OPINION: Where now for Nintendo?

As if the varied reporting on Nintendo’s financials this morning is not confusing enough, the disparity of the analysis could well baffle many readers.

The fact is that Nintendo is a brand that matters personally to a lot of people. David Braben once suggested to me that this is because unlike companies like Sony and Microsoft, Nintendo has a constant style narrative that flows through all its products.

There’s no single strand that runs through first party exclusives on Xbox or PlayStation. Be it Gears of War, InFamous, Fable or Killzone – each game is distinct and exists its own universe and is largely unrelated to its host platform.

The same is not true of Nintendo. When you’re playing a Nintendo game you know you’re playing a Nintendo game. Whether it’s New Super Mario Bros, Nintendo Land, Luigi’s Mansion 2 or Pikmin, all of Ninty’s products have that Ninty air about them.

And over the course of a decade or two that can seemingly create a strong bond between player and company.

This is demonstrated not only by the affection with which many gamers (and indeed lots of the press) show toward the company but also by the ferocity with which they will jump to its defence. Speaking ill of Nintendo on Twitter is not for the light-hearted.

But brand loyalties aside, Nintendo is in a bad situation and I’m not completely sure how they’re going to escape from it.

Yes, losses have been halved – but it’s still yet another year of loss. Wii U’s hardware sales are lower than even the most pessimistic had predicted and Europe is in freefall for the company. Wii u has yet to sell 1m units in Europe in the five months since release and is still being outsold globally by Wii.

(Compare that to sales of 37.4m for iPhone and 19.5m for iPad in the last QUARTER alone).

Make no mistake about it – this is not the financial performance one would expect from a platform holder with a new console on the market and certainly not one you’d expect from a company who just a few short years ago was redefining the market.

Firstly, let’s get the 3DS out of the way. 3DS is doing OK. It’s developed a decent software line-up and has garnered quite a following. Commercially it continues to miss Nintendo’s expectations as, quite rightly, the firm had hoped to build on the phenomenal success of DS.

To my mind what is preventing 3DS going one better than its predecessor is partially the same phenomenon that is so badly hurting Wii U.

That being – who exactly are Nintendo making games for nowadays?

Remember how the ‘problem’ with the record-breaking Wii was that Nintendo was focusing too much on the mass-market and not enough on its devoted fanbase? Well that’s certainly a problem it’s addressing with Wii U. Every new software announcement is a sequel or extension or re-release of an existing brand or title. And fans – judging by the jubilation online – are delighted by this.

The problem is, I don’t think anyone else is. You can go on and on about high scoring 3DS games or the promise of some new Wii U releases later this year, but to the non-Nintendo loyalist Nintendo has announced next to nothing that’s likely to appeal.

But that’s fine, right, because Nintendo can just grow its business by serving that loyal fanbase better? Err, no.

The truth is that said fanbase is declining. Yes, there’s still millions of twenty and thirty somethings who grew up with Nintendo and will happily follow Kyoto’s lead. But like an aging Tory party failing to appeal to young voters, how does Nintendo hope to attract a new generation to its machines.

Ten years ago all kids wanted was Wii, DS, Pokemon and all things Nintendo. Now, in 2013, this is very much not the case. Kids are obsessed with iPads and iPod Touches (and indeed Android tablets and the like). Touch control and tablets and free-to-play games are second nature to them now. Plus, from a child’s perspective Apple is cool. Not only does it offer a dizzying array of free software that they want to play, but it also offers the promise of being like mum and dad because they have iPhones too.

How ironic that one of the most premium priced product lines on the market has become the fascination of the most financially bereft sector. But mums and dads are buying these things for their kids in droves.

It ticks all the boxes.

So working on that assumption – that kids are no longer aspiring to be Nintendo users – where on earth does that leave the company? Can it really hope to win back” those who defected” during the Wii era by re-releasing yet more versions of games we’ve been playing since the 90s?

And what confidence can be garnered from this week’s Wii U Virtual Console launch in the US that comprises eight games from the SNES and NES era that every single Nintendo fan on the planet has probably purchased more than once already?

Perhaps the bigger question is whether Wii U’s struggle is down to a strategic mishap from Nintendo or instead a wider malaise amongst the games buying public regarding consoles and premium priced software. That’s a question that will in part be answered by the launch of PS4 and the new Xbox later this year.

My sneaking suspicion is that at least one of the new consoles – PS4 if I were a betting man, though Xbox will of course do well in America at the very least – will perform very strongly, leaving Nintendo fighting to nurse what is a arguably a fundamentally flawed console through a potential five, six or even seven years of pain.

Unless it decides to cut it losses and try again. Because even if the 3DS continues to improve and becomes the most successful handheld there ever has been, that’s not enough to appease Nintendo shareholders who as recently as 18 months ago had expected the Japanese giant to stride forward and eclipse the achievements of the last generation.

But in the near future Nintendo has to knuckle down. Yes, big fanbait IP like Zelda and Pikmin will likely provide some sales uplift for Wii U – though it will likely be limited in scope and short in term. And with third parties turning their backs in droves, there seems little immediate hope for the machine.

But any piece of hardware is just one killer app away from success. That’s about as positive as I can be for the time being.

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