I keep on hearing about how Nintendo is in trouble and is dying because the Wii-U is doing poorly. The problem with that is this: the financial data does not back this up. Nintendo’s financial data that they released showed they made a profit of $98,891,500 (¥10,195,000,000). It does make sense that some of the investors would be upset. Profits did fall between 2012 and 2013 by roughly $43,000,000 (fell by roughly 30%). But the thing is, Nintendo is still making a profit. When a company makes a profit, they are not dying. Investors being upset that the profits are smaller is not the same as dying.
With that in mind, I do believe Nintendo is in trouble. And it doesn’t have to do with the struggling Wii-U. I believe the problem goes much, much deeper than that. To understand why, you need to go back to 2006 and look at their most successful console of all time: The Wii.
I am going to be arguing that the Wii was a huge turning point for Nintendo. They changed their long-term strategic planning to no longer pursue the gamer audience. They broadened their net to everyone, trying to attract as many as possible to their console. Doing this drove away the core gamer community, the reliable customer for the video game industry. By driving away the core gamer community, the ones that consistently purchases consoles and console games, Nintendo’s hope would be to attract the same broad audience to their new console. But the whims of the general community is fickle at best. They are not reliable customers. This leads to overall poor sales and, as a consequence, driving away third-party developers. This brings us to the situation Nintendo is now in with the Wii-U.
The Wii: A System For Everyone?
Satoru Iwata: “It does seem that there is a level of misunderstanding among some people. I am concerned about this. It’s true that Nintendo is reaching out to non-gamers, but this does not mean that we are ignoring game fans.” (Special Interview, Nintendo)
Iwata had the best of intentions. He truly believed that Nintendo needed to expand their market base in order to improve the industry’s reputation as a whole. If more people played video games, it would become much more socially acceptable for gamers to play the games and make producing games far easier. The move would benefit everyone and Nintendo would act like the industry leader by doing this.
He does claim that Nintendo isn’t ignoring the gaming community. They are going after a wider audience. He explained that Nintendo was still making the next Zelda game, so that would show they are still making games for gamers. Nintendo would also be making games that would appeal to the widest possible audience, like they did with Wii Sports.
And Nintendo’s plan worked perfectly. The entire company came together and brainstormed, creating a console and games that had a broad-based appeal. The Wii was nothing short of a revolution (it had the code name ‘Revolution’ ) in the industry. While the PlayStation 3 and Xbox 360 had traditional video game controls, the Wii had motion sensors and a far more interactive interface system. Where the PlayStation 3 and Xbox 360 attracted the traditional gamers, the Wii ended up being #5 best selling console of all time.
But the seeds of discontent have been planted. One of the main reasons why Iwata had to address Nintendo ignoring the gaming community was the growing perception that they were. Hardcore gamers went to the PlayStation 3 or the Xbox 360. 3rd party games were not selling well on any Nintendo system. For example, in 2009, only 3 of the top 50 games sold in 2009 were 3rd party games for the Wii. The rest were either 1st party games for the DS/Wii or 3rd party games for the PlayStation 3 / Xbox 360. So sure, the Wii was selling very well. But at what cost?
The Cracks In The Foundation: The Wii-U launch
The seeds of discontent grew and grew during the life of the Wii. 3rd party sales never improved. The Xbox 360 and PlayStation 3 did an excellent job securing the traditional gamer market. Nintendo was no longer the powerful brand among the gamer community it once was.
The Wii-U had a lackluster launch. After the overwhelming success of the Wii, they had to be anticipating duplicating their success with the Wii-U. But they failed to take account of one important fact. The people who purchase consoles at launch are the hardcore gamers. You know, the people who would willingly wait in line for hours at a time. Casual gamers don’t do that. The non-gamers that Nintendo went after don’t do that.
The Wii U launched with some very impressive 3rd party games, including Batman: Arkham City, Call of Duty: Black Ops II and Assassin’s Creed III. I’m sure Nintendo was hoping this would have attracted gamers to purchasing their system. It didn’t. Worse, 3rd party games sold so poorly, it drove them away from the Wii-U. If you look at the game sales from 2012, only two games for the Wii-U cracked the top 50 games. Both of them were 1st party games from Nintendo.
Nintendo Is In Trouble
“Nintendo continues to pursue its basic strategy of “Gaming Population Expansion” by offering compelling products that anyone can enjoy, regardless of age, gender or gaming experience.” (From Consolidated Financial Highlights, Nintendo)
The difficulties Nintendo is experiencing now didn’t come from nowhere. It’s been building up since 2006 when they abandoned the traditional market in order to go after a much wider audience. Unlike the traditional gamer who may be loyal, there’s no reason for the wider audience to have any such loyalty. This is why there’s next to no 3rd party support. This is why people aren’t buying Wii-Us.
Things will only get worse for Nintendo in this regard. There’s no indication they will attempt to win back the traditional, or even the hardcore, gamer. Their strategies show they are still going for the wider audience, casting their net as wide as they can. One can only assume, but being health conscious is an attempt to repeat what they were trying with the Wii. This time, if they can show video games can be healthy, it will get more to see video games in a much better light. A noble attempt.
But probably not a good one. There’s no reason for the wider audience to come back to Nintendo. They already purchased the Wii. Why would they want to purchase the Wii-U? Video games are a luxury item. Hardcore gamers would buy video games for their luxury items. Even casual gamers would. But the non-gamers? The Wii-U would be competing with every single luxury item that currently exists. I wouldn’t bet on the current Nintendo strategy.
But I’ve been proven wrong before. Nintendo is not afraid to try new things, not afraid to fail. Maybe this risk will pay off and we’ll see a repeat of the success the Wii had. Only time will tell.