One my my pet peeves -- not that I haven't done it myself -- is
when those in the media give "advice" to major companies, as if
CEOs running hugely complex multi-billion-dollar global businesses
care about what any of us think.
And these days, one of the most common recipients of this advice is
Japanese video game revolutionary
(OTCMKTS:NTDOY), which, before its recent stumbles, was the darling
of the industry, courtesy of its revolutionary Wii console and DS
If you have a short memory, you may have forgotten that the Wii had
the most innovative user interface
in any technology product released in the past decade, easily on
) iPhone, which brought touchscreens to the masses.
The Wii's motion-control system was incredibly friendly to
non-gamers, and for a short period of time, it did what
) could not: It created
a new legion of gamers
However, as cool as the Wii was, there was a certain faddishness to
it, and sales eventually slumped following initial years of huge
Simultaneously, smartphones and tablets rapidly improved their
gaming capabilities to provide a high quality -- or at least "good
enough" -- alternative to standalone handheld gaming devices like
Nintendo's current 3DS,
which has underperformed
relative to the blockbuster DS.
As a result, Nintendo shares are down over 84% from the glory days
of Wii/DS mania:
Now, the most common suggestion is for Nintendo to give up on its
own hardware efforts, particularly in mobile, so it can join the
) Android app boom that has fueled the success of franchises like
There is some merit to this argument. Nintendo's biggest asset is
its incredible library of game franchises like
In the first quarter of 2013, consumers spent far more money on
iOS/Android game apps than on games for dedicated handhelds.
According to the research firms IDC and App Annie, gaming revenue
from the Apple App Store and Google Play was almost triple that of
And for years, demand for specialized portable gaming hardware has
been stalling out, as evidenced by lackluster sales of the Nintendo
Sony PS Vita
So the question is, how can Nintendo best monetize its number one
asset (its game library) in an era of diminished demand for its
hardware (the only way to play its games)?
This is a fairly complicated issue.
From one key standpoint, there's a major obstacle in Nintendo's
incredibly strong corporate culture, one that resists the idea of
abandoning its hardware plus software formula, even though it
clearly hasn't always worked well.
On Tuesday, Nintendo's president Satoru Iwata emphatically told the
Wall Street Journal
that the company is not succumbing to the temptation to go software
"If I was only concerned about managing Nintendo for this year
and next year - and not about what the company would be like in 10
or 20 years - then I'd probably say that my point of view is
nonsense," Mr. Iwata said during the interview at the Electronics
Entertainment Expo earlier this week.
"But if we think 20 years down the line, we may look back at the
decision not to supply Nintendo games to smartphones and think that
is the reason why the company is still here."
So at least for now, even with its struggles, Nintendo is digging
in its heels -- and to some extent, it's probably right to do so.
Nintendo could sell an infinitely larger quantity of games if it
made iOS and Android ports -- but the products would have to sell
at a much lower prices, and they would officially be competing with
games that are free or nearly free, effectively devaluing its
Although I haven't seen much discussion in this area, alternately,
I'd like to see Nintendo give up on hardware and let Sony and
Microsoft bid for the right to get Nintendo games exclusively on
their new consoles -- not that Nintendo is listening to me.
Those two companies are primed for a serious fight, and there
aren't many weapons better than franchises like
. Nintendo could probably extract a big fat upfront payment with a
sweet royalty deal on future game sales.
So is Nintendo doomed? The answer is yes -- perhaps not to the
point of death, but the company's most likely to see a ceiling on
its financial success because it just isn't moving the hardware to
support its incredible software franchises.
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