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Nintendo Co Ltd Suggests Massive Changes for Its Next Gaming Systems


Nintendo (NASDAQOTH: NTDOY  ) is in a tricky spot. After delivering incredible successes with its DS handheld and Wii home console, the company found itself in a market that it was no longer ideally suited for. The rise of mobile platforms from Apple and Google and strong direct competition from Sony (NYSE: SNE  ) and Microsoft hurt the hardware and software maker's business at multiple levels. Its Wii U console has been a major underperformer, and the likelihood of a turnaround remains scant. The 3DS handheld has performed well enough given market realities, but the current technological progression looks to render dedicated handheld gaming machines irrelevant in short order.

Facing tremendous pressures, the task of engineering its next hardware platforms becomes increasingly complex for Nintendo. Publishers like Electronic Arts have sworn off development on Nintendo's home console, and a strong presence from third parties is viewed as essential to building a viable gaming platform. With these elements in mind, Nintendo is planning big changes for its next hardware releases. Will the company's new hardware strategy be a brilliant gambit or prove to be a misguided move of desperation?

The father of Mario and Zelda wants to bring the hardware family together
Recent comments from Nintendo's legendary game designer Shigeru Miyamoto suggest that Nintendo's next home console and handheld will be built to play many of the same games. In an interview with Kotaku, the "Mario" creator indicated that unifying its hardware problems represents a substantial opportunity for the company. One of the chief criticisms leveled at Nintendo consoles is that the company's big game releases are punctuated by long stretches of software drought. Creating games that can be played on both its handhelds and home consoles would do away with that problem and give Nintendo a way of better supporting two concurrent platforms.

Nintendo's President suggests it will pursue a unified platform strategy
Miyamoto's comments on the promise of a unified hardware ecosystem aren't the first out of the company to indicate that it will take that direction. President Satoru Iwata has previously stated that its next hardware platforms will feature architecture largely similar to what is found in the Wii U. Nintendo's handheld and home console divisions have also recently been unified, so there appears to be little reason to doubt that this will be the direction it takes with its next hardware releases.

Has a unified hardware platform been successful for Sony?
Sony has already built a hardware ecosystem reminiscent of the one suggested by Nintendo's comments. There are a substantial number of games that can be played across the PlayStation 3, PlayStation 4, and PlayStation Vita, and some titles even allow users to buy the game once and have access to it on the other platforms in the family. While this strategy has had obvious benefits and greatly improved the value of PS Vita, there are reasons to doubt its broader efficacy.

The PS Vita was positioned as a powerful handheld that was capable of playing near-console-quality games. Its streaming abilities even allow it to run software that would otherwise be far beyond its technological limits, but that hasn't done much to spur interest in the device. The Vita never broke into the mainstream because many of its offerings could be found elsewhere, and often in superior form. The system never received the type of platform-specific breakout hits that typically drive handhelds.

Unified hardware could limit individual platform appeal
Nintendo's vast array of characters and franchises stands as an incredible asset, but switching to a cross-platform model far from guarantees that the company will be able to grow or expand its audience. The effects of mobile platforms on the dedicated handheld market have been abundantly apparent, but much has also been made about the depressing effects that tablets, smartphones, and set-top boxes could have on home consoles.

For now, the traditional console industry has escaped the deleterious effects of new and increasingly popular competition thanks to the ability of its main players to provide suitably differentiated products. There are experiences that can be had on home consoles that can't be matched by non-dedicated alternatives. Nintendo's plan to make console and handheld games one and the same could make the company ill-equipped to handle the challenges presented by the changing market.

Nintendo's implied strategy sounds massively risky
Hardware sales currently make up approximately 60% of Nintendo's business, making the introduction of successful new platforms an absolute necessity. The move to unify its hardware systems makes sense given that third parties have been hesitant to support the company's consoles, but the strategy could expose Nintendo to tremendous risk from mobile and set-top box competitors. If the plan goes through, its level of success could very well make or break Nintendo.

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Comments from our Foolish Readers

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  • Report this Comment On July 01, 2014, at 1:41 PM, joujou77 wrote:

    Does the gaming world really need all three consoles to support all third party games? Even if Nintendo does what they say they plan to do will people buy the Nintendo over Sony or Microsoft for Third Party games?

    This article also insists that EA is done working with Nintendo which is not entirely true because EA retracted that statement almost as quickly as they made it. If a developer can't figure out how to make a game for a certain system then I would question the developer before the maker of the system.

    But I don't think that is the issue with making games for the Wii U the issue is consoles sales. Madden 13 plays just as good or better on the wii u than it does on the ps3 or 360.

    Not to mention Mass Effect 3 and Ninja Gaiden 3 play well on the wii u. If the wii u had sold 20 million consoles by now everybody would be on board. More console sales equals more software sales. But that's just common sense.

  • Report this Comment On July 01, 2014, at 4:18 PM, clamo wrote:

    Nintendo, you had better stop fooling around and put out a gaming machine. not a family machine, a GAMING machine. you need something that will rip sony/MS gaming machine a new ass hole. get some adult games on it (uncut games) maybe its time to seek partners again with a old friend, Square soft.

    cause if you don't do something about it NOW, you are going to wind up back were you started, a plush toy manufacture.

  • Report this Comment On July 02, 2014, at 1:29 AM, gibbga wrote:

    Clamo is dead on!

    So let's talk their new potential strategy through for a second.

    First, they want to have a unified hardware platform, despite seeing the mostly unsuccessful implementation of the PS Vita. (The caveat here is Sony really didn't push the unified strategy as hard or as early as they should have.)

    Second, I believe the general target audience for handheld gaming likely skews a bit younger than consoles. If true, I don't believe game sharing between hardware will be as big of a boon as they would suppose.

    Third and most importantly, the PS Vita was released approximately 5 years after the PS3. In other words, it took 5 years to have the necessary comparable processing power in a handheld form factor, as the PS3 had on release. What this ultimately means is that if a Unified Platform is sought, then you can anticipate the home console to once again be woefully underpowered compared to its next-generation console competitors. (I'm using competitors VERY loosely here.)

    There are true solutions for them out there however to return them to true videogame royalty.

    1) Adopt the Sega approach. Drop the consoles/handhelds and be a software provider only.

    2) Bring Mario to Android & IOS.

    3) My personal favorite and the one they will NEVER do. Double down on the Unified Platform concept.

    3a) build out a massive Cloud infrastructure gaming system

    3b) release a new console supported only through the Cloud. All major processing occurs at the Cloud server

    3c) did I mention the new console is also a handheld? At home, you can wirelessly connect it to the TV and use multiple wireless controllers for multiplayer games ala a console. On the go, you can connect with wifi or 4G to the Cloud servers.

    3d) you can build this as a tablet w/ internet accessibility to replace the need/want of having one & for placing on the back of car head rests for kids to play with their controllers. Or sell it as a box with a more expensive accessory controller w/ screen to play handheld games.

    Ultimately, going to the Cloud is the only way Nintendo can compete WITH a Unified Platform without placing performance limits on any future console release. IMO, if you don't see this type of strategy AND they announce a Unified Platform, I'd run for the hills. I'm not sure how well 2 failed consoles in a row would play out for them.

  • Report this Comment On July 02, 2014, at 2:46 AM, AudieMurphy wrote:

    Clamo, Gibbga, you're both wrong. 1st, Clamo, Nintendo has gone that route in the past, the N64 was way more powerful than the PS1 and Saturn and the Gamecube was almost as powerful as the Xbox (substantially more than the PS2). That didn't help because processing power by itself doesn't equate into fun games (hence the PS2 blew out the first Xbox). It didn't do anything for Nintendo except cost them a lot of money in development to end up selling the machine at a loss. By the way, Nintendo was a card game manufacturer. Where Nintendo needs to improve is in production. They are the unquestioned best at making outstanding games but without 3rd party help they need to get more titles out there so the customers have a library to pick from. The current titles for the Wii U are awesome as Mario Karts sales and reviews show, but if you don't want it or a platformer you are almost out of luck.

    Gibbga, there are 2 big problems here. 1) Nintendo has been too slow to adapt to new technology (discs, internet, etc) in the past but streaming just isn't there yet. Many countries offer their people speeds that may make this work, but the majority of the US at least is nowhere near what would be needed and if you read the news, that situation won't change anytime soon. As it is, most of the country won't have high-speed anything in the near future and the speeds needed for next-gen cloud gaming would be limited to what, the Google fiber cities? First we need to see how Sony's project works out, then maybe they could look at it. 2) and most frustrating is the call to end hardware and bring Nintendo titles to Android and IOS. It sounds great to investors but just shows gamers which ones just buy stock and which ones have actually played a Nintendo game. Nintendo's success isn't based on a handful of characters because they're cute, it's because they consistently make the best playing games out there. That comes from 2 things, first they offer perfect, tight controls for their action games and their games are almost without technical flaw. As Mr. Iwata tried to explain, you can't replicate the kind of detailed control you need for a Mario game on a touch screen and you cant' make games for dozens of technical variations that work as well as Nintendo is able to on their own hardware. You drop these 2 and all you have is mascots; you have a Nintendo that will go the way of Sega. Nintendo tried farming out their characters once before way back on the CD-I and they learned the hard way to never do that again. If Nintendo can get up to speed on game production, actually put out the kinds of things they showed at E3 on a consistent basis, they'll do just fine.

  • Report this Comment On July 02, 2014, at 8:51 AM, gibbga wrote:

    I wont spend a lot of time defending my suggestion for cloud gaming because as you said Nintendo has been late to adopt technological advances, which is why I said they would never do this in the first place. (Also, this is only suggested as a way to make the concept of a Unified Platform work.) However, I will say that the FCC notes that 98% of the US Population has access to Broadband. Access versus paying for it are very different things, I realize but we should be thinking 4+ years out for next console release too. The majority of Western Europe & Asia also have access. For the laggards, it would be possible to develop a differing system, as Nintendo is now doing with China.

    To your other comment, I'll give a twofold response. 1) Do you really think that Nintendo with some of the best programmers out there can't program Mario just as well on a PS or Xbox system? Surely you jest! I did not propose licensing of the characters for others to program. 2) If you think there aren't already Mario & other Nintendo games on Android, then you have had waaaay too much kool-aid from the Nintendo fountain. Look up Android emulators. I can easily download; no, rather I can easily pirate older generation Nintendo games for free. As an investor, I see that as leaving money on the table, and it is one which too many investors are letting Nintendo get away with because of the koopa kool-aid. Whether it is the best gaming environment or not doesn't matter w/ mobile, the fact is the demand is there. Plus, if Nintendo is that concerned game control, release a retro looking bluetooth SNES controller to use with phones/tablets. It could be a big seller for them. They just aren't looking for the opportunities that are available to them.

  • Report this Comment On July 02, 2014, at 9:14 AM, gibbga wrote:

    Audie, I had a longer response for you but my laptop died on me. So, here is a condensed response.

    - my alternative of a Cloud-based system was only offered as how to release a Unified Platform that would not dumb down the console to such a level as to limit the home console's processing prowess. The lack of 3rd Party support is all because they are not releasing consoles on par with their competitors. Essentially EA and others are having to develop 2 separate games to put a release on a Nintendo console because of the lack of power. It's too expensive for them to support Nintendo.

    Also, I agree w/ you. Nintendo is slow to adapt to new technology. That is exactly why I said they would NEVER do this alternative.

    - 98% of US population has access to Broadband per the FCC. Yes, access to versus paying for it is different, but we should be looking 4+ years out for a new console release.

    - In parts of the world where broadband is not an option, have an alternative system. This is similar to the strategy Nintendo is looking at with the China market which was just opened.

    - If you think Mario, et. al. aren't already on Android, then you are drinking the koopa koo-aid. Look up Nintendo emulators. I can go pirate virtually any old school Nintendo game for my phone right this second. That is money Nintendo is leaving on the table, and if I were an investor in Nintendo I would not let them get away with it.

    - Nintendo has some of the best programmers in the world. Surely you don't believe they can't program just as easily on a PS or Xbox system. No where did I suggest they license their characters for others to program games.

    - If game input/control is the issue for mobile, then release a retro SNES controller with bluetooth built into it.

    Nintendo is so focused on what they have always done they can't see beyond it. They need to think about how to expand their reach of products, reach new markets and reach new audiences.

  • Report this Comment On July 02, 2014, at 3:27 PM, bbbygenius wrote:

    Ill say this time and time again.... the next nintendo handheld will/ should be in line with phone usage... maybe partnership with apple.. as it was once rumored? That will also work as a controller to their next gaming system (why they didnt do that with the 3ds and WiiU just blows my mind)... much in line with how Wii U works with the game pad. It will be connected to it's own nintendo cloud and can work on multiple "wireless compatible" television or maybe with a cheaper adapter. so that way you dont need to have the system in one fixed room. even if it has graphics/hardware level comparable to PS3 it would be a beast of a system..... just my opnion but it would really put a stamp into the market that has seemingly crippled the handheld industry in just a few years.

  • Report this Comment On July 02, 2014, at 3:37 PM, belardo wrote:

    UH... the USA actually has sub-standard high-speed internet... there are many countries with far better infrastructure.

    Sega still makes SONIC and other games... but overall, they don't have many ICONS for people to remember. They provided the hardware, sold SONIC and some arcade imports, that is it.

    Nintendo has a much larger IP base to work with. Going SOFTWARE only makes sense if their 3rd party support is dead. (It is dead).

    Look at it from EA and others... the WiiU is an overpriced PS3 with a much smaller user base and far less features.

    (PS3 starts at $200, WiiU is typically $300) There are 5~6m WiiUs and 80m+ PS3. Do the math.

    Wii U is last-gen tech, nothing more. It doesn't play blu-ray or DVD media. It has a bulky and mostly useless and idiotic dumb-tablet controller.

    Had Nintendo been SMART, the WiiU could have been released 2-3 years ago WITHOUT the tablet controller and sold for a much lower price.

    To come out a year before the PS4 which is about $70~100 more in price, yet has over 10x the graphics and CPU power.... yeah, the WiiU sales are in the dumps and it shows. Even the Xbone is in trouble compared to the PS4. Other than future (yawn) Halo titles... it offers nothing above the PS4 and what MS did to its gamers was stupid. If someone doesn't know much about the difference between the PS4/Xbone (parents) and saw them side by side, the smaller and slicker PS4 would be bought anyway.

  • Report this Comment On July 02, 2014, at 4:30 PM, wlkfoo wrote:

    really the only issue nintendo has was the wii u didn't sell well due to lack of games. Though the wii u has been out selling the ps4 in Japan. Making too big of a change would be a mistake imo. They just need to focus on getting key titles out to get the 3rd party support back which they did when they easily won e3. Really who buys nintendo for the 3rd party games sure they're a bonus but I brought mine for games like monster hunter, mario kart, zelda, pikmin, and not to mention all the wii games that the wii u also plays unlike the Xbox One and PS4. Honestly if gaming goes to the cloud services it'll lose way too many customers having it as an option might be cool but it should never be required just like Xboxs mistake with the "Always On" which still has hurt them despite taking the statement back. Also as someone who's used Playstation Now I'm not sure its going to a realistic idea any time soon. Playstation Now prices are all over the place and I've had some issues streaming some games despite the games being games that would normally only take up less than 1GB. I don't see it working well for a game like skyrim and such.

    Anyway Nintendo is number 1 in my book because they offer games other than shooting games which are boring and usually have no story line.

  • Report this Comment On July 02, 2014, at 5:38 PM, belardo wrote:

    PS4, PS3, etc have lots of games that are not just shooters. And its not like Mario Kart has a deep and earth shattering story, does it?

    The WiiU sales picked up because of the Kart game... Many in Japan are also upset that the PS4 came to their own country quite bit later than the USA.

    Overall, PS4 sales are healthy. WiiU sales will not grow much more than they already are. We'll know for sure in another 6 months.

  • Report this Comment On July 02, 2014, at 7:38 PM, tonicmole wrote:

    Nintendo has had major problems since the end of the Super Nintendo. Nintendo 64, and Gamcube showed how out of touch Nintendo really was. The Wii was a fluke, and in reality not even a very successful fluke. Nintendo has depended entirely on the handheld segment, which is over. There is no trick, or gimmick to save the business model they have refused to give up since the mid 90's. Home consoles survive because they can be a high end PC, Bluray/DVD player, general entertainment hub, at a low cost. Nintendo wants to sell low end gaming systems with limited functionality at $300. No DVD, or Bluray play back, no high end 3rd party games.....they have nothing to offer. That is usually a sign of a bad business model.

  • Report this Comment On July 02, 2014, at 8:20 PM, awang0718 wrote:

    These comments show that some people REALLY want Nintendo to go third party. That won't happen.

    Nintendo is a hardware manufacturer who makes software to sell hardware. It has been that way for over 30 years, despite disasters like the Virtual Boy and flops like the Gamecube and the Wii U (currently).

    Nintendo's next handheld and console will have similar architecture, which means developing games on both devices will be more efficient. Both devices will still have different games, it is just that Nintendo can develop Mario Kart, Smash Bros, Animal Crossing, Super Mario etc. on each system simultaneously. Adding Cross-Buy for Virtual Console and indie games will also help a lot.

  • Report this Comment On July 02, 2014, at 8:25 PM, awang0718 wrote:

    My predictions:

    Nintendo's next portable will still be a dual screen handheld 9like the DS and 3DS), only it will have an HD 720p display, dual analog sticks, no sterioscopic 3D graphics (it's a waste of money and is under-utilized), and some form of TV connectivity (like a console).

    Nintendo's next console will be a competitive console with similar hardware to the next Xbox and Playstation. It will feature a traditional, non-touch screen controller, with the Wii U Gampad and Wii remote serving as extra controller options.

    Nintendo will improve upon the Nintendo Network significantly.

    Nintendo will make some smartphone games, but these games will all be new IPS specifically desinged to be played on mobile deivces. No Mario, Zelda, Pokemon, Metroid, Donkey Kong etc.

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