Yup, Nintendo Is Still Stuck in the Past

Nintendo's Wii U sales have been lagging. Image source: Nintendo.

Nintendo (NTDOY 3.03%) is a dinosaur. The iconic game maker has fallen behind the times, in part because it remains strategically stuck in the past. Nintendo held its ground in refusing to bring its popular franchises to mobile platforms, which was a costly mistake, as the company could have easily topped the charts.

Its strategy of only making software for its own hardware had worked for decades, but things have changed. Only now is the company preparing to offer smartphone apps, but they will merely be companion "service" apps as opposed to standalone games. CEO Satoru Iwata outlined the plan to investors in January.

No itch to Twitch
Well, there's a new example of Nintendo's failure to adapt. According to Polygon, Nintendo will not integrate Twitch into the Wii U. Nintendo of America President Reggie Fils-Aime says that the company "[doesn't] think streaming 30 minutes of gameplay by itself is a lot of fun."

Instead, Nintendo prefers to selectively use Twitch to broadcast curated experiences. Nintendo has used Twitch to broadcast specific events, such as Nintendo Treehouse Live at E3, but the company simply doesn't believe that average gamers bring much to the table as far as entertainment value goes.

Over 45 million people disagree
By the end of 2013, Twitch was bringing 45 million unique viewers to its site each month. That's just one of a handful of impressive stats for a service that was launched just three years ago.

These are all very big numbers that Nintendo should not be ignoring. Source: Twitch.

We're now halfway through 2014, so these metrics have probably risen even further. In fact, the site has grown so quickly that Google's YouTube is reportedly looking to acquire it for $1 billion. That rumored price tag would be an absolute steal for the advertising potential. We're talking about a hyper-engaged audience that spends nearly two hours per day on the site, which is a lot more than the average YouTuber who watches a three-minute cat video and wanders off into cyberspace.

Twitch streaming on Xbox One. Image source: Twitch.

Twitch has become so popular that both Microsoft (MSFT 1.82%) and Sony (SONY -0.13%) integrated the service into their respective next-gen consoles. It was so important to Microsoft to include Twitch integration that it made sure Twitch was available on Titanfall's launch day. On that day, 30% of Twitch's broadcasting was coming from Xbox One. When the PlayStation 4 launched last year with Twitch integration, the console comprised 10% of Twitch's traffic.

A different kind of mistake
Neglecting such a highly complementary service is a clear mistake for Nintendo. Not only does Twitch increase engagement within the current installed base, but Twitch streams can also effectively serve as free advertising. Furthermore, the rising number of unique broadcasters shows that gamers value the ability to broadcast, and those gamers won't be buying a Wii U anytime soon.

Perhaps more peculiar is that Nintendo offers a Mario Kart TV service for Mario Kart 8. The service allows gamers to upload clips directly to YouTube. That seems to conflict with Nintendo's reasoning that watching other average gamers isn't fun, since it is facilitating exactly that for the popular racing game.

Despite having launched a year earlier, the Wii U continues to lag both the Xbox One and PlayStation 4 in unit sales. Last month, Nintendo reported its third consecutive annual operating loss, in part due to the Wii U's underperformance. Unit sales were down 20% year over year. You'd think that Nintendo would have learned its lesson by now.