Nintendo Has a Character Problem

Nintendo (NASDAQOTH: NTDOY  ) has made a lot of questionable decisions over the last two decades. Its poor choice in storage formats, hesitance to embrace online gaming, and the positioning of Wii U as successor to its Wii console are among the strategies most frequently cited by critics. The company has also managed to consistently remain profitable and has overseen monumental successes like the DS, which helped to usher in the age of touch-screen gaming.

One area that does not typically receive a great deal of focus is Nintendo's handling of IP's and its willingness to introduce new, character-based properties. It's clear that Nintendo has a very different philosophy when it comes to IP utilization than rivals Sony (NYSE: SNE  ) and Microsoft (NASDAQ: MSFT  ) . Is the company's reliance on its storied franchises still sound, or is Nintendo painting itself into a corner?

It's time to make new friends
Few, if any, software companies have the breadth of legacy titles that Nintendo possesses. If you were to look at the big franchises on the PlayStation or Xbox platforms, you would find that most of them trace their lineage no more than a decade back. Nintendo franchises like "Mario," "Donkey Kong," "Zelda," and "Metroid," on the other hand, made their first appearances in the early to-mid 80's. These titles and their associated characters helped define gaming and long served as the standard to which other aspiring franchises were compared. As gaming progressed, so too did the company's premier series' . This created a powerful association between Nintendo and its medium of choice, but the strength of that association is now faltering.

Mario may remain the most recognizable face in gaming, but the empire that he helped to build is in danger. Nintendo has become overly reliant on the IP's that helped to cement its place in the industry. The last new character-based IP that the company internally developed was Pikmin, a 2001 launch title for the company's Gamecube console.

During the Wii generation, the company's forays into new IP largely followed the precedent established by the system's flagship title Wii Sports. Games like Wii Fit and Wii Play used simplistic, stylized characters called "Miis" which users could create and customize at the system level and use in a variety of titles.

Visionary creator and characterization pioneer Shigeru Miyamoto seemed to focus much of his efforts on critical and commercial underperformer Wii Music. The company's software output for the Wii U has followed a similar trend, primarily consisting of "Mario" titles, a "Pikmin" sequel, and updates to titles in the Wii series.

Different approaches to casting
To say that Sony and Microsoft have taken more progressive approaches to new IP would be putting it lightly. These efforts arrive out of necessity. The reason that Nintendo has chosen to stick with its premier franchises, often eschewing the creation of new character-based IP's so as not to divert attention from its existing stable, is that the strategy has consistently worked. With each subsequent generation, Microsoft and Sony have made concerted efforts to establish new, generation-defining IP's; these new IP's often come on the heels of brand deterioration or complications attached to previous flagships.

Swapping partners
Microsoft's Xbox console succeeded largely on the strength of the "Halo" series developed by Bungie Software, a company now partnered with Activision Blizzard. While the studio stuck with Microsoft for most of the Xbox 360 generation, it was already planning a multi-platform future around the completion of Halo 2 in 2004. The company had ambitious plans for its then-conceptual game, Destiny, and feared being relegated to constant work on "Halo" sequels and spinoffs.

For the Xbox 360, Microsoft managed to secure another generation-defining exclusive by partnering with Epic Games for the "Gears of War" series, which, along with "Call of Duty," shaped a new breed of console software. With Epic going the multiplatform route, Microsoft has pursued a familiar strategy by partnering with Electronic Arts for the upcoming Xbox-exclusive Titanfall.

Internal nourishment
Sony's approach to studio and IP management differs from Microsoft in notable ways. The company has shown itself more interested in building up internal studios than partnerships that nab generational blockbusters. The result is a selection of highly varied, generally critically acclaimed exclusives that have built broader platform value but typically failed to outsell their Xbox counterparts. Halo 3 outperformed the first two games in the "Killzone," "Uncharted," and "Resistance" franchises combined.

There's promise outside the comfort zone
Whether one is speaking of mobile or console gaming, it's difficult to overstate the importance of established franchises. With more and more young gamers cutting their teeth on mobile and the Wii U tucked into its deathbed, Nintendo's brands are weakening. Titles like Angry Birds and Minecraft are attracting demographics that Nintendo once commanded. The company that unleashed Pokémon needs to marry its design expertise and stated passion for innovation with new and iconic characters. Mario is great, but the guy needs a breather every now and again.

What's the Fool's top stock for 2014?
There’s a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (7) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 01, 2014, at 11:06 AM, Galzero wrote:

    Dear Motley Fool: What's your beef with Nintendo? Honestly, everyday you have something negative to say about their strategies and products. The interesting thing is that you issue your opinions as analysis. It shows how unprofessional and unreliable you are as a source of information. It is not doing any food to your reputation.

  • Report this Comment On February 01, 2014, at 11:48 AM, Amberyerno wrote:

    Another day, another crack at Nintendo. You could set your watch by these article.

  • Report this Comment On February 01, 2014, at 12:38 PM, isforshooting wrote:

    I read the first sentence and then skipped the rest to comment here. The reason I felt I didn't need to read the article beyond the first sentence is because I've read about 20 or more of Motley's articles that have already said pretty much exactly the same thing. Nearly every time I come here there is some article talking about the failure of Nintendo, how they screwed up, where they missed the mark. If you need to write so many articles about it just to get the point across, then YOU are likely the ones missing the mark. It seems like you feel there is something wrong with Nintendo but you can't put your finger on it so you keep pumping out articles trying to figure it out. The fact is it's all premature and none of it sticks, yet you continue to tarnish your credibility in pushing this notion. I like reading about Nintendo but not the same drivel over and over again. Please don't bother writing anymore about Nintendo until you have something new and relevant. Nintendo is an incredibly successful company. Easily one of the most successful in the world and you constantly attempt to disrespect them with your redundant script. It's like cheap news I'd expect to glance over while standing in line at the grocery store.

    For the record I actually like the Wii U. Once some great games come out for it I will like it even more.

  • Report this Comment On February 01, 2014, at 12:43 PM, chrismireya wrote:

    @ Amberyerno: I think that the "cracks" at Nintendo are due to the "cracks" that are driving the company to near bankruptcy. The Wii-U -- love it, hate it or general apathy toward it -- was a huge commercial failure. It just doesn't bring in profits and the cost from R&D and production may never allow the company to break even from it.

    Nintendo should prepare a new console that can actually push technology forward without relying entirely upon gimmicks (e.g., nunchuk games, game pads, etc...) as the main selling points. Their console needs high end graphic processing capabilities that can play anything that PS4 or Xbox One can play. As the "family friendly" console, Nintendo needs to develop an Xbox Live type of experience to make the console more friendly for families, organizations, etc...

    Nintendo can be saved. However, there are some glaring cracks in their current business model and widespread value of the Wii-U.

  • Report this Comment On February 01, 2014, at 1:50 PM, JaredM80 wrote:

    and yet they are still around. Sure the Wii U isn't doing too good b/c Nintendo let the success of the Wii try to sell the U, they will learn from their mistakes and the next console they make will do well. Look at Sony, they let the success of the PS2 go to their heads and as a result the PS3 didn't do as great as they hoped in the short run and now the Playstation 4 is out and great things are still to come. And now it is Microsofts turn, well they made their mistake early on.

  • Report this Comment On February 01, 2014, at 7:21 PM, doomrider7 wrote:

    @chrismireya

    Near to bankruptcy? Nintendo could buyout Sony's gaming division if they so chose to. Both Sony and Microsoft suffered BRUTAL losses on the PS3 and Xbox 360, yet no one felt need to mention it. The high end graphics argument is very empty and shallo since for all the money spent on RE6, Hitman Absolution, Tomb Raider, Battlefield 3/4, and several others they RARELY even break even.

  • Report this Comment On February 01, 2014, at 7:52 PM, bcweir wrote:

    Asking Motley Fool to at least PRETEND to be knowledgeable about the industries they write about is like watching a banker do a cooking show.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2818149, ~/Articles/ArticleHandler.aspx, 9/30/2014 8:33:30 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement