Nintendo's (NASDAQOTH:NTDOY) announcement on Friday confirmed what many already suspected: Its living-room console, the Wii U, has been a colossal failure. To anyone who had been following the industry, this announcement was hardly shocking -- sales of the Wii U had been terrible for most of 2013.
But what's far more surprising, and ultimately much more important, is that Nintendo's handheld gaming business is also in decline. Friday's release suggests that Apple (NASDAQ:AAPL) and Google's (NASDAQ:GOOGL) mobile devices are finally taking a toll on Nintendo's 3DS.
Nintendo cuts 3DS projections
Alongside a 69% reduction in its Wii U sales forecast, Nintendo also slashed its projections for the 3DS. The Japanese gaming giant now expects to sell just 13.5 million handheld consoles -- it was forecasting sales of 18 million.
If Nintendo's projections prove accurate, then it will have sold fewer 3DS consoles in 2013 than it did in 2012. This is a troubling trend, as it suggests that the 3DS may have hit its peak popularity in only its second year. For comparison, Nintendo's prior handheld console, the DS, didn't see its sales peak until 2009, its fourth full year on the market. Nintendo expects to sell more 3DS games this year than last, but there, too, it cut its projections -- from 80 million down to 66 million.
What's even worse is that 2013 should've been a tremendous year for the 3DS. The console had a strong lineup of games, including Pokemon X/Y and The Legend of Zelda: A Link Between Worlds (the later of which GameSpot dubbed the "Game of the Year" for 2013 -- an award that is virtually never given to a game released for a handheld console), while Nintendo released a new, more affordable version of the 3Ds -- the 2DS -- in the second half the year.
2013 was a great year for mobile gaming
So why is Nintendo's handheld business shrinking? It might have something to do with Apple and Google.
Mobile gaming has been around for some time, but 2013 was a banner year for the industry. Earlier this month, Apple announced that it has now paid out $15 billion to mobile developers -- and $10 billion of that came in just the last year. Exactly how much of that went to game creators is unknown, but research firm Gartner (via Forbes) estimates that about two-thirds of app-related revenue comes from games.
Apple's iOS 7, released in September, added support for controllers with physical joysticks and buttons -- iPhone gamers and game creators are no longer limited by the touchscreen. Google's Android, meanwhile, has supported controllers for years, but Google made several game-related updates to Android in 2013. The new "Google Play Games" allows for, among other things, easier online multiplayer.
Mobile gaming is only going to improve
Of course, there are no mobile games nearly as good as Nintendo's Legend of Zelda, but that won't always be the case. With tablet and smartphone adoption accelerating worldwide, mobile gaming should only continue to improve.
Earlier this month, at the Consumer Electronics Show, NVIDIA showed off a new mobile chip, the Tegra K1, capable of outputting graphics on par with the PlayStation 3 and Xbox 360. Meanwhile, Samsung is starting to push gaming as a way to sell its TV and tablets, and Sony's newly announced streaming video game service will, when it launches later this year, allow mobile devices to play old PlayStation games.
Although Nintendo continues to make games of unmatched quality, the days of its dedicated gaming hardware seem to be coming to an end. As Apple and Google slowly killed the market for digital cameras, so now do they seem to be doing the same to Nintendo's 3DS.
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Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.