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[Gamesbriefers] Can Nintendo sustain the traditional console business for much longer?
This is a Gamesbriefers post, where we ask industry luminaries to respond to a topical question.
While other companies in the console games business are struggling to adapt, Nintendo has so far defied expectations – most notably by managing to sell tens of millions of 3DS consoles, despite the ubiquity of smartphones and tablets. With the Wii U coming out in a couple of months, the company seems to have tentatively embraced digital distribution and social networking – but are steps like that, and the company’s own amazing IP, enough to sustain its existing business model? Or does it still seem inevitable that we’ll be playing Mario and Zelda on our iPads in the not so distant future?
I’ve never really fallen for the Nintendo spell, but I do understand why they have such otherwise universal love. However, unless they can find a way to leverage the WiiU as a second screen family living room experience I just think this is too little too late. Digital download? Social media? They should have done that 2-3 years ago. Now it should be about meaningful social integration and Freemium content – and cross-platform support.
In my view Mobile and Tablet devices are just moving way too fast for an old Skool hardware provider like Nintendo.
Microsoft’s Smartglass seems a much better way to go – as long as its widely adopted and does what it says on the tin.
Perhaps I will feel differently about Nintendo games when they are available on my tablet of choice.
They have so many strengths, but to me Nintendo really excel at two things – making incredible games, and making a profit on their hardware. They don’t play the same game as the other platform holders and, while it’s generally the case that their product appears inferior to the competition if you go by spec sheets (PSP vs DS, 3DS vs Vita, Wii U vs next-gen formats) they’ve so often surprised and delighted us with their software that it’s difficult to bet against them – certainly every time I’ve thought they’re going down the wrong path, it’s me that’s been wrong.
Because they’re not in the business of loss-leading on hardware, and sell a huge amount of first party software, they haven’t had to be number one to be successful – and when they have been number one (DS, Wii) the success, and profits, have been phenomenal. Wii U won’t come close to the success of the Wii, but that doesn’t necessarily make it a failure for Nintendo. At the same time, it’s always been trickier for third party developers and publishers to make money on Nintendo formats compared to others. What’s driving innovation in the industry now is new business models, and new developers, many of whom are coming from outside the ‘industry club’ older companies have enjoyed membership of for so long. By casting an infinitely wide net, ‘open’ platforms are more likely to bring in this innovation than closed ones.
However, innovation can be destructive – there’s no way an existing console company selling games for $50 was going to lead the way on freemium. The big problem for the new consoles is that people now have other devices to play on, and those devices are effectively free – i.e. they’re not bought for gaming, but are great at it. If the freemium model – removing all financial barriers to start playing – is the way forward, a $250 paywall in the form of a new piece of gaming kit breaks that model. My suspicion is the coming console systems represent the last major generation of bespoke gaming devices we’ll see. A quote I’ll no doubt regret in a few years!
We asked the audience a similar question at the end of the ‘Battle of the Platforms’ day last week in Shoreditch.
The question was, “Which of these will be generating the most revenue in 5 years’ time – PlayStation/PSN, Xbox/XBLA, Nintendo or OUYA?”
Out of the 95 people there, not one voted for Nintendo.
This didn’t surprise me – I know the industry generally wrote Nintendo off before it launched the Wii and turned the console business on its head, but see Nintendo either following Sega and switching to software publishing in a few years, or being bought by another company for its IPs. I just can’t see a long-term market for games-only devices from a company that doesn’t properly understand online, free-to-play or cross-platform.
I don’t think people want multiple devices, whether that’s portable or under-the-TV. Games on mobile/tablet are now getting so good and are so competitively priced that I can’t see a compelling reason to buy an expensive new 3DS style handheld and games for £30 when you can get FIFA for £5 on your iPhone (a device you already need to own) It’s a similar story with under-the-TV hardware.
3-4 years ago, I might have suggested kids as Nintendo’s trump card, particularly with the DS. Pokemon and all the other children’s games were the driver for owning one, and it could have been the perfect device for introducing those young players to the core Nintendo brands (Mario, Zelda etc).
In 2012? All the surveys I’ve seen say that children want an iPad, iPhone or iPod touch for Christmas (the latter being most likely, obviously), and those are the devices they’ll be playing on. I suspect for a large swathe of the under-10s population, Angry Birds is a more exciting brand than anything Nintendo have, right now.
Nintendo has technical know-how, brand appeal, a reputation for inventiveness, die-hard tribal loyalty, positive press bias and an amazing ability to execute on all of the above where it counts. It is also maddening, often old-school (region locking etc.), bottom-line focused and has always had difficulty playing well with others.
The rest of the industry needs Nintendo to exist because – however frustrating it may be – Nintendo defines the waves that we all follow. Kinect and Move would not exist if not for the Wii, and when Wii U does prove a success (which I think it will), both Microsoft and Sony will scramble to create their own tablet/console hookups. Likewise, many social game mechanics would not exist had Nintendo not invented them first. It has sat at the top of the innovation waterfall for three decades.
So the major threat to it is not new platforms, digital distribution or any of those concerns. The vast majority of customers do not care about any of that. Nintendo’s big problem is internal: It may simply be running out of ways to innovate. What comes after the Wii U, after the console that can accept every conceivable kind of input? That is the question of the decade for Nintendo, because once the verbs run out, they may have nowhere left to grow.
On a final note, everyone should be intimately familiar with Dan Cook’s 2005 essay on Nintendo’s innovation strategy
I don’t think that the Wii U tablet/TV hook-up is going to capture the imagination in anything like the same way the Wiimote did, and I’d expect a far smaller uptake of the hardware as a consequence.
The point of two-screen activity is to give the user space and time away from the rest of the room. Nintendo’s philosophy of bringing the people on their separate screens together is noble, but I think ultimately misguided. Also, smartphones and tablets do a lot more and are a lot more integral to people’s lives and identities than a tablet controller will ever be. So I don’t think they’ve got the behavioural psychology the right way around. If you want to bring people together, make them all look at the same thing, by making it very fun. Like the Wii and Kinect have done at my family gatherings.
Surely most everybody is confident enough that Apple will make a move to control the living room screen that they will see Nintendo, Sony and Microsoft’s efforts as side-shows or distractions from the main event. Nintendo have traditionally done their own thing and fought their own battle. They’re a toy manufacturer! This feels far more like following than leading. It’s Apple by Nintendo. And they’re stepping directly into an area where Apple are already destroying them – without even trying to do so. Games are not Apple’s focus.
So this is going to be a very tough sell. I don’t see them capitulating any time soon, I imagine they will make a profit and what have you, they are savvy as a business and they won’t be letting their franchises wander (effectively turning from a hardware to a software business in the process) until they have literally no choice. Like Apple, they seem to feel that to make the best experience, you have to control hardware and software. They’re probably right. So I wouldn’t hold out for Zelda on the iPhone, but due to a lack of innovation or wow factor, or novelty, nor would I see them having anything like the impact they had with the Wii.
Nintendo make toys – brilliant ones
I reckon Nintendo will sell a million of these in the UK in the 1st 6 months – you won’t be able to get one, there will be panic and all the usual stuff. To get Mario and Zelda you will need the Wii U, but Wii U games will be £40-50 and 3rd party support will be led by Ubi IMHO – Zombie U & Rayman.
The market for 3rd party games is not a profitable one unless you are Nintendo. That is the history and I have the dev and publishing scars to prove it. That won’t change, it may even get worse. The Wii U is a great concept, and a challenge to games makers. I am told COD will be going large on this, but will it sell Wii U’s? I doubt it.
Wii U will face a massive attack if Apple bother to market AirPlay to the iPhone and iPad owners and actually push Apple TV this Christmas. They show no signs of doing this, yet. Also, Microsoft are launching Win8 – and basically spending gazilions on ads – that will be a noisy old time and could distract potential Nintendo customers from buying or more importantly spending £250-300 to get going.
Nintendo make toys, brilliant ones. Christmas is toy time in toy town, every year.
Nintendo is a great toy and the Wii attracted a lot of non-traditional gamers, in large part to the novel idea of playing tennis in your living room, and in part to the $199 price point. It looks like the Wii U will retail for $299, which is on the boundary of prices where the spouse needs to be consulted.
If the Wii U is still focused on non-core gamers, that price point is hurting their cause.
You’re quite right, compared to previous successful consoles Wii U is great value. Compared to the high end mobile devices customers think they get for free on contract, or consider free because they bought them for something else, it’s very expensive.
Bernard Chen User Experience Director at Ubisoft
My memory of the Wii launch price was wrong (or I bought it on sale somewhere?). The Googlebox says the Wii launch price was $249 and not the $199 I remember.
Instead of inflation-adjusted prices, we can compare against the price of a Blu-ray DVD player in Nov of 2006 (thank you Waybackmachine). The first page of Amazon hits for Blu-Ray DVD had an average price of $182 in 2006. That number provides an idea of the kind of fun a Wii had to offer to get a non-gamer to buy it. Today, the first page of Blu-Rays on Amazon has an average price of $98.
Nintendo is competing in a world where the price of gaming is coming down for non-core gamers who now have Facebook and smartphones. I’m under the impression that they need to attract non-core gamers, but their pricing relative to comparable, electronic toys is moving in the wrong direction.
Whenever anyone asks me to comment on Nintendo I say
“It is a brave analyst who bets against Nintendo”
I have been thinking about this on and off for a few days now and I think my conclusion is that it is very difficult to see how they are not going to get relegated into a future niche with some of their staunch attitudes. Think of the niche that Apple effectively occupied in the 90’s vs Microsoft. The difference is that when Apple came back on the rise again, they did not only by innovating in new market niches (e.g. digital music) but by making those products easy enough to fit people’s lives! This is surely one of the reasons why mobile gaming has become so ubiquitous! So WiiU is a smart toy that solves a real problem, but as for their handhelds: does anyone who isn’t A) in the industry, or B) older than 7, really want to carry around a brightly coloured lump of plastic and a load of cartridges?
On this basis perhaps we will find that they soften and change more gradually than Sega did, where we essentially all woke up one morning and they weren’t doing any type of console anymore, period.