Does Nintendo Have a Future?

Since before the introduction of the company's very successful Wii console, Nintendo (NASDAQOTH: NTDOY  ) has claimed that it does not exist in direct competition with Sony (NYSE: SNE  ) and Microsoft (NASDAQ: MSFT  ) . Nintendo touted a "blue ocean" strategy that sought to create new experiences and attract customers that existed outside of traditional demographics.

Satoru Iwata, the company's CEO, recently indicated that Nintendo will continue to pursue disruptive strategies but pointed to an inability to compete as part of the rationale for doing so. As per The Bridge's translation, Iwata stated, "Nintendo is not good at competing so we always have to challenge [the status quo] by making something new, rather than competing in an existing market." Assuming this translation is more or less on point, it paints a risky portrait of Nintendo's future.

So, what color is the ocean, again?
Whether Nintendo likes it or not, it has to realize that it is, in fact, in competition with virtually every gaming-enabled device on the market. The rise of mobile and tablet-based gaming and the deterioration of the dedicated handheld gaming market should make this abundantly clear. Just ask Sony's President of Worldwide Studios Shuhei Yoshida, who stated that there was no question that its Vita handheld had been hurt "quite badly" by the prominence of smartphone and tablet alternatives. While Nintendo's 3DS is performing much better than the Vita,  it is still underperforming when compared to the original DS system. As the manufacturers of dedicated handheld gaming devices, Nintendo and Sony are creating "high end" experiences for a market that is increasingly satisfied by the likes of Angry Birds and Candy Crush.

It's also worth noting that Nintendo shied away from its "blue ocean" strategy with its most recent gaming systems. The 3DS is essentially a more powerful version of the DS, with 3D display capabilities that probably seemed like a great idea around the time that James Cameron's Avatar was released. The Wii U is basically a souped up Wii with a tablet controller. These are simplifications, but it is clear that neither system matches the DS and Wii innovations that propelled the company to the top.

No contest?
Iwata's stated belief that the company is not good at competing has some validity, but the reasons why are muddied by Nintendo's long history of questionable decisions. It is true that the company is not in the best position to employ the loss-leading practices that Sony and Microsoft have traditionally used for their hardware. Gaming is a small part of Sony's business and, to an even greater degree, Microsoft's business. These companies are better equipped to sell high-tech hardware at a loss while profiting from software sales and online services. There was a time when Nintendo's systems dictated the technological standard for gaming platforms. That time has passed.

There's more to Nintendo's "competition problem" than hardware power. The company has spent decades being unfriendly to third-party publishers and overplaying its hand as a platform holder. Sony's PlayStation would likely never have materialized if Nintendo had not torpedoed a partnership to produce a SNES-CD platform. The N64 stuck to expensive proprietary cartridges, driving publishers into the arms of a newly created rival. The GameCube saw a transition to optical discs, but the medium was again proprietary and had substantially less storage space than a DVD.

In the current generation, publishing giant Electronic Arts has abandoned the Wii U platform, citing the lack of a worthwhile online ecosystem. There are many reasons why third parties are loathe to do business on Nintendo platforms, and having to compete against Nintendo software is certainly among them. The company may not be able to survive in the hardware space if it insists on going its own way.

Poor Wii U
The impending November launches of the PlayStation 4 and Xbox One look to make Nintendo irrelevant in the home console market. Sony's device will debut at $399 and Microsoft's at $499, and each system will offer superior hardware, online services, and third party support than the $299 Wii U. The Wii U also competes with the cheaper Xbox 360 and PlayStation 3 systems. This might not have been a death sentence for the console if Nintendo had the right software to propel the device. After a number of flops and underperformances, only Super Mario 3D World is likely to have a notable impact.

What next?
Outside of ditching the GamePad and implementing a massive price cut, it is safe to say that nothing will save the Wii U. Meanwhile, Nintendo's handheld breadbasket is being eaten by mobile. Iwata may be right to suggest that the company needs to pursue disruptive strategies, but recent history suggests the company is not in a position to shape the industry. History also showse why the industry might not want the company back in such a leadership position. 

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  • Report this Comment On October 17, 2013, at 4:08 PM, BHGamer wrote:

    As an analyst for years and hobbyist and collector, everything that I have predicted for Nintendo has come true with one exception, the fall of the Wii-U came much quicker than I expected, I never thought it would do this bad this early. The "blue ocean" though is a one time shot, which is why it's failing now. The Wii sold bajillions because it reached a platform of people that had found an interest in gaming when there was none, or were younger and grew up to Xbox or PS. So now you have this entire Wii group of people that are happy with their Wii's and have no desire to "upgrade". Plus you have all the systems sold for Wii Sport and that only. There's a reason the Wii has the worst software attach rate of any major system in history. It's like the 80's crash with the shovelware all over again. These new Wii gamers don't know about Gamefaqs or to check reviews first. They go out, but a shovelware game, it's aweful then they stop buying software. All of these add up to Nintendo being where they are now, and it's thanks to the Wii that did it. Will Nintendo go away no, i don't see it happening with strong portable sales, I do believe the Wii-U will be the last of their home consoles and they will more likely go the Sega route and publish software rather than release hardware.

  • Report this Comment On October 17, 2013, at 4:22 PM, Iownstocks wrote:

    I own Nintendo Stocks and im deeply worried.

    But seriously mobile devices are no competition.

    I think the truth why Nintendo fails is the marketing.

    Microsoft has them all in the pocket, making everyone talk bad about it and make People who are easy to manipulate only focus on specs.

    Its easy to see, becazse when marketing Powers were small atari jaguar and 3do failed. They were more ahead than Sony and Microsoft.

    Thats the only reason Nintendo fails.

  • Report this Comment On October 17, 2013, at 4:23 PM, Iownstocks wrote:

    Microsoft has ea in their Pocket and they have game reviewers in their pocket.

  • Report this Comment On October 17, 2013, at 4:28 PM, MikeJones77 wrote:

    i would say they have a future considering making billions off ds and wii, and the fact the 3ds is printing money like the federal reserve

  • Report this Comment On October 17, 2013, at 4:29 PM, MikeJones77 wrote:

    then again a nintendo is doomed article pops up every week on this site

  • Report this Comment On October 17, 2013, at 4:39 PM, rahnyc4 wrote:

    Nintendo has more of a future than Microsoft and Sony. Nintendo is all gaming with no side division, but they also make more profit from the games they produce than the other guys. they also have a bigger money stash in the gaming division than the other guys.

    Personally i see them outlasting the other guys in this day and age, but then again unlike the other guys they don't have access to other war chest like the other guys.

  • Report this Comment On October 17, 2013, at 4:47 PM, gaucho420 wrote:

    Wasn't the same thing said about the N64...and Gamecube...and even the DS?

    Yet, here we are. The one thing Nintendo has is software and without anything major released on the Wii save one Mario game and one Zelda remake that just came out, the software isn't there to drive sales. Yet.

    I would also add that once the PS4 & Xbox One come out, the myth of their greatness will be broken by the reality of wha they truly are, which thus far does not look that enticing to me. There's no exclusive to get excitted about, Watch Dogs has just been delayed.

    I got a Wii U as gift and I enjoy tremendously. I wanted to preorder a PS4, but I cannot for the life of me find one exclusive game (ie-reason) to.

    Nintendo's been around a long time for a reason...and I beleive, they will continue to do so. They may not make hardward, but when you look at how many copies their Wii software sold, they will no doubt find success again on other people's consoles, if that's what it takes. Their software is top notch, that's the bottom line and if push comes to shove, it can live anywhere else.

    I would worry for Angrybirds the day Angrymario shows up. I'd put my money on Nintendo over Rovio any day of the week in direct head to head competition, at the same price.

  • Report this Comment On October 17, 2013, at 6:02 PM, sypoth wrote:

    Nintendo has only had three successful consoles and only two of them won the market saturation for their generation and one of them simply because of over hyping the system and empt promises which quickly ended with a flood of used consoles and unhappy customers. Wii U is the same gen as PS3 and 360 and is just late to the party and offers nothing new. Nintendo has been relying too much on gimmicks that rapidly fade into disuse and empty promises to sell their products. The only market Nintendo has truly dominated since they first ventured into it is Handhelds and it was the handhelds that pulled them through the luke warm success of the SNES through the Game Cube. If Nintendo is to truly have a future it is as a handheld system only, it's the only logical step for them to make at this point unless they decide to pull a SEGA and go software only, which was a bad move for the ailing SEGA company.

  • Report this Comment On October 17, 2013, at 7:28 PM, philthymcnasty wrote:

    Next year is going to be a very bad year for all the console makers.

    Valve will be releasing three consoles to the market. The consoles will be playing next gen games, but each one will be of different graphics ability. In essence, they are giving the consumer the choice as to how much they want to spend and how good of the graphics they want. Top this off with the cheap, digital distribution, and it will be a bad year for all the current players. Never has the industry had such a shake up.

    Maybe now is a good time for Nintendo to focus on improving its handheld market.

  • Report this Comment On October 17, 2013, at 7:56 PM, Andaimaru wrote:

    This site is so biased it isn't even funny.

    Nintendo isn't "doomed". Once their first-party games have some time on the market, they'll be boosted as usual. Pokémon is selling millions of copies now. $$$ People buy a console just to play that series. What do you think will happen when SSB comes out? Same thing.

  • Report this Comment On October 17, 2013, at 8:10 PM, wizardaeon wrote:

    I feel like Im shouting into the wind here, and I really am, but Nintendo just needs to cut back on production to meet demand like any other manufacturer, and it needs to make it easier for programmers to develop games for them. They need to realize that hardcore gamers were all former Nintendo players, who feel like Nintendo doesnt love them anymore. (hence all the anti-nintendo people)

    My favorite games were all RPG's and Zeldas- they havent had a decent RPG in years and the last 2 Zeldas recquired Motion controls.

  • Report this Comment On October 17, 2013, at 9:14 PM, rv498 wrote:

    I think if you have kids, you should get Wii U. Main reason many say it is failing is due to lack of games. But those games are coming out later this year. So it's the best time to buy imho.

  • Report this Comment On October 17, 2013, at 10:43 PM, Fyrefalcon wrote:

    How much does Sony and Microsoft pay to have a "oh no nintendo isn't going to make it" article on the front of yahoo every week?

    Fact is they have been around for a long time and will always be around. Everyone knows they have their heavy hitters and people will buy a console for even just one game. (I did and I love my 3ds and Pokemon) For the most part both Microsoft and Sony offer a similar array of games and they will never be able to offer what Nintendo has. When you buy Nintendo you know for a fact what you'll be getting (even if it isn't out yet, which is their main problem)

    "Market increasingly satisfied with Candy Crush and Angry Birds" Is that a joke? The people that love that crap will never be and have never been in the market a Nintendo or Sony product.

    Nintendo also has a thing called quality. My NES (albeit needing to clean the pins) SNES, n64, gamecube, Wii and all handhelds in between still work great.

    However I have been thru 3 ps2s (the ps2 and ps1 were great system with some great titles no denying that), tried a 360 for a short while before it got the rrod, had a ps3 a month before it got the ylod.

    I also know when I buy a Mario title or Pokemon it's going to hold it's value for almost ever. How much are the COD games that were the hottest pile of stink a year or two ago now that cost $60 PLUS all the extra content you have to buy afterwards?

    And I'll leave it at that, had to say my 2 cents. Tired of these Nintendo's doomed articles. The Wii-u may not be Nintendo's biggest hit, and it may not sell as much as the other two. But by no means does it mean Nintendo has no future.

  • Report this Comment On October 18, 2013, at 9:22 AM, Burstedbladder wrote:

    Nintendo will beco0me a thing of the past if they do not start listening to what the people want. Forcing the Wii and wireless controllers on the people (old school people) that liked the hand held joy/arcade stick option, Nintendo lost a huge revenue when they went wireless. Not all of us old schoolers want to be jumping around like a fool and swinging our arms in the air.

    I liked Nintendo, but I stopped buying once the Wii debuted.

  • Report this Comment On October 18, 2013, at 10:44 AM, Rosco24 wrote:

    Gamers now-a-days want great graphics and good story lines, not repetitiveness. Nintendo has great games with lots of history, they just don't know what to do with them. They should enhance the graphics and give gamers the option on controllers, like sony did when they tried to emulate the nunchucks. If they enhanced graphics on legends of Zelda, Mario, donkey kong etc, they would get a stronger following. Also, bring Pokemon to the big screen and have the graphic set like a play station or xbox game (easy money maker with graphics like COD or the dragon games). They don't use their assets correctly which will eventually be nintendos downfall.

  • Report this Comment On November 03, 2013, at 12:03 PM, Stealth2k wrote:

    Nintendo has a great bright future. They are number 1 now.

    This site is factless

  • Report this Comment On November 03, 2013, at 12:04 PM, Stealth2k wrote:

    "Meanwhile, Nintendo's handheld breadbasket is being eaten by mobile"

    HAHAHAHAHAH no.

  • Report this Comment On November 03, 2013, at 12:04 PM, Stealth2k wrote:

    "While Nintendo's 3DS is performing much better than the Vita, it is still underperforming when compared to the original DS system"

    So because its not selling as much as the top selling system of all time its bad?

    no logic

    In that case Sony is doomed.

  • Report this Comment On November 18, 2013, at 12:15 PM, CrowMaster wrote:

    Exactly. Nintendo will always be around forever, and I know why. It's because They are creative. For God's sake, people should like Nintendo the best for what they do. They created the traditional sideways controller, first portable game system, shoulder buttons, joystick, and I dare say this, the first true 3D system named the Virtual Boy. They influenced touch-screen games in 2004, and made movement control more popular than it has ever been. So who cares if your "jumping around like fools", because Nintendo is fun. Oh, and not to mention the love they put into their games. When I was 5, I wasn't biased for Nintendo, I just loved it. I had an N64 and a PS2, and I would go for Nintendo every time. It's because Nintendo's fun.

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