Is it game over for Nintendo? Not even close

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Image: JD Hancock/Flickr (Creative Commons)

Image: JD Hancock/Flickr (Creative Commons)

Screen Shot 2014-01-21 at 2.55.28 pmThe following was originally published on Technology Spectator, and has been republished with permission.


If Nintendo were a character in a Mario game, it would be on its last life, hovering precariously close to a Game Over screen.

That may sound a tad dramatic, but it sums up the sentiment on Nintendo after its latest round of forecasts. Commentators are jumping on Nintendo’s own admission of defeat and are calling for radical changes in the company’s strategy. The iconic gaming firm has lost its way, squeezed out by the likes of Sony and Microsoft, and failed to remain relevant.

But it’s not all doom and gloom, particularly if you’re willing to take a long-term (almost futurist) view on the issue.

After two Christmas campaigns and a year of stalled sales Nintendo has conceded that the Wii U – a gaming device with a tablet built into the controller – has been somewhat of a flop. At a recent investor meeting, the company predicted a ¥35 billion ($A384 million) operating loss for its full financial year ending March. As expected, Nintendo’s shares on the Nasdaq have taken a beating.

Nintendo Share price NASDAQ_0

Nintendo’s current share price, at the time of writing. Source: Nasdaq.

All the numbers revolve around weaker than expected console and software sales. As for why this is the case, well, it’s a bit of a chicken and egg scenario. In its official statement on the matter, Nintendo says that limited consoles sales have translated to lower than expected “high margin” game sales.

However, the opposite applies as well. It’s a rather common adage in gaming circles that software sells hardware, and for the first year of its existence there were few Nintendo brand games released to push the Wii U. The best of the bunch, Super Mario 3D World, was released in the weeks leading up to Christmas last year and it made a dent in the consoles sales. Analyst firm NPD recently reported that the December sales saw Nintendo push more Wii U units than ever before.

If all stays to plan, 2015 could be a big year for the Wii U sales. High profile titles like Donkey Kong: Tropical Freeze, Mario Kart 8 and Smash Bros Wii U (to name a few) are all being released this year, and may tempt more purchases and buy the Japanese firm some more time.

But investors and analysts are looking for a more permanent solution to Nintendo’s recent spate of missed targets downward forecasts. The company has been failing to perform for a couple of years now, and shareholders are hungry for a return to the days when it cornered the so-called ‘casual gaming’ market with the launch of the original Wii console.

Nintendo's share price over the past 10 years. Note the spike after the launch of the Wii in 2006. Source: Nasdaq.

Nintendo’s share price over the past 10 years. Note the spike after the launch of the Wii in 2006. Source: Nasdaq.

Nintendo’s share price over the past 10 years. Note the spike after the launch of the Wii in 2006. Source: Nasdaq.

Super Mario for the iPad

The latest slip has renewed calls for Nintendo to move out of the hardware space and focus on producing games for other devices, such as the smartphone and tablets. That’s right, Super Mario for the iPad.

Though, this scenario seems unlikely. Nintendo has already indicated its preference to use apps and devices to enhance the games on the Wii U. A move to port its popular game franchises to devices would also likely cannibalise its efforts in the handheld gaming space.

Nintendo will likely discuss this issue at an investor meeting on January 30. But given the cascade of popular titles set for release in 2014, any radical solution will likely have its implementation delayed until the following year.

Perhaps the most interesting point of this whole situation is the fact that Nintendo actually holds all the cards going into an era of cloud-based virtualised gaming. Amazon’s AWS division has already chimed in on this issue, saying that the current crop of consoles may be the last of their kind.

The next generation of gaming devices may be virtualised machines operating out of the cloud.

Virtual delivery for iconic IP?

It all sounds good in theory, but whether this kind of delivery method is actually viable remains to be seen. Sony’s anticipated Gaikai cloud gaming initiative will likely be the first test of this new technology. If successful, Nintendo could follow in its rival’s footsteps. Though, it’s worth noting that the delivery of Sony’s Gaikai service has been fraught with hiccups and delays. Sony’s yet to commit to a launch date for the new system in Australia.

But, if the technology works as planned and Nintendo jumps on the trend, it could easily outpace its rivals.

Nintendo’s IP (it’s assortment of characters and games) are more iconic and popular than Sony’s or Microsoft’s. Of the three, it’s best suited to operate in an era where the focus is on software rather than hardware.

It just needs to hang on long enough to get there.

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