Nintendo 2013 is Sega 1997

Nintendo kicked off the new generation of console hardware last fall with the introduction of the Wii U but will it be able to survive the rise of new consoles by Sony and Microsoft and how will it evolve?

The death of the console

Innovation in controllers has been a mainstay of recent Nintendo offerings. It was the first company to provide a motion-activated approach to gaming with the introduction of the Wii and, with the Wii U, is the first company to include a second screen experience directly into their controllers.

However, what was once innovative is now looking like a standard component. Both Sony and Microsoft included their own take on motion sensors (with Microsoft doing completely away with the controller when it introduced the Kinect) and now Sony and Microsoft are likely to introduce their own take on second screen experience with the new consoles they will unveil this year. Xbox, with Smartglass, showed that it can manage games that run on Xbox and mobile phones. And Sony, at the PS4 unveiling, talked about how it sees the mobile experience as an integral component of what the PS4 will be about.

All this, however, belies a larger underlying problem for console makers: Buried in a recent report on the state of the gaming industry was the news that only 6.4% of developers intended to develop titles for the Wii U, a substantial problem for Nintendo if it intends to remain competitive in the console business. And with more developers seeing the Wii U as underpowered, the news is not good for Nintendo.

On the other end of the spectrum, however, is the rise of mobile as a new platform, further undermining console businesses. While Nintendo, Microsoft and Sony battle for a share of the console world, game developers have started looking at iOS and Android as viable platforms for game development. And with the cost of development for those platform being substantially lower than for proprietary consoles, the challenge will continue to rise. With mobile gaming continuing to engage players at a deeper level than consoles, what could it mean for the next generation of TV-connected consoles?

Nintendo: The new Sega?

One does not need to be a substantial tea-leaves reader to see that this is not going to end up well for the incumbent but Nintendo’s weakness in the console business may be its salvation in the long run.

An interesting artifact in Nintendo’s history is that it is a very large game publisher. In fact, it is one of the largest game publishers in the world, larger than EA, Blizzard Activision, Ubisoft, or Take-Two. And as such, it has a rich library of titles that it could port to another platform if it wanted to.

One may think that abandoning the console business would be suicide for a company like Nintendo but there is some historical precedent for it. Atari, which dominated the console business in the early 1980s, morphed into a game business and grew without the console for several generations. And Sega, which was bested by Nintendo, transformed itself into a software company that now produces titles for Microsoft and Sony’s console as well as for iOS and Android.

The history of Sega could provide a useful, if painful, model on how to deal with such a transition. Throughout the 1990s, the company was the leader in the console business but its last console failed to gain traction, leaving the company with heavy losses and an unclear path. As it announced it would move out of the console business and transition to becoming a full time game publisher, Sega had to do some substantial restructuring. While it has had ups and downs, the company’s net income has increased to levels higher than those it saw as a console maker and its margins are substantially higher.

If Nintendo were to take that approach, it could see itself becoming a dominant force cross a number of platform while solving some weaknesses it has had. For example, the Nintendo DS is being heavily undermined by Apple’s iPod touch with kids (the main public for such devices) preferring the touch display of Apple’s devices to the joystick approach of the DS. By shifting to producing titles for iOS, the company would be able to appeal to the same audience and extend its power in the field, instead of potentially losing relevance among a critical public.

At the same time, the company would increase its margins and become more nimble and adaptable to changing market trends. Interestingly enough, Nintendo is the rare kind of company that could effect this type of change. Its introduction of the Wii, at a time when many of the nay-sayers had left it for dead, was a genius move as it allowed the company to position itself away from the core gamer world occupied by Sony and Microsoft while expanding into the unaddressed market of more casual and social gamers. This position, however, is what now sits at the core of its difficulties, as the very players the company has been targeting are now more comfortable playing their mobile phones or tablets and do not see the need for dedicated hardware to handle home playing.

Will Nintendo make the move? That remains unclear but rumors are that it is an option that is being investigated. Whether that option becomes a reality is something that Nintendo will have to more seriously consider later this year as Microsoft and Sony enter the battlefield.

Previous Post
Convergence is here
Next Post
Social Networking rises in mobile apps

Related Posts

6 Comments. Leave new

“Will Nintendo make the move? That remains unclear”.. No, it’s not unclear. They will not. “rumors are that it is an option that is being investigated.” No, it is not. “Nintendo will have to more seriously consider later this year” No, they will not. Stop posting this garbage, please.

    Conley, I assume from your note that you’re a Nintendo insider. The rumors I’ve heard of this being an option being discussed were coming from people inside the company. Are you saying that those people lied to me?

      A Nony Mouse
      March 4, 2013 4:04 pm

      Considering the fact that financially Nintendo has literally loads of money stockpiled, the 3DS is dominating in Japan, and low sales for the WiiU at this time are expected considering that not only are all console launches usually slow, but the early Jan-Feb time span has always been a slow time for the entire entertainment industry. And also a poor economy. Yes, I would reckon that those people did lie. Financially, Nintendo is doing pretty well. Sales for the WiiU could be better, but they are far from being catastrophic.

      Also, the comparison between Sega and Nintendo is completely unjustified. Sega had repeated failures leading up to their eventual fate. The 32x, Sega CD, Saturn, and Dreamcast as well as poor investments. Nintendo has done spectacular with the Wii and DS, and the 3DS is also doing very well. Also consider the fact that Sega really didn’t have too many killer apps except Sonic. Nintendo, just to name three, has Legend of Zelda, Mario, and Pokemon. All of which are system sellers. And that’s just three alone, Nintendo has plenty of other IPs the appeal to a wide audience. You know Animal Crossing? It’s sold millions of units, both retail and digitally. In Japan alone.

      So to sum my point up, no, Nintendo is no where close to being Third Party. Heck, Sony and Microsoft are closer to Third Party considering that Sony recently sold their US HQ, and Nintendo having more money then the others for their gaming division. But that’s besides the point, which is that Nintendo is here to stay. And those rumors you’ve heard from said insiders are nothing more then exaggerated media hype.

“with the Wii U, is the first company to include a second screen experience directly into their controllers”

So that VMU thing the Dreamcast had was a dream?

I’m just knowing of this for the first time and, honestly, whether Nintendo decides to go mobile or not, they are still a million miles ahead of SEGA and will most likely stay that way for many more years to come. Just their name alone and the great improvements and genuinity they brought to the gaming world(and their continuation to do so)will always manage to keep them alive. Besides, a company in charge of one the most popular and possibly biggest gaming franchises(you know what they are)in the world won’t go down in the competition or hands of companies such as Microsoft, Sony, and most definitely not SEGA. They’re just too good for that;).

    Sega was once in the same position as Nintendo: a top player in the game space, with strong titles and recognition, hobbled by poor performance on recent hardware sales. They decided to go software only, which led them to survival, albeit as a smaller company.

    I suspect Nintendo’s future will include something like developing titles based on their IP for platforms like iOS and maybe Android.