to remain independent and competitive in the long-run. Nintendo do need something new, but they need even stronger foundations for the battles ahead.
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Nicholas Pantazis Senior Editor, VGChartz Ltd5 years ago
@ Andrea You would have a point if Nintendo games didn't look great as well, but Pikmin 3, Super Mario 3D World, and Wind Waker HD are three of the best looking games this year on any system, and certainly look better than most PS4 and Xbox One titles. I'm not saying they're pushing tech further (PC games do that anyway), but they have a finely crafted balance of tech versus performance that most developers never reach. 60 fps does matter. 1080p matters (though not quite as much, since a lot of people still have 720p TVs).

Most AAA devs and pubs choose to go for 30fps because it's much easier to advertise more impressive 30 fps graphics and textures than it is 60 fps. Most video sites don't even support 60fps video, so they choose the selling power if impressive bullshots and trailers over the quality of the end user experience.

@ Jeff I'm perfectly aware of the difference between native resolution and upscaled resolution, and yes I'm talking about native resolution. Most of the rest of your post is buzzword nonsense. It's true that Wii U games are obviously not as system intensive, but that doesn't make them less attractive or worse experiences. If publishers were more concerned with the end-user experience they would do a better job of balancing performance and high res textures. AI has yet to make any real advancements on any platform for the last 10 years. Even games that claim amazing AI like The Last of Us tend to have incredibly predictable patterns.

And you and Andrea are both missing the forest for the trees. The point remains that Nintendo is probably the only publisher in the world that consistently releases complete games. No preorder bonuses limiting your experience. No day one DLC, and any DLC made is substantial and fairly priced. No microtransactions in full games. No patching to make the game work for a full 2 months after releasing a broken beta game.

Edited 2 times. Last edit by Nicholas Pantazis on 26th January 2014 2:17am

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Jeff Kleist Writer, Marketing, Licensing 5 years ago

Sorry I missed you earlier

Japanese adults do not pkay games like Americans do, and they don't pkay aNintendo when they do. Nintendo is alsmost exclusively a children's brand in Japan. Adults who play games typically do so at Game Center arcades, and the ones who do pkay consoles won't admit it most of the time. I have a lot of friends in the Jaoanese entertainment industry, and NONE of them play games except the ones who are actively novo lived in making them. They will okY in their phones and iPads, a few you're five time more likely to see someone on a train with a book than a DS and/or PSP/Vita, but adults just don't play on consoles.

The adult market for WiiU is effectively nil in Japan. Why do you think Sony waited 4 months to launch at home
L because consoles are dying there. Xbox one, if Microsoft has a brain in their head, which is questionable, will be marketed as a home entertainment system that happens to play games.

To be clear, there is no culture of adult gaming like there is here. I'm not saying it doesn't exist, or that it's rare, but it is uncommon among married men, and slightly more so among up marrieds. It's a very different dynamic than here

Edited 1 times. Last edit by Jeff Kleist on 26th January 2014 4:18am

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Nicholas Pantazis Senior Editor, VGChartz Ltd5 years ago
@ Jeff I have to agree with Christian, but just another really odd part of your most recent comment that I have to bring out is that Microsoft should market the Xbox One as a home entertainment system. Home entertainment is not a priority for the Japanese. They don't spend much time in their houses. One of the reasons portable and mobile games are so popular over there is that they tend to prefer on-the-go entertainment. Japanese homes tend to be small, and people don't stay at home for entertainment the way Americans do.

@ Andrea Nintendo definitely makes DLC now, but it's substantial, often free at release, and never a chunk of the complete release game that's removed to force people to buy it to get the whole experience (Looking at you, every Bioware RPG for the last 7 years).

Edited 1 times. Last edit by Nicholas Pantazis on 26th January 2014 4:22pm

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Klaus Preisinger Freelance Writing 5 years ago
Regardless of how sane any course of action is, the industry will always lean towards a gold rush and favor companies at the wake of a gold rush. Blizzard making money with an MMO, then there is a rush towards MMOs. Same thing for Nintendo creating waggle controls, Apple popularizing an online distribution model, and GungHo making $1,5 billion off one mobile game.

With the Wii and the DS Nintendo was not once but twice at the center of such a gold rush, for better or worse, the market expectation is that things remain this way, meaning when products underperform, analysts will point towards current gold rushes.

It is also strange to defend Nintendo, a globally acting company, on the merits of how much they cater to their home market. If I were to buy a Japanese car, I wouldn't expect to find the steering wheel on the right. Nobody is disputing NIntendo's ability to create their market. The question raised now, as Nintendo seems to struggle creating the next iteration of their home console market, is whether they adapt or let it pass over and release the next console in 2017.
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Nick Parker Consultant 5 years ago
A shame we don't have archive GI Biz comments for a year after launch of N64 and a year after launch of GameCube - was there such an autopsy of views on Nintendo then?
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I have the perfect surprise solution

Nintendo make an excellent well powered hardware gaming machine to marry their excellent stable of games. Didn't see that one coming from Nintendo did ya :)
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Nick Parker Consultant 5 years ago
I am interested to hear about the shareholders structure that Rob describes in the article; it sounds like Nintendo is defended from a price crash by its shareholders but then how could the share price move in any direction, dramatically or not? I remember Nintendo shares falling by 7% after the announcement of the Wii U and Michael Pachter saying that the Wii U was ahead of the curve and will do gaming better than an iPad (?). Maybe, for Nintendo, 7% or 18% (after the latest financial reveal from a profit to a loss) isn't much.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.5 years ago
Nick, you'll probably have much interest in this page.
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Nick Parker Consultant 5 years ago
@Jim, Many thanks, very insightful. It appears that the largest shareholder group is "foreign institutions and individuals" at 47% - surely they could influence (be "activist" as Rob calls it) the share price?
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.5 years ago
Nick, you could be correct given that that 47% is controlled by just 719 people/entities. If half of them followed Pachter, say, then they could easily have a large impact on the share price. Keep in mind that of that 47%, nearly half is held by financial institutions and banks. Over 28 million shares out of the 66 million foreign shares are owned by the aforementioned. That leaves about 37 million shares out of 141 million for personal foreign influence. Nearly 25% but far lower than the average major tech or entertainment company I suspect.
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Jeff Kleist Writer, Marketing, Licensing 5 years ago
Christian, how much time have you spent in Japan, working with Japanese entertainment companies etc? I've spent a lot, and a lot of time asking these kinds of questions. For instance, what was the specific question asked? Who was it asked to? These kinds of things are hugely important in determining the accuracy of these kinds of polls Assuming these numbers are accurate, it's less than half of the numbers in the same demographic who game in the United States.

Nintendo has always designed their systems around Japanese children, and welcomed others along for the ride. We are also discussing people with families here, and not the otaku market. The poster was talking a specific scenario, and that's what I was addressing. That mom and Dad aren't picking up the Wii when junior is watching Doraemon, because their attentions are elsewhere.
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Jeff Kleist Writer, Marketing, Licensing 5 years ago
Nicholas, the Xbox brand is a failure in Jaoan, partly because Microsoft are idiots when it comes to marketing there, and partly because Jaoanese CEs have spent decades scaring the populace about foreign brands. Couple that with threats to retailers, like Nintendo got caught doing here in the US, and "incentives", and the Xbox brand has virtually zero value in Japan.

You're right, that as a streaming box, it has little value. However, part of the adjustments that MS Japan was talking ABIUT, coupled with reports of manufacturing changes indicate that MS may have done some research this time. Step into a Jaoanese electronics store, yiu will find virtually zero standalone Blu-ray players. They're all DVR/Burner combos. Japan has an extremely low cable TV subscription rate compared to the rest of the world, and most people get their TV OTA. As you noted, they don't spend a lot of time at home, so that's one of the reasons these things are important. Since Microsofts goal is to be the entertainment hub, they're going to need to get an antenna interface, DVR, and possibly replace the drive with a burn capable one to even have a shot a changing their current fortunes. The path to success in Japan for X1 has a similar path to 360. Hell, many retailers won't even carry Xbox anymore, and an employee at one of the biggest electronics stores in Tokyo told me that MS rents the half an aisle they occupy in the store mostly for show. Whether that's accurate or not I can't confirm, but it's certainly food for thought. The cost of the X1 is also entirely in line withthe aforementioned Blu/DVR decks, so if they made a to of it at the break-even point, there might be some impact. They need to conform the X1 to how Japan consumes the media they want to market, and selling the Cbox has a game machine hasn't worked. Time to play to their strengths, and the things that make the box stand out from the crowd, preferably with a well known Jaoanese partner. To help with the confidence issue.

What MS really needed to do was partner up with Tsutays, the rental giant who recently launched their own streaming service. Their power over home video in Japan is like Blockbuster at its height, or Walmart. I don't see that likely at this point, as they're already marketing a low cost streaming stick.
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Jeff Kleist Writer, Marketing, Licensing 5 years ago
Christian, that what's confusing me. The chart yiu gave applies these numbers to console, while you use "Video games". If taken as a fenre of entertainment, I totally agree they are likely valid numbers, as a lot of people are rediscovering gaming through their phones and tablets. The stigma that is attached to even handhelds (which are more socially acceptable in general) is not really attached to the phones and tablets, and so,people feel freer to both play, and admit to playing. I'm not dismissing them, but I know HOW a question is asked is extremely important when polling people. Look at the polling on the affordable care act

On your second post, I've stated many times that Apple is one of the few companies that Nintendo can, and should merge with as quickly as possible. Ask Samsung about their TV business in Jaoan

The a Nexus has the full backing and partnership iwithNTT DOCoMo, it's attached to a Japanese partner of high standing. Many Japanese cell phone makers already use android. When I talk about CES, I'm talking a whirlpool washer, a samsung television.

One of the most common memes is that the foreign companies could pull out at any time, leaving you without a repair shop. Hell, this is a common meme only now starting to break in general. Westerners with Japanese wives or husbands are still on green cards and required to renew their visas. I have friends who have been there twenty years, have teenage children and own property. I couldn't even rent a storage locker in Japan without a citizen to sign for it.

These things are changing(visa times were recently doubled for aforementioned green card holder), but progress is fairly recent, and much of the old games are still in place when it comes to prejudices and distribution, which can be micromanaged down to the level of a dozen blocks in a city. Sure, Yodobashi Camera buys direct, but the mom and pops don't, and have to deal with the local "family affiliate".

So while mobile, in partnership with Japanese partners is finally breaking some ice, it's only that formula that proves successful thus far. Hence my mention of Tsutaya

Heres a good piece about the difficulties of distribution in Japan.
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