I mentioned in my last post that Nintendo had kind of a rough year in 2013. I was going to leave it at that, but after Nintendo adjusted their annual forecasts to predict another operating loss, everybody from SonyFanboy69 to gaming news sites to venerated mainstream news outlets like Forbes and the New York Times collectively lost their marbles. So I figure that if Forbes and the Times are taking potshots at Nintendo, I can take one post to speak my piece in their defense.
Yes, Nintendo has been struggling. Their newest console, the Wii U, had a promising start with a strong launch, but sales quickly dropped off to the point where they didn’t even sell one million systems globally in the following nine months. The system’s software release schedule for 2013 was barren, to put it kindly, with only 45 retail releases during that time. Third-party developers publicly withdrew support for the system, sometimes unprofessionally bashing it in the process. And while their handheld system, the 3DS, has been doing much better after its own rocky launch, it’s underperforming Nintendo’s expectations for hardware and software sales.
And naturally, these struggles have prompted a number of armchair analysts (and a few professional ones) to offer up their opinions for what Nintendo needs to do in order to right the ship. Most of these suggestions boil down to the rote response of releasing games on mobile platforms like iOS and Android, though there are a few more…imaginative suggestions. The most noteworthy of these (and the one that prompted me to write this post) comes from game industry financial analyst/professional troll Michael Pachter, who claims that Nintendo should “get out of the Wii U business.”
By that, he means that Nintendo should immediately cease supporting the Wii U and develop games for the PS4 and Xbox One until they can release a new console, and then shift support back to that platform. That statement is one of the more stunningly ill-informed remarks I’ve heard in the past few months, but that hasn’t stopped many people from echoing it.
So, the general consensus of these analysts seems to be that Nintendo needs to drop the Wii U like a bad habit and immediately start releasing iPhone games. Here are my responses to that conventional “wisdom:”
1. Dropping support for the Wii U would kill Nintendo.
The Wii U has had a bad first year, there’s no denying it. Sales were abysmal, third-party support is at an all-time low (even by Nintendo standards) and Nintendo’s own game output was slowed down by the unexpected difficulties of developing HD games. Nintendo was not prepared, and the launch suffered as a result. So naturally, that means that they should scrap the whole system and go back to the drawing board, right?
Wrong. I realize that many of the people who play and talk about video games are probably too young to have owned a game console in the ’90s, and the Internet as a whole seems to have a very short memory, but I would think that at least some of these analysts and reporters would remember what happened to Sega.
For those who don’t recall, Sega used to be Nintendo’s primary competitor in the video game console market. The Sega Genesis (or Mega Drive, outside of the US) had about a 50% market share for most of the ’90s, not only competing with Nintendo, but thriving, something that NEC, Atari, Philips, SNK and 3DO all failed to do. Nintendo still managed to sell more consoles in the end, but just barely.
But Sega, in their attempt to gain an edge on the competition, kept releasing poorly thought-out add-ons to their console, and dropping them shortly after introduction due to poor sales. The Sega CD and 32X, both of which cost more than the Genesis itself when they were released, were introduced and abandoned in 3 years and 11 months, respectively. Then, after the failed North American launch of their successor system, the Saturn, Sega dropped support for that console just 3 years after it launched.
By the time Sega launched their successor to the Saturn, the Dreamcast, consumer confidence in Sega was in tatters, and sales were slow. Most people opted to wait for Sony’s Playstation 2 to come out, as both the hardware and Sony’s track record were better than Sega’s at that point. Hemorrhaging money, Sega was forced to withdraw from the console business and become a third-party developer and publisher. Their body of work has suffered since then, and many of their published projects have underperformed and suffered, leaving the company teetering on the verge of financial ruin.
That is the future that awaits Nintendo if they drop support for the Wii U. It would be more merciful for Nintendo to close their doors right now and pay out on everyone’s shares than to follow Sega’s path, and thankfully, Nintendo knows that, even if many supposed experts don’t seem to.
2. iPhone games aren’t “easy money.”
Pop quiz time! How many active games are there in the iOS App Store?
The answer is roughly 186,000. Now, how many of those games have you ever heard of? I’d guess twenty or thirty at most. Those are the most popular titles, the Angry Birds and the Cut the Ropes and the Candy Crush Sagas of the industry. All told, less than 1% of the total games on the App Store, and they’re the ones raking in the majority of the revenue. The rest of those games are left to fight over the scraps left behind by the big dogs, and those scraps likely don’t amount to much.There’s little chance that the developers making those games are going to hit on a title that lets them rise above the rest of the crowd and join the elite that are making millions of dollars, 99 cents at a time.
This is the market that analysts are proposing that Nintendo enter. A market where most of their game concepts simply would not work due to the control limitations imposed by touch-screens. A market that other known game companies like EA and Square-Enix are trying, and failing, to thrive in. And a market that is in semi-direct competition with handheld gaming, the one area where Nintendo is currently doing rather well.
So, what part of Nintendo making iPhone games seems like a good idea, exactly?
3. Nintendo’s prospects aren’t as bleak as people make them out to be.
I’ve outlined why Nintendo’s financial prospects are suffering at the moment, and no doubt the picture looks pretty grim from that description. But what I haven’t talked about is what’s going right for Nintendo, and that’s the aspect that most of these analysts are overlooking.
First off, while the Wii U’s first year of sales was pretty miserable, its last two months were looking much better. Remember when I said that the Wii U failed to sell a million units worldwide in the first nine months of 2013? Well, if you look at the sales numbers for November and December (admittedly, those numbers can be hard to piece together, but a few minutes of Googling will give you most of the pieces of the puzzle), you’ll realize that, between Japan and North America alone, Nintendo sold 1 million Wii Us over the course of eight weeks.
December of 2013 was the system’s best month of sales to date; in North America alone, they sold a minimum of five hundred thousand units. That’s more than sixteen times what the system was averaging from January through September. Granted, five hundred thousand is still on the low end of the sales spectrum, but going from thirty thousand units sold in a month to five hundred thousand is nothing short of miraculous. The Wii U has a long way to go, but it’s on the comeback trail.
As for the 3DS, even though it underperformed Nintendo’s expectations, it was still the top-selling console of 2013, selling a million units in North America in the December 2013 alone. And this is from a system that analysts were calling dead in the water back in 2011, a system that analysts said would be killed off by tablets and smartphones. It may not be selling as fast as Nintendo would like, but the 3DS is far from a flop.
Bottom line, it’s in Nintendo’s best interest to stay the course for now. The Wii U is finally picking up momentum, and while it will probably never become the runaway success that the Wii was, it’s likely to become profitable in short order. And the 3DS is going strong by any reasonable standard.
That’s not to say that Nintendo shouldn’t look to the future and where they can fit in and thrive. Iwata himself admitted as much. They need to take this time to lick their wounds, to re-evaluate the market and their own approach to business, and they need to crack open the vast war chest they built up during the halcyon years of the Wii and DS and start making some changes. Nintendo needs to repair their relationship with third-party developers, and start to look at how they can appeal to the Western market again.
The console market is changing, and Nintendo needs to change with it and find out where and how they can succeed. What that new course will mean for Nintendo, I can’t pretend to know. One of Nintendo’s greatest strengths as a company has always been their innovation and unpredictability; they’re at their most successful when they’re being themselves and doing something nobody would ever expect. I don’t know what that will mean this time around, but I do know this; it’ll be different and exciting, and I can’t wait to see what happens.