Wednesday, February 27, 2013

Whether Nintendo Likes it or not, they are in trouble

When I was growing up as a child, Nintendo was king in the video game space.  Everyone and their brother had to have a NES, SNES, Gameboy, and others.  This was a different time.  This was a time before smartphones and tablets when if you wanted to play games on the go, you had to buy a dedicated gaming device and if you wanted to play at home, you had to buy a home console.  Even though PC gaming was big during those days, it offered a different experience.  In today's market, we have smartphones and tablets that will play games for a dollar or even free.  Even though these games do not offer the same depth of a dedicated handheld or gaming console, its enough to scratch the itch.  People are now buying their kids iDevices instead of Nintendo gaming consoles, taking the drawing away the market that Nintendo has built their business around.  There are many other factors that are leading to the decline of Nintendo's marketshare.

The Nintendo DS was hands down the greatest selling gaming system of all time.  It was extremely popular with kids and parents as well because parents could buy a DS at a relatively low cost and provide their kids hours upon hours of entertainment.  Then came the iPod, iPhone, and the Apple Appstore.  I really can't remember a product that was so disruptive in the market than Apple's products. Whole industries struggled to keep up and other industries had to change their business models completely.  This happened to Nintendo as well.  It's even more ironic when you stop to think that Apple didn't even try to make their devices mobile game consoles.  What made them so successful is that parents can buy their kids an iPod, which is more expensive than a DS, that offers games as little as a dollar or even free!  Developers can crank out games at a much lower cost than would take to make a game for the DS.  There are also fewer hoops to jump through.  Even adults who may have had a DS system may now just buy games on the device that they already own.  Couple this with the rise of the Play Store and Nintendo is in a really big bind.  That was clearly evident when Nintendo dropped the price of their 3DS quickly do to low sales volumes.  It is clear that phone and tablet gaming has really taken a huge chunk out of Nintendo's marketshare where they previously dominated.

What I think Nintendo did wrong was first, not change their business model fast enough to allow the same games you see on other devices on their platform.  Second, they felt they were offering the market better products at a higher price.  This may have been true at first but good developers have learned how to make good games at a hugely discounted price.  There are some games on phones and tablets that require on screen controls.  These games could have been where Nintendo provided a better experience than on phones and tablets.  Third, I felt that Nintendo could have courted indie developers that were making games for the Steam platform on PC.  Many of these games were cheap as well but were very good and innovative.  I feel this could have created a market of people who wanted to play great indie games but maybe didn't want to play on the PC or wanted to play on the go.  Lastly, the gambled on a fad with the 3DS that turned out to be what consumers generally didn't want.

The Nintendo Wii was a phenomenon.  It brought gaming to the mainstream unlike any other game console had done before.  It was demoed on Ellen and other talk shows.  It was used by families and nursing homes.  This was possible because the Wii was simple and also a new way of interacting with a video game.  People who were adverse to trying a video video game found it natural to hold the Wii-mote in their hands and play tennis, bowling, or other games.  The Wii was more of an activity than a game console for many people.  Nintendo target the casual market and was immensely successful at it but what they failed to do was keep the "hardcore gamer" interested in the console.  This is where the danger set it.  People who are not enthusiasts lose interest and are not nearly as emotionally invested as your enthusiast gamer.  Many people that bought a Wii as an activity used it as a Wii Sports machine and maybe bought a few more games but that was it.  Since Nintendo wasn't attracting the "hardcore gamer," they lost a lot of potential sales on the software side.  Microsoft and Sony owned the enthusiast market and were enticing the casual market in other ways.

Now Nintendo has the Wii U.  First of all, the marketing message sucks.  There is a problem with the name, in that many people do not know the different between the two consoles, even if it has a U at the end.  People who do not know that the Wii U is actually a new console may think it is either what they already have or maybe its just an add-on for their current console.  Its easy to see how someone who doesn't follow the industry would think this way.  Nintendo really only showed the tablet part of the Wii U and never really articulated to the consumer that this is actually a new console.  I saw this first hand while at Walmart.  They also didn't articulate that this tablet has a very short radius from the system.  People who have seen tablets see them as portable mobile devices, not something that is tied to a console by a leash.  I also think that many of the casual market who bought a Wii probably stopped playing it after a certain point, letting the machine become a dust collector.  Even if they do still play it, the tablet controller is probably intimidating to someone who just wants to wave their arms.

I really never thought the casual market was going to be interested in this machine.  It doesn't have the same marketability and ease of use of the Wii.  Nintendo didn't do the Wii U any favors by providing a terrible marketing campaign.  Nintendo didn't fully target the casual market with the Wii U, they also wanted to bring back the hardcore that they lost.  This is important because that market buys software, and lots of it.  At launch, they released a ton of ports of games that people probably already played unless a person only had a Wii, making that person more of a casual player anyways.  Nintendo didn't have the killer first party titles they should have had.  Not to mention, the Wii U is graphically in the current generation.  If they were going to get any kind of hardcore enthusiast, other than the Nintendo fanboys, they needed to get original games out quick since new next-generation consoles from Sony and Microsoft were right around the corner.  Nintendo failed to do this and it may be too late to attract those buyers.

If you want a tablet to play games with, your probably going to buy an Android or iPad tablet.  You're not going to go out and buy the restricted Nintendo Wii U.  I think we will see this play out in the future.  Sure, there will be people who buy the Wii U but no where near as many as who bought the Wii, there just isn't that killer app and it doesn't translate well to a talk show.  Nintendo really should have invested their time in releasing a dedicated tablet or phone although they are terrible at making operating systems.  Nintendo is in a lot of trouble and I think it won't be too long until we see Mario on other platforms.  

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