How Nintendo Co. Opted Out of Partnerships With EA and Activision and Damaged Its Gaming Empire

Source: skylanders.com

Nintendo (NASDAQOTH: NTDOY  ) has a long history of failed and aborted partnerships. The company was once the most powerful force in the gaming industry and dictated terms and conditions to third party publishers that shaped both the development ecosystem and the progression of the medium at large.

Nintendo's often troubled relationships with developers created the widespread belief that the company was difficult to deal with and overly concerned with retaining control. This reputation and the actions that led to it facilitated the rise of competitors like Sony and Microsoft in the gaming space and contributed to the weakening of Nintendo.

Now, the company faces greater adversity than at any point in the last decade. Nintendo's share price hovers around 10-year lows, the dedicated handheld market is evaporating thanks to the rise of mobile, and its Wii U home console is dead in the water. Things could have been a lot different for Nintendo if the company had chosen to pursue key partnerships with Activision Blizzard (NASDAQ: ATVI  ) and Electronic Arts (NASDAQ: EA  ) .

The rise of Skylanders
Activision's Skylanders series is one of the modern gaming industry's biggest breakout hits. The series makes use of toy action figures that can be scanned and imported for use as playable characters in games. Players can purchase individual figures or themed packs that feature multiple characters—a model that generates more revenue per user than the typical $60 game.

The success of the series and its toys-to-game hook did not go unnoticed by competitors. Disney (NYSE: DIS  ) rushed to introduce its largely similar Infinity series, while Nintendo is expected to debut its own variation on gaming's latest craze at this year's E3 conference. Nintendo apparently passed on a chance to partner with Activision in the creation of Skylanders in hopes of building its own competing product, a move that hindsight casts as incredibly shortsighted.

Nintendo missed out on a Pokemon-like success
According to an article published by Polygon, Activision approached Nintendo at the early stages of the Skylanders project in hopes that the two companies might partner to create the next Pokemon-like sensation. Nintendo was riding high on the success of the Wii, and the company's rich cast of characters seemed ideal for bridging the gap between toys and video games.

While demonstrations of the Skylanders concept apparently impressed Nintendo executives, the company opted not to get in on the ground floor of what would eventually become one of the biggest things in gaming. Paul Reiche, one of the chief minds behind the creation of the Skylanders craze, is quoted as being shocked that Nintendo hasn't more quickly readied a competitor. While one is likely to emerge within the next few months, Reiche believes that Nintendo would have wiped the floor with Disney's Infinity. While that may have been true at one point, it's likely no longer the case. 

Source: disney.com

Nintendo's bargaining position has weakened
Nintendo's decision to pass on the Skylanders project meant that the company was also missing out on the opportunity to align itself with America's biggest gaming publisher. Now that the Wii U has proved to be a flop and developer support is sparse, the move looks increasingly condemnable.

It's likely that Nintendo wanted to retain greater control by creating its own toy-based software offerings, but its slowness in readying such a competitor has limited the chances of breakthrough success. The Wii U's GamePad controller was built with the Near Field Communications technology that Skylanders hinges around, but any game that releases on Nintendo's disastrous console is going to have a limited audience.

An unprecedented failure
Nintendo's failure to team with Activision on Skylanders is doubly problematic when viewed in conjunction with the company's failed EA teaming. Put forth in 2011 as an "unprecedented partnership" with the potential to reshape the industry, the deal quickly fell apart and relations between the two companies deteriorated.

EA was supposed to help Nintendo modernize its online infrastructure and reach groups of gamers that were otherwise settled on Sony and Microsoft platforms. The end result was a small number of ports that sold incredibly poorly, a decree that EA would no longer develop for Wii U, and a souring of terms between two industry giants. Had Nintendo been able to effectively navigate a meaningful partnership with Activision or EA, the company's present fortunes might look a lot different.

Could Nintendo partner its way out of its current predicament?
After missing out on two potentially massive partnerships and finding itself on the brink of irrelevance in the home console market, Nintendo has stated that it will proceed with a more open policy regarding team-ups and licensing. Unfortunately, the early results of this new approach do not seem to be particularly meaningful.

Source: officialnintendomagazine.co/uk

Nintendo's valuation has the potential to explode with the right partnership, but the company has repeatedly shown that it is difficult to deal with and that it has a pension for torpedoing potentially transformative deals. The idea of Nintendo teaming up with an Apple or a Disney is rife with possibilities, but the fact that the company missed the boat with Activision on Skylanders and lost EA's support is a reminder of fundamental issues that led to its present, undesirable state.

You can get paid while you play games, but that's only if you are ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.


Read/Post Comments (12) | Recommend This Article (1)

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 April 20, 2014, at 1:24 PM, LaughingTra wrote:

    haha. I love reading this guys obviously biased articles. Dude, you really need a new story write.

  • Report this Comment On April 20, 2014, at 3:19 PM, DrModulok wrote:

    These articles, man they are so full of propaganda. I am not going to pretend that Nintendo is perfect, nor am I so naive to think that they are difficult to work with, but one comment had me scratching my head.

    "According to an article published by Polygon, Activision approached Nintendo at the early stages of the Skylanders project in hopes that the two companies might partner to create the next Pokemon-like sensation."

    Why would Nintendo need a Pokemon-like product when it already HAS Pokemon? Why would Nintendo want to relinquish creative control for a competing product?

    Any day, Nintendo could just release a toy based pokemon game and mop the floor with Skylanders and the super lame Disney Infinity.

  • Report this Comment On April 20, 2014, at 4:38 PM, zeroryoko1974 wrote:

    I am confused, is this a paid advertisement for Skylanders, or an article bashing Nintendo?

  • Report this Comment On April 20, 2014, at 5:46 PM, awang0718 wrote:

    I agree with DrModulok. Why would Nintendo need a Pokemon-like product when they already have a Pokemon-like product called Pokemon.

    Pokemon X and Y, the most recent Pokemon title, has sold over 12 MILLION copies worldwide in approximately 6 months. You would have to be stupid or high on some drug to think that Skylanders or Disney Infinity can approach that level of success anytime soon.

    Besides, there is no point for a Skylanders exclusitivity. Skylanders is already available on Wii, Wii U, and even 3DS, as well as other platforms. You have be stupid to beleive that making Skylanders an exclusive would help the game compete with Disney Infinity, since an exclusitivy deal would have done nothing but limit sales for the game.

    Keith Noonan should just stop writing about video games in general. He clearly knows nothing about the industry, other than the fact that the Wii U sales are bad.

  • Report this Comment On April 21, 2014, at 1:29 AM, PatrickFrye wrote:

    As of 2013 the Wii U sales numbers were up to 5.86 million, putting the platform higher than the Xbox One. While I have no doubt Microsoft's console will surpass Nintendo later this year it's not like it can be dismissed as a target platform entirely by game developers. But it still hurts Nintendo to not have as many must-have exclusives. I personally know Nintendo fans who are holding out on buying a Wii U until certain games (Bayonetta 2, X, Mario Kart 8, etc) are released.

  • Report this Comment On April 21, 2014, at 8:02 AM, targeyone wrote:

    Well Keith, I see you're still at it.

  • Report this Comment On April 21, 2014, at 9:26 AM, Bunnyking77 wrote:

    Nintendo was up against a wall and they suffered for it but still made the right decision by not allowing EA (the worst company in America) to run its' digital sales department.

    Nintendo's Wii U is not selling because of the hyperbole surrounding the other two systems. As a proud owner of a Wii U I can tell you, only the Wii U impressed me and only the Wii U has any worthwhile games right now.

    I love my PS4 and PS3 but my Wii U is the system I am most excited about.

  • Report this Comment On April 21, 2014, at 10:30 AM, wizardaeon wrote:

    the thing that damaged Nintendo is all the negative hype you news writers do ALL THE TIME. You are obviously being paid by Microsoft or Sony to write this garbage. Nintendo has always tried to make child friendly games- they didnt jump on the GTA bandwagon because thats not what they were trying to make. Just like fisher price makes toys primarily for kids under 5.

    I really wish Nintendo would start some lawsuits against media companies like yours. If you wrote this garbage about Walmart, your great grandchildren would be dealing with litigation!

  • Report this Comment On April 21, 2014, at 12:12 PM, timslim14 wrote:

    Ha... Probably one of the best moves that Nintendo ever pulled. EA is an EVIL. They are a very greedy corporation!!!!!

  • Report this Comment On April 21, 2014, at 1:04 PM, kdognumba1 wrote:

    Despite Nintendo hurting financially right now and being in dire need of 3rd party support, I actually think they made the right decision in the case of both deals.

    First and foremost, we need to look back and remember why the PS4 is smashing the XB1 in sales and both fan and developer support. Regardless of performance, price, Kinect, games, content, etc. the fact of the matter is the DRM issues of the XB1 destroyed mass consumer interest in the system and for many people, it made them ignore every other possible good thing Microsoft has done. That said, because of the "EA" partnership, bad rep of Origin, and the DRM all being in the reveal, most people associated the XB1 DRM with EA. IF Nintendo were to have gone with EA, THIS could have been them. Did it help Nintendo financially to walk away from a deal with EA? No. Does it help Nintendo's reputation and image with consumer knowing that they walked away from a deal with the devil? Yes, absolutely!

    Second, while the deal with Activision could have been good for both Nintendo and Activision, doing any deal with Activision could end up with their IP's being burned to the ground with constant spam. Sure we see Mario a lot, but we don't see Mario Kart, Smash Bros, NSMB, 3d Mario Platformers, Paper Mario, Mario Party, Mario Sports, etc. once a year however even though we don't see the same style of games once a year, we are all burnt out on seeing these same characters all the time. Now, imagine seeing the same style game with ALL Nintendo IP once a year. That would kill all the appeal of all their IP. Do we really want that? I know I don't. Better yet, should Nintendo exchange long term success with for short term profit? If I was the president of a company, I wouldn't.

    Hey, I think Nintendo needs help as much as the next guy but I honestly don't think either of these deals would be good for Nintendo and I honestly don't think that most actual gamers, not mass audience consumers who don't keep up with this industry nor do they care to know, would want to see Nintendo do that to themselves. I didn't enjoy watching Microsoft shoot themselves in the foot with the XB1 with DRM so I really wouldn't enjoy watching Nintendo do that to themselves.

    What Nintendo DOES need to do is, first and foremost, get their marketing issues straightened out. They need to have much more direct and forward messaging as many people are STILL confused about what the system is.

    Next, they need to use ALL of their IP. Dig deep, bring back games people are wanting. Let 3rd parties make them if needed via partnerships, deals, and maybe even full on licensing.

    They also need to give some things on the system a facelift. Add in cross game group chat, on screen notifications pop ups, and the ability to invite friends to games and join in friends games in progress. Speed up the OS even more, give Miiverse a visual facelift and integrate it more into the system, upgrade Nintendo TVii to make it be more functional and make videos launch without the need for different apps to open.

    Another, they need to make some strong partnerships with 3rd parties and get some serious 3rd party support. Not just Japanese, but strong western support as well. They need the catalog of games coming at retail to increase drastically and they need games that will attract the general gamers. This means exclusives but also multiplatform titles.

    Lastly, yes I know they just had a price drop but there sweet spot is $250. They need to get the system there. They will definitely take a hit, the same way they did with 3DS, but look at 3DS now. If you do something, you have to go the whole way, not half jobbing it. Introduce the price drop with a bundle, maybe a Mario Kart 8 bundle.

  • Report this Comment On April 21, 2014, at 4:03 PM, kdognumba1 wrote:

    @Undauntedone - Really now? My points are Nonsensical? Are you serious? Facelifting the features of the Wii U, using all of their IP whether it be through in house studios or 3rd party partnerships (the way they are with NamcoBandai for Smash Bros), getting more 3rd party support at retail, and dropping the price to the sweet spot with a bundle for a big game people can't get anywhere else sounds "nonsensical" to you?

    Also, like everybody else, we all know about Nintendo's warchest of money. That said, Nintendo is NOT a private company. If the current people in power at Nintendo don't get on the right track and start turning a profit, the board and investors can boot the current leader aka Iwata out and take over the company which if you've been paying close attention means they'll take the entire company in a different direction away from dedicated gaming device (mobile gaming). This would be disastrous in the long term. They would never be able to return from such a move and would lose their entire fanbase.

    The only real tangible options are to get their current home console turning a profit so that they can make their next pieces of hardware that much better.

  • Report this Comment On April 22, 2014, at 8:07 AM, AudieMurphy wrote:

    Nintendo has a ton of problems right now that we all know, they've been pointed out thousands of times, but the first order of business has to be content. EA's answer to their deal was to offer what, Mass Effect 3? EA started out of the gate doing the same crap they did with the Wii, quietly walking away from them was one of the first smart moves Nintendo's done in a long time. As for SkyLanders, it could've been a system seller but the writer didn't find out any of the details of the deal. What was Nintendo's requested investment? Either way what I want to know is what is N doing to increase content for the WiiU now? I know Mario Kart will be out in days, but if there is no 3rd party support (as usual for N) what are they making themselves? Smash looks good but it's been farmed out, are we supposed to be happy with 2 games this year? That's less than the output on the competitor machines per month and it may not be fair since it's 3rd party based but customers don't care about fair, if they aren't into one or both of these what are they going to play? Last Gen Sony started with a big head and didn't take care of their customers, now they are pumping out free small content between big games to keep people on their machines and it's working, Nintendo, with the most content in the world and the mechanism to put that into action is doing what? Trickling out the same old games we've been buying on the Wii for years at high prices! I love Mario and probably own 6 copies of SMB3 but that's the point. I can buy good 7th Gen games for less than the price Nintendo wants for the "new" GBA ports. Many people say stop the bleeding and drop the U or go mobile; they have deep pockets,they should use them while there is still any good will and stop bleeding customers.

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: 2919839, ~/Articles/ArticleHandler.aspx, 9/17/2014 4:04:06 AM

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