Nintendo's Next Move: Consolidation

A lot of virtual ink has been spilled about Nintendo in the last couple years, as the original Wii faded into the annals of history and the Wii U struggled to gain any real traction in its first year. Meanwhile, Nintendo's 3DS (and 2DS) continues to defy conventional wisdom and is selling quite well in an era that screams "smartphones have killed the dedicated handheld." It's amazing what the right price and some amazing software can do.

But the fact of the matter is that Nintendo is failing to keep up with the pace of technology - I'm not only talking about graphical horsepower here - and the company is going to have to think long and hard about its next big move in the games business following 3DS and Wii U. I'm not suggesting, as so many others have ad nauseum, that Nintendo take the Sega route and abandon the hardware business, nor am I pushing them to develop for smartphones and tablets.

But after the Wii U lives out the rest of its GameCube-like days and the 3DS nears the end of its successful lifespan, what's Nintendo to do? Launch yet another console, perhaps this time bringing the processing power up to speed with the competition? No, that would be foolish, and it's clearly not the Nintendo way.

To me, the answer is clear. It's time for some consolidation. Scrap the idea of a traditional console. Engineer a new portable console hybrid that gives players the best of both worlds.

Being in the hardware business is difficult enough these days. New consoles require enormous amounts of R&D, manufacturing and marketing. Rather than push out another Wii (or some new console brand) why not consolidate hardware lines and focus on one, singular product? Leverage the business that has been so kind to you since the days of the first Game Boy and focus on your ultimate strength.

"It's time for Nintendo to really sit down and think about its future. Every successful company must endure transformations"

The difference is that the next portable should be far more versatile. Platform differences in today's market are already blurring. Consoles, microconsoles, PCs, Steam Machines, Smart TVs... it's all blending. What matters most is the games, and Nintendo's first-party efforts have always shined. The key here is to engineer a portable that also effectively functions as a home console when you want that big screen experience. Merge that portable with a compelling, feature-rich network like Xbox Live or Steam, and suddenly Nintendo is dominating living rooms again.

It's clear that add-on controllers for tablets and phones will never catch on to the point that mobile could ever truly work as the centerpiece of the living room. But a dedicated handheld, designed by video game engineers with traditional controls, that can play AAA games when connected to the TV while also offering the typical Nintendo portable experience - how could a gamer pass that up?

What I think needs to happen next is Nintendo must use its more than ample cash on hand to build up a real network, to dive headfirst into the online world and create its own ecosystem (a la Steam) that indies, third parties and of course Nintendo games can thrive in. The world is increasingly digital, the potential of PlayStation Now is evident, and even if the cloud doesn't take off right away, day one digital downloads are commonplace on both new consoles.

To its credit, Nintendo has moved more in the direction of digital releases on both 3DS and Wii U with its eShop and a number of indies have been supportive as well, but Nintendo can and should do a better job in building up its network.

A network-centric all-in-one portable is something Nintendo could easily do. The technology is there, and if the obstacles holding back cloud gaming can be overcome, Nintendo could future-proof this new hybrid console as well.

What the company must do now, however, is get aggressive. Poach the competition. Hire top engineers from Microsoft, Sony, Apple and Google. Build out a best in breed network. Stop being so insular and focus on the needs of markets besides Japan. And for Mario's sake, cater to third-party developers for a change. Sony's developer-centric approach with PS4 is winning people over. And the decision that both Sony and Microsoft made to use a familiar PC-like architecture is easing the transition for developers. Nintendo must learn from this and bring outside development back to its side. Assisting more developers with funding in exchange for timed exclusivity might help this cause.

"It's meaningless for third parties to take risks by developing games for the Wii U," Tokai Tokyo Securities analyst Yusuke Tsunoda told Bloomberg back in December. If Nintendo intends to stay relevant, the company must do everything in its power to avoid associating sentiments like this with its future platforms.

Shigeru Miyamoto is getting closer to retirement everyday. Satoru Iwata's tenure as CEO is already on somewhat shaky ground. It's time for Nintendo to really sit down and think about its future. Every successful company must endure transformations. Nintendo's already undergone a few since its playing card days well over 100 years ago. With a streamlined approach to hardware, a robust network, and a developer-first mindset, Nintendo can successfully navigate the 21st century and hopefully outlive me.