The Real Reason Why Nintendo Is In Trouble

The Real Reason Why Nintendo Is In Trouble

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.

400px-Satoru_Iwata_-_Game_Developers_Conference_2011_-_Day_2_(1)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.

Wii-U-Trouble-620x412The 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.

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Hello there. My name is Michael Zack. I’ve been gaming for well over 20 years now, ranging from table top RPGs to almost any video game you can imagine. I approach video games and the video game industry with a critical eye and give a fresh perspective to my readers.
  • Ruefrak

    Nice write up.
    I think a big problem with the Wii is that everyone was hyped for it, everyone bought one, and then few people continued to use it. You may have 100 million sold, but I’ll bet half of those never went beyond playing Wii Sports or Wii Fit. So people like my parents who bought one (why??) will never have an interest in getting a Wii U. They most likely regret buying the Wii

    As for the Wii U, that console has been confusing since the day it was announced. It has a gamepad, but it also uses the Wii controllers. But only one person can use the cool gamepad, so you end up with this confusing mish-mash of controllers. It took me two E3s just to wrap my head around what the Wii U was, and then when I did, I could care less

    As for the games it launched with, it had big 3rd party titles, but those games had been released on competing platforms months earlier. Batman Arkham City had been out for over a year already before it appeared on the Wii U. People aren’t exactly going to rush out to buy a new console to play a game that’s a year old.

    The sad part is that I kind of like the Wii U, but there’s nothing there to make me buy one. Strange enough, one of the things that I don’t get is that it won’t even play DVDs. Blu ray players are incredibly cheap, and yet this thing can’t even handle a simiple DVD. It’s the little things like that which keep me away.

    • tanto

      You are perfect for this site. You use just as few facts.

      Wii had a higher attach rate for games than 360 or PS3. MORE people bought games for Wii than any other system.

      Keep lying to yourself

      • I’d love for you to elaborate on this, you talk about facts, but you are not bringing nor showing facts. Can you link us to all this information you’re claiming to be right?

        • Here’s a good article on attach rates for Nintendo consoles. It’s written by IGN
          http://www.ign.com/articles/2014/01/29/these-are-nintendos-lifetime-hardware-and-software-numbers

          It’s easy to figure out attach rates. It’s basically sofware sold divided by consoles sold!

          According to the article, the Wii attach rate was 8.84 with 100.9 million consoles sold and 892.34 million software sales. So 892.34/100.9 = 8.84. This data is from January 2014.

          This is actually a good attach rate! For comparison’s sake, the Nintendo DS had an measly attach rate of 6.12, even though it sold 50 million more units than the wii.

          The PS3’s attach rate is around 9-10 I think. I couldn’t find any numbers from official sources. most of them were outdated.

          But this debunks the “everyone just bought like 3 games for the wii and stopped playing.” Sure, some people probably bought like 1-2 games, but most people bought around 9 games.

          Just thought I’d bring some facts to the table. I would guess attach rates go like: PS3 > Xbox360 > Wii. But I really only know the wii’s attach rate. All 3 attach rates are good though.

          • There you go! That’s the sort of information that I wanted to see, actual facts and not just throwing information as if they were facts without some actual solid basis.

  • tanto

    Nintendo is not remotely in trouble.

    • Why do you say that? The fact that their investors are upset… they are the ones who own the company… is a very clear indication they are in trouble.

      • tanto

        Investors do not care about gaming, and do not know about gaming. Who gives a shit if they are upset.

        They do not own the company.

        • Investors do own the company. That’s what it means to invest in a company.

        • Investors are the ONLY people that own corporations.

          • Yep! Got it in one 😀

            It’s weird that there are people who don’t know this!

      • Charles

        Sony’s investors are upset as are MS… Guess they are in trouble too right? No you wouldn’t write a whole article about that would you?

  • tanto

    This article is ridiculous. Short sited, generalized, half truths to make a slanted point. Nonsense.

    Nintendo is in the BEST position out of the big 3 and honestly? not even really close

    • Can you site proof? In my article, I used facts and figures, as well as referencing numbers that came from Nintendo itself. You claim Nintendo is in the best position. Why? What makes them in the “best position?” The Wii-U isn’t selling well. Nintendo is looking into micro-transactions. Their investors are in near revolt. Their profits dropped by 30%!

      There’s far more proof that they are in trouble than them being in the ‘best position.’

      • tanto

        1) Wii U is selling fine

        2) They are in the best position because they actually do make profit.

        Have you looked at Sony latey? Cutting Jobs, cancelling games, ect

        Nintendo is actually growing.

        Nintendo is looking into micro transactions, how is that a sign they are doing badly…………….

        Profits dropped 30%, THEY ARE STILL MAKING PROFIT.

        Sony is about to take a billion LOSS

        • 1. Define “fine.” By what standard? It can’t be by Nintendo’s, as the financial report by them that I posted has them saying it wasn’t selling well at all and dragging the entire company down.

          2. You still haven’t shown Nintendo is in the “best position.” You’re only throwing around random statements with no citations nor analysis.

        • 1- 5.8 million world wide since Nov 2012 for home console isn’t fine. The Vita has outsold it, and they came out opposite ends of the same year.

          http://www.vgchartz.com/platforms/

          2- http://www.usgamer.net/articles/nintendo-cuts-fiscal-year-forecast-from-527m-profit-to-240m-loss

          Their financial statements are all public, by the way, if you really want to check up on it.

          I’m sure if the article was about Sony, it would include all of those doom and gloom numbers about them as well. Luckily, that wasn’t the topic.

          • I’m not as familiar with Sony’s numbers. But Sony’s such a huge multi-national corporation that does so much (music, movies, games, computers, etc), I wouldn’t know how to begin an analysis of them. With Nintendo, they release all their numbers themselves and does a fair job analyzing them.

            Like, their huge loss in 2012. At the 3rd Quarter investors meeting Q&A session, this was brought up. Iwata argued that the loss was mostly from the strengthening of the Yen versus the U.S. Dollar. As proof, he pointed out another year that had similar numbers, but Nintendo was able to pull in a profit.

      • Aiddon

        They just finished building a new R&D building that cost a couple hundred million. Sony just sold another building for around $150 mil. This isn’t quantum physics

        • Who are “they?” Citations?

          And more importantly, the construction of any building isn’t any indication the company is doing well or poorly. It’s just proof that they built a building.

    • @tanto Care to elaborate?

    • ian

      Microsoft is in the best position of them all and always will be because they have truly unlimited funds. They can throw money at things the other two simply can not. Is that the best way to approach it, maybe not.It works tho for them and they do not have to rely on the xbox’s success.

  • Gengar

    Honestly, Nintendo has a lot going for it, just not in the console department. People have compared the Wii U to the Sega Dreamcast , but that is an unfair analogy. The Dreamcast actually did quite well, it forced Sony to release the PS2 almost a whole console generation early, where as the Wii U is nothing more than another gimmicky console Nintendo is trying to sell.

    Now before all the bashing gets started, I own a Wii U, PS3, PS4, High end PC, Vita, 3DS, and owned a 360 at a point. Gamecube was my favorite console of its generation and was actually more powerful than the PS2, just didn’t have the library to back it up.

    Sadly, I have not played my Wii U other than Windwaker HD, since most of the games are ports of games I’ve already played on 360/PS3, or a rehash of the same game I played years and years ago.

    Nintendo seems to have a problem with creating new IP’s and having good third party support. Honestly the last good console Nintendo has made was the Gamecube, as they didn’t sell gimmicks but they looked at their audience and tried to offer something fresh in terms of library.

    Nintendo wasn’t always like this with their gimmick ordeal, they used to have a pretty solid library and like all companies before they got successful and greedy, they showed the audience the new experience in terms of games that they would find nowhere else i.e. exclusives, and they had quite a few games to show.

    Now, since the Wii era, they have done nothing more than tried to make consoles with poor performance to price ratios and struggle to justify it. The Wii didn’t really have a library, Skyward Sword and Twilight Princess and Metroid Prime 3 which were supposed to be on the Gamecube, only one of them was. They took both of those games and threw them at the Wii to try to justify a purchase, and make you buy a peripheral that only works with two games for Skyward Sword called the Wii Motion Plus.

    The Wii was more or less a barely upgraded Gamecube with not even a 1/4 of its quality library. Brawl was good, Mario Galaxy was good, Twilight Princess was good (Port), Skyward Sword was good, Xenosaga was good, but other than that the console was just too kiddy and gimmicky with the Wii Motes, instead of trying something new studio wise it just became a toy.

    The 3DS had a mediocre launch with its very short launch library, which yes I don’t expect a console or handheld for that matter to have a huge library but they sat around like Sony did with the Vita and did nothing. Eventually, Nintendo put its focus on the sinking handheld and viola, we got games. They seemed to quit focusing on gimmicks with the 3DS and made quality JRPG’s, and all other genres, making a killing in the process.

    Now the Wii U is what the 3DS was, straggling around for almost two years with the same games we’ve played on SNES (Mario, DK) with a different coat of paint. New Super Mario Bros U is the exact same game as New Super Mario Bros Wii, just a couple more added costumes and new maps. When you consider that the Wii U is more powerful than the 360, and slightly better than the PS3, it is not a next-gen console.

    Once again they have favored gimmicks over quality games and new IP’s such as Luigi’s Mansion, Metroid Prime, Star Fox Assault, Windwaker, Paper Mario, and more. The Wii U has sold a few consoles , but it seems now as far as console goes Nintendo might become what Sega did, a game publisher.

    If Nintendo would quit sitting around and letting the Wii U be nothing more than an HD Release/Port Heaven/Gimmick Console, they could beat out Microsoft’s Xbox One in terms of games. While Nintendo won’t beat out the XB1 or PS4 in the graphics department, they have the potential to beat the Xbox in libary since Nintendo has one of the most loyal fanbases.

    If they would quit delaying games, Make a whole new Star Fox, Metroid game, Pokemon Stadium, release that new Zelda game, pop out the official release date for Mario Kart 8 and Smash Bros,and update the console to allow controllers instead of the gamepad, they could really make some money and climb their way back to the top. But, sadly Nintendo has the reputation to be stubborn.

    .Hopefully they will turn around and learn from their mistakes, as it would be unfortunate for them to drop out of the console biz.

    • I should hope nobody flames you. You gave proof and then explained yourself.

  • ZeroBC\

    I agree with Tanto

  • Charles

    Lots of spin in this article. First they are trying to convince people that Nintendo is dropping support for Wii U in order to go after people that want to be healthy but that is not the case and has been stated by Nintendo but this person refused to acknowledge it.

    They bring up 3rd party sales for a specific year only. Yeah that doesn’t say you have an agenda. You also only look at sales without looking at quality. Nintendo gamers should buy any garbage 3rd parties put out? So I should bring up the number of 3rd party games on PS360 that failed in sales and not mention the quality of the games as proof those two companies are in trouble? Its moronic to say the least.

    “If Nintendo would quit sitting around and letting the Wii U be nothing more than an HD Release/Port Heaven/Gimmick Console, they could beat out Microsoft’s Xbox One in terms of games.”

    Yes because Nintendo can dictate the level of quality games 3rd parties offer. Simply laughable.

    “Sadly, I have not played my Wii U other than Windwaker HD, since most of the games are ports of games I’ve already played on 360/PS3, or a rehash of the same game I played years and years ago.”
    Yes W101 is a rehash. lol. What is infamous 2 but a rehash? God of war is just a rehash of the same game. I also like how to make your point valid you have to act like the PS3 and 360 were the same console . It’s like to make Dodge look bad, you add in everything from Ford and Chevy into one as if they are one company. That isn’t the case. Its subjective BS with a lot of spin and no facts. Opinions are not facts and just the fact that you think they are shows how little anyone should take you seriously. Pikmin 3 a is rehashed being spread out over 3 console generations but 4 Uncharted games in a single generation is fresh.. Typical hater dribble that isn’t based off of fact.

    While you do post some “facts” its how you present them that is the issue. It is nothing but spin in order to fit your agenda.

    ““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)”

    Nintendo has always made games for everyone. To imply otherwise shows you lack any knowledge of gaming in the 80s and 90s.

    Okay I am done making this dude look like a fool. Actually they did that on their own I just pointed out how. I am sure there will be some BS reply about they are only posting facts, which is complete BS for anyone that knows what a fact is, but they have lost any cred with me they might have had by using fanboy opinion as fact.

    • Psss… you didn’t even respond to any points I made in the actual article.

      “First they are trying to convince people that Nintendo is dropping support for Wii U in order to go after people that want to be healthy…”

      – I never said that.

      “They bring up 3rd party sales for a specific year only.”
      – I said in that ‘for example’ then cited a source to back it up. Feel free to look at the years before and after it. They look exactly the same. Nintendo’s first part games are selling well. Third party games rarely, if ever, crack the top 25.

      “You also only look at sales without looking at quality.”
      – Because game quality doesn’t matter with the premise of the article. Quality of games do not equate to sales. If it did, Working Designs wouldn’t have gone out of business.

    • We have an Nintendo Agenda? I must have missed that memo

    • God you wrecked him Nice job

    • Gengar

      You’re done making me look like a fool? Doesn’t really look like you did. I find it funny that you act as if The Wonderful 101 is a Wii U saving game or people actually care about Pikmin 3. What I meant by Rehash is that Nintendo keeps pumping out the same games with little to no gameplay changes and just expects to watch it sell like $1 health insurance.

      It’s like what Apple does, promises people change and tells them about all this new upgraded tech and features and then adds practically none of them for the drones who will buy it just because of its brand name. I never said the Ps3/360 was the same console, and I don’t see how you perceived it as such.

      I have a fanboy opinion because I actually don’t hate the company as a whole. just their marketing/support strategies? Don’t flatter yourself.

      Nintendo can easily get third parties to make games for their consoles, they just drove everyone away just as they did with the SNES where they only wanted first parties except for a select few. If you want sales to increase, you need things to be accessible, not giving people false hope about games getting released and then putting them through delay hell.

      Also about the whole Uncharted and God Of War comment, I’m prolly one of the few people who owns a Sony console that doesn’t care for those series and The Last Of Us. Infamous is only on it’s third game by the way. so it is acceptable. Mario and the like have more games than Call Of Duty and they play almost the exact same way as they did before. Uncharted is just a feeble attempt of taking Tomb Raider’s glory. Four games you said? Three were on PS3, the “fourth” was on Vita.

      Don’t try to compare a new franchise to an old one, because you have shown your true ignorance. inb4 “Wait, but you said you didn’t care for Uncharted”. I don’t even want to count how many Mario, DK, Zelda games there are because we both know they have made over 20 Mario games and while you compare Mario to Uncharted or God of War, they are still relatively new, not 15+ years old. when they keep doing the same thing over and over again in the same amount of time, you have my permission to make me sound stupid.

      It’s funny how you sit here and assume since I own a Sony console I play the stereotypical Sony “fanboy” games and voice it as fact. Something you told me I shouldn’t do, which apparently makes me look like a fool. Contradiction much?

      The comments I have made about Nintendo have been made from experience, not from reading some article on a hate site such as N4G and the like, where as you sound is if all your “opinions” are formed from the most drawn out hate article you can find.

      I’m done making you look like a “fool” because you sound about as blind as the people trying to defend the RE franchise from the terrible franchise it has become after RE4.

  • Just a professional note- maybe consider being less defensive about your article. Your comments seem really pointed. If people disagree with youre article, that’s just their opinion- no need to get on the defensive and try to slam down their thoughts. You could be driving away readership.

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