Can Nintendo’s ‘NES Remix 2’ Boost Sales of Classic Games on Virtual Console?

Get ready for some more retro goodness, gamers -- Nintendo's (NTDOY -0.41%) NES Remix 2 will arrive on April 25 for the Wii U.

Like its predecessor, NES Remix 2 blends some of its most popular 8-bit NES titles into unusual twitch-based mini games. The combos come straight out of the feverish dreams of a 1980s kid -- Link battles a Hammer Brother, Samus collects coins in the Super Mario Bros. underworld, and Princess Peach battles Bowser in the climax of Super Mario Bros. 3. The game also features a completely mirrored version of the original Super Mario Bros. in which the player runs from right to left. As a result, old games become new again in a surreal wave of nostalgia.

NES Remix evolved directly from the "9-Volt" levels in Nintendo's WarioWare series, in which a player is given mere seconds to complete tasks from well-known Nintendo titles like Super Mario Bros., The Legend of Zelda, and F-Zero. Since 2003, the WarioWare titles have sold more than 8 million copies worldwide and fueled the popularity of "twitch-based" mini-games.

Although NES Remix looks a lot like a continuation of WarioWare, the game also reveals a lot about Nintendo's business sensibilities.

The business of reselling old games
When many investors think about Nintendo, they often overlook the importance of Virtual Console (VC), an online shop on the Wii, Wii U, and 3DS that allows gamers to purchase classic games for discontinued consoles. Consoles featured in the past include the Game Boy, NES, Super NES, N64, Sega Genesis, NEC's TurboGrafx-16, and SNK's Neo Geo.

Super Mario Bros. 3. Source: Nintendo.

Nintendo launched VC in 2006 to counter the rise of emulation, which the company considers a form of piracy. Therefore, just as Apple (NASDAQ: AAPL) took aim at P2P (peer-to-peer) services like Kazaa and Napster with iTunes, Nintendo introduced VC to offer gamers a legal means of emulating classic games. These games usually cost $5 to $10.

NES Remix is an excellent way to boost sales of older titles on VC. An older gamer who plays NES Remix will likely feel pangs of nostalgia while playing those remixed 8-bit challenges, which leads them to purchase the full game on VC. Therefore, it's no coincidence that Nintendo launched the VC version of Super Mario Bros. 3 for Wii U and 3DS on April 17, as part of a "month to remember" for classic game aficionados.

Simply put, NES Remix is actually a tantalizing sampler platter aimed at generating sales of Virtual Console titles.

Nintendo does not disclose Virtual Console sales. Back in February 2010, research firm FADE (Forecasting Analyzing Digital Entertainment) forecast that VC generated $66 million in sales in fiscal 2009. If FADE's estimates were correct, VC would have accounted for less than 1% of Nintendo's total revenue that year -- indicating plenty of room for growth and improvement.

Other forecasts of VC sales have not been made since then, but we can safely assume that the figure is now much lower, since Nintendo's annual net sales fell 65% between 2009 and 2013.

Could Virtual Console actually be Nintendo's 'mobile solution'?
NES Remix could certainly drive more gamers to purchase older games on VC, but Nintendo has to pave a clear growth path for VC first.

One persistent criticism of VC is that Japanese gamers get a library of 656 titles while North American gamers only get 402. Yet both virtual libraries are dwarfed by their physical counterparts -- to date, there have been over 1,000 NES/Famicom games, almost 800 Super NES/Super Famicom games, and nearly 400 N64 titles released.

In addition, popular titles such as Bionic Commando and Super Mario World 2: Yoshi's Island notably remain missing from VC. Considering that most (if not all) of those missing titles have been successfully emulated by third parties for over a decade, it's bizarre than Nintendo hasn't made more of an effort to fill in those gaps.

Super Mario World 2: Yoshi's Island is still missing from VC. Source: Nintendo.

Beefing up its VC offerings could go a long way toward silencing critics who want Nintendo to release mobile games to generate more revenue. VC is already available on 44 million 3DS units, 6 million Wii Us, and over 100 million Wiis, and the individual games are comparably priced to premium mobile titles. The key difference is that Nintendo can only offer a few hundred titles, while Apple's App Store and Google (NASDAQ: GOOG) Play can each offer over a million apps.

The bottom line
Although NES Remix is a creative idea that might lead to higher digital sales on VC, it also represents an ongoing problem for Nintendo -- it keeps dwelling on the past when it should be planning for the future.

Over the past decade, Nintendo has been focused on remaking the same game -- Mario Kart, Super Smash Bros., Mario Party, to name a few -- repeatedly. As a result, it has fallen behind the curve in terms of innovation. In the past, Nintendo's greatest accomplishments always came from thinking outside the box -- Super Mario Bros. revolutionized the platformer, The Legend of Zelda: Ocarina of Time raised the bar for 3D action role-playing games, and the Wii took motion gaming mainstream.

Looking ahead, Nintendo must address the fact that the popular 3DS is getting much better software support than the ailing Wii U. NES Remix is a great way to remind gamers why they loved Nintendo in the first place, but the company needs to do more to convince them to love its consoles once again.