My cheers for Nintendo (OTC BB: NTDOY.PK) have recently turned to fears, and I'm not exactly heartened by its U.S. chief's decision to bash Apple (Nasdaq: AAPL) as a new force in the gaming universe.
"It doesn't look like their platform is a viable profit platform for game development because so many of the games are free versus paid downloads," Nintendo of America president Reggie Fils-Aime told video game website Kotaku.
Fils-Aime also claims that Apple isn't making a dent in Nintendo's handheld business.
I hope he's just in marketing mode. Nintendo would have to be ridiculously naive to think it's immune to the App Store's stranglehold on iPod touch, iPhone, and now iPad owners.
"If our games represent a range between snacks of entertainment and full meals depending on the type of game, (Apple's) aren't even a mouthful, in terms of the gaming experience you get," Fils-Aime said in his Kotaku interview.
Here's the problem with his metaphorical bravado. Let's say a new restaurant is giving away free appetizers, because advertisers are willing to foot the tab in exchange for sponsored access to freeloading eaters. The grub may not be great, but it fills the gut. By the time a patron is done, why spring to eat a regular meal at the dining establishment next door?
The call is coming from inside the house
The economy alone is not to blame for recent negative comps at video-game retailer GameStop (NYSE: GME). The entire console-gaming industry has been in a funk for a year. How can the rise of casual gaming -- through free, ad-supported App Store downloads and social games on Facebook -- not eat into hardcore gaming?
The quality of the games doesn't matter, eliminating one potential edge that Fils-Aime's company -- and the more potent consoles put out by Microsoft (Nasdaq: MSFT) and Sony (NYSE: SNE) -- would otherwise have over cheaper diversions available through Apple and Facebook.
The time suck involved is far more crucial. Users streaming video on their iPads, chatting with friends on Facebook, or scrolling through the top free downloads on Apple's App Store has less time to devote to traditional games. Apple's devices devour both discretionary income and discretionary hours.
Ready. Fils-Aime. Misfire.
Nintendo's financials have been as flimsy as a Paper Mario backdrop. During the first nine months of fiscal 2010, revenue and operating profits fell by 23% and 41%, respectively.
We can't pin the fail on the economy. Other leisure providers are doing just fine. Movie theaters had a record year in box-office receipts. Sirius XM Radio (Nasdaq: SIRI) has been tacking on net new subscribers since last summer.
Activision Blizzard (Nasdaq: ATVI) also managed to set new sales records with Call of Duty: Modern Warfare 2 in November, which actually proves that gamers still show up for "tentpole" releases. However, the weakness elsewhere proves that the underlying fundamentals for the industry as a whole have been irreparably altered.
Apple isn't the only culprit, but it's a major conspirator in the plot.
Nintendo has to know this. If it's not ready to embrace Apple's model -- breathing new life into its handhelds with ad-supported, downloadable, free minigames -- or at least attack the casual gaming trend as the legitimate threat that it is, Nintendo is as good as toast.
