After forecasting a third straight annual loss on Friday, Nintendo president Satoru Iwata said the company is considering a big shift which could possibly—finally—place its hit game franchises like Super Mario Bros. and Zelda in the hands of iOS and Android users.
But such a move could threaten Nintendo’s own hardware business, and scare away the developers who still write games for its Wii console and handheld 3DS game player—which is why the company has long hesitated at even suggesting such a move.
“We are thinking about a new business structure,” Iwata said at a Friday press conference in Japan, according to Bloomberg. “Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. It’s not as simple as enabling Mario to move on a smartphone.”
That may sound like he’s hedging, but even broaching the idea is a marked reversal from what Iwata said in late 2011, after Nintendo announced its first-ever annual net loss.
Porting Mario to other platforms "is absolutely not under consideration,” Iwata told the Nikkei at the time. “If we did this, Nintendo would cease to be Nintendo. [Making mobile games is] probably the correct decision in the sense that the moment we started to release games on smartphones we'd make profits. However, I believe my responsibility is not to short-term profits, but to Nintendo's mid- and long-term competitive strength.”
Nintendo was not expecting another annual loss for the current fiscal year, which ends March 31. Prior to Friday’s report, Nintendo projected profit of 55 billion yen ($529 million) based on Christmas and holiday sales, as well as new Mario and Zelda games for the Wii U and 3DS consoles, respectively.
Friday’s announcement was a humbling reality check for Nintendo. Instead of a profit, the company forecasted a 25 billion yen ($240 million) loss for its fiscal year. Instead of selling 9 million Wii U consoles, as the company hoped, it now expects to have sold 2.8 million units by the end of March. And instead of 18 million 3DS units sold, Nintendo now expects to have sold 13.5 million units. Even price cuts couldn’t help.
But Nintendo isn’t just contending with new consoles from Microsoft and Sony; it’s also battling Apple and Google, which have disrupted the casual gaming space with their respective app stores that have enjoyed almost 100 billion combined downloads over the last five years.
Contending In The Mobile Space
More than 20% of the world’s total population owns a smartphone—that’s 1.4 billion people—and that number only continues to grow. With Android and iOS leading all other smartphone operating systems in the world, the mobile games available through their app stores continue to explode in profitability.
The video game business is still highly lucrative, with the potential to be a $100 billion industry in the next three years. According to Gartner, the market could even reach $111 billion in revenue by next year, with mobile and online gaming representing the biggest portion of that pie with $22 billion in revenue.
So far, Nintendo’s best attempt at “mobile,” besides its 3DS ($169) and 3DS XL ($199), was the tablet-esque 2DS, which was released in October at $130. Unfortunately, while that product was mobile, it was not very accessible, or portable, for that matter. The 2DS was $40 cheaper than its 3D sibling but couldn’t do nearly as much—the odd form factor stood out for all the wrong reasons. For example, unlike the 3DS, it couldn’t fold in half to protect the screen.
Compare these hundred-dollar portable machines to an all-in-one smartphone, and there’s no competition. Android and iOS devices offer its users a myriad of diverse features, from calling and texting to games and work tools, in a smaller, more portable form factor.
Maybe it’s time Nintendo gives up on creating mobile hardware, and simply focus on software. But that combination of hardware and software is what has long powered Nintendo’s profits.
In "The Wheel," a 2007 episode of Mad Men, adman Don Draper said:
In Greek, "nostalgia" literally means "the pain from an old wound." It's a twinge in your heart far more powerful than memory alone. This device isn't a spaceship, it's a time machine. It goes backwards, and forwards ... it takes us to a place where we ache to go again. It's not called the wheel, it's called the carousel. It lets us travel the way a child travels—around and around, and back home again, to a place where we know we are loved.
As one of the oldest gaming companies, Nintendo benefits from one of the largest game libraries of all time. Many of these games can be played on Nintendo’s new machines through a feature called Virtual Console, but those who don’t own a Wii or Wii U don’t have access to Nintendo’s classic titles.
But there’s the hitch: While Nintendo has released some 3,600 games for its various platforms over the years, it only has rights to its own game library.
Still, its best first-party games would likely top Apple and Google’s respective app stores. Nintendo owns beloved characters and properties like Mario, Donkey Kong and Zelda. Mario, the mustachioed plumber, stars in 100 games of his own. Nintendo could offer just its oldest and simplest 8-bit and 32-bit classics from its collection—Nintendo owns 129 first-party titles between the NES and SNES—and they could still succeed on smartphones and tablets. (They're already succeeding on the Web.)
“We cannot continue a business without winning,” Iwata said at Friday’s press conference. “We must take a skeptical approach whether we can still simply make game players, offer them in the same way as in the past for 20,000 yen [$199] or 30,000 yen [$299], and sell titles for a couple of thousand yen each”—or about $19.
Let's not break Iwata’s spirit by telling him that smartphone games typically sell for $1.99 or 99 cents.
Nostalgia hurts. And yet, one way or another, Nintendo desperately needs to go back to a place where it knows it is loved.
All images via Reuters