Fact From Fiction: Nintendo’s Uncertain Hardware Future

We were sitting at our dining room table and had just finished eating some dinner when the topic came up. It was 2006, and my brother and I began to vehemently debate which company would dominate the industry. Being Italian, our voices raised and our hands flopped around like a gaggle of water noodles. He backed Sony, chiding me about how the BluRay capabilities would deliver a new graphical, liminal space.

I backed Nintendo — anything but the logical choice at the time. It had a goofy controller. Forget BluRay, it hadn’t even incorporated a DVD player. It also performed dismally in the years prior with the GameCube. Not to mention its gaming palate was flavored with bright characters that most mature gamers wouldn’t go near. Aside from its appealing price tag, this “Wii” didn’t seem to have a lot going for it. What the hell was I thinking? Why did I back Nintendo?

Because it’s Nintendo! Because, in my eyes, it started the whole idea of gaming marketability. Because it knew something other companies didn’t know and it was going to exploit it. Well, the Wii came out and for a while there I thought I made the right choice. But in the past few weeks, it looks like my brother and I both bet on the wrong horses:

$330 million loss in sales. 40% drop in stock. Pay cuts for major executives, including President Satoru Iwata (lost half of his early earnings) and former president Hiroshi Yamauchi (lost more than $300 million in stocks).

One could argue that the tide began to turn with the release of the 3DS. As the handheld’s sales meandered along after its launch, Nintendo did little to calm the brewing competition storm that is iOS mobile gaming. And in a desperate attempt to quell the 3DS’s lackluster start, it dropped the price by $80. The 3DS is now being sold at a loss.

In episode 96 of IGN’s Tech Fetish Podcast, Justin Davis blamed Nintendo’s current state on its slow reactionary skills to the mobile gaming market.

“I don’t  have much sympathy for [Nintendo] in this sitauton” Davis said, citing how the iPad is the fastest growing gaming product in all of history. “The [Apple] app store didn’t sneak up on them…They could have done it. They could have said ‘We’re going to have our own app store.’ “

But Nintendo didn’t. It stagnated, much like it did with the GameCube in the first half of the decade. That time, though, it was able to stabilize the situation. Backed by the support of the GameBoy Advance and later the DS, the GameCube was able to limp to the finish.

However, things have changed. Apple’s iPad and iPhone have proven formidable with $1 games and a sturdy customer base. Downloading games to a tablet or cell phone is much easier for the casual, mature gamers. Suddenly that $40 3DS game just seems like a hassle.

Wedbush Securities Analyst Michael Pachter, who labeled Apple as “the most important company in video games,” understands and sees the trend.

“Nintendo is not ever going to get back that lost DS market,” he said in episode 224 of Pach-Attack. “The handheld market will be 60% to 70% of what it used to be… Nintendo used to own it. They used to have 100%. That’s going to go down to 50% or less than what it used to be.”

So what does that mean? The Wii sales will continue to decline, perhaps spiking with one last hurrah after the release of The Legend of Zelda: Skyward Sword. But what will this company do if they’ve lost the handheld market security? Max Parker, the Pittsburgh Post-Gazette’s Game Guy, put it simply:

“Nintendo can’t stay afloat financially if it stays on its current path. During the lifespan of the Wii U, Nintendo will need to shell out money for R&D to get the ball rolling on the next big innovation to follow the Wii U. If the Wii U’s performance suffers and the 3DS doesn’t spike profit, Nintendo will continue to dwindle. Then what? The company will simply lose too much money to remain sustainable.”

There is another option. Should the 3DS and Wii U utterly fail, IGN’s Scott Lowe believes it may be time to take the Sega route.

“Ultimately, the future for Nintendo…it is not in hardware, it is in software,” he said. “No one can turn their back on money and that’s where all the money is. I think that is where they will inevitably head.”

It may be a bit too preemptive to say that is the most rational move, but it certainly isn’t a ludicrous one. Without a dominated handheld market, Nintendo must perform a balancing act between its two mainstays: the 3DS and the Wii U. With this upcoming holiday season, which Nintendo has dominated for the past five years according to GameInformer, the company may rebound.

History has proven Nintendo can shunt through unfavorable situations for which the company itself is to blame. This time, though, its turbulent past will either steel the company for its rocky future or be found as an avoidable failing that inevitably contributed to its premature departure from hardware manufacturing.


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Author: Greg Galiffa View all posts by
Greg Galiffa is an Associate Editor at GamerNode. He's also an apologist for the first TMNT film. You can follow him on Twitter @greggaliffa

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