What Should Nintendo Do? (WSND)

My advice to a billion dollar company...

There has been a lot of ink spilled over the last few days, or last few months, about what Nintendo should do to turn around their fortunes with the Wii U. After they recently announced a $335 Million Operating Loss for the year the chorus of voices calling for them to 'pull a Sega' has grown to a crescendo.

I am not one of those voices.

I believe that one of Nintendo's strategic advantages is the fact that they create their own software and hardware in unison, discarding that advantage because the battlefield is changing around them is not the way to stay alive, let alone win the battle. I do, however, believe that Nintendo needs to make some pretty serious changes to their strategy if they want to fight their way out of this. If you'll indulge me, I'll lay out a few of those ideas in the paragraphs below.

What Happened?

Before we look at new courses of action let's first take a look at what actually happened to Nintendo's fortunes. In the last console generation (360, PS3, and Wii) Nintendo was the king. The Wii outsold both competitors and enjoyed tremendous software sales, for the first half of the generation. The second half of the generation was actually a different story. After a huge initial sell through in the first few years the Wii started to really show it's age and began to fall behind the 360, and then PS3, in hardware and software sales.
Part of this, I believe, is that Nintendo waited too long to update the Wii. Nintendo's initial thinking when developing the Wii was dead-on. HDTVs had not reached the mainstream in significant numbers and the 'casual appeal' of motion control was a brilliant move. However, 7 years was much too long for Nintendo to champion the Wii and their hardware sales reflected that mistake.

A long console cycle wasn't the only problem for Nintendo, however. A larger threat appeared in the form of smartphone or 'mobile' gaming. Not because mobile games come anywhere near the quality or fun on a Nintendo product, but because most of the time they are good enough for the consumer that rushed out to purchase the Wii in droves. The 'casual' audience moved on from the Wii to smartphone gaming and has likely left the 'home console' behind entirely.

I am of the mind that Sony and Microsoft are not actually Nintendo's true competitors. The PS4 and Xbox One are not taking sales away from the Wii U, they are fighting over a shrinking pool of gaming enthusiasts who need the fastest, biggest, best gaming experience at any cost. Nintendo is fighting for the much bigger pool of players who like to enjoy a game with their friends or unwind with a game every once and awhile but who don't care to spent a large portion of their income to get that experience. For this audience, smartphone gaming is the perfect solution. The quality isn't nearly as good but the convenience factor is so high that it counter-acts the loss in quality. This is a very difficult problem for Nintendo to overcome.

What can be done?

This is where more pundits start talking about how Nintendo needs to jettison their hardware business and start making games for smartphones. You're not going to get any of that nonsense here. Should Nintendo make games for smartphones? Yes, I think they should, but not at the expense of their core product, which is currently the 3DS and Wii U. Any Nintendo games made for smartphones should be seen as a way to market and expand the reach of Nintendo back to the consumers who made them so successful in the Wii years. Think of it as a new form of consumer outreach, not a complete direction change for a 100 year old company.

Virtual Console

One option for Nintendo to pursue is the release of NES and SNES virtual console games on smartphones. Most of these games are already of a higher quality than the smartphone games that are currently available and it would not only be an immediate boost in revenue but an avenue to market new and upcoming games to players on their mobile devices. Say you download Donkey Kong Country for your iPhone, in that game there could be a video ad and direct sales link to the upcoming Donkey Kong Tropical Freeze for Wii U. Honestly, I have no idea why this isn't already happening. Nintendo shouldn't expect their 15 and 20 year old software titles to be a reason for people to purchase new hardware. Make these titles available, at the same price they are now, on smartphones and use them as a vehicle to drive consumers to new hardware and new products.

New Game Demos

Another avenue that Nintendo could explore is one that they have actually just recently attempted on the 3DS with the upcoming game 'Bravely Default Flying Fairy'. Last month Nintendo announced that before the release of Bravely Default they would release a free demo of the game on their eShop service. What makes this different from any other demo is that the 'demo' is actually a mini game all of it's own. Instead of just pulling out a part of the full game and calling it a demo Nintendo, and Square Enix, have created a small 'prequel' for the game that players can try for free and that feeds into the full priced main product.

This would be a perfect way for Nintendo to debut new titles on smartphones. Create a small, stand-alone, title for smartphones that whets the appetite of gamers and then directs them to purchase the 'real' game on a Nintendo game system. Imagine how much larger an audience Nintendo could reach with a 3-4 level iPhone version of 'Donkey Kong Tropical Freeze' than they are currently reaching with traditional advertising and Nintendo Directs.

This tactic obviously is more labor intensive than just putting Virtual Console games smartphones but I think it would be a great opportunity to show mobile gamers what they are missing on Nintendo's system when they only play games on their phone.

The Future - Undivide and Conquer

Finally, should Nintendo move forward with another generation of hardware?
YES, and much sooner than they traditionally have done!
I believe that the next hardware from Nintendo needs to be a home console/mobile console hybrid. Instead of having two distinct platforms like the 3DS and Wii U they need to have one system that can serve as both a mobile and home gaming system. Looking at the Wii U it's already pretty easy to see what this might look like but the difference would be that all the 'game playing guts' of the system would be in the handheld portion, not the 'base station'. This would mean that you could take the handheld with you, just like a 3DS, and play games on the go. Then when you get home you wirelessly stream your game to the Nintendo Base Station under your TV and play on the big screen with your family and friends.

What would really sell this thing is if the base station could function on it's own as a media center device, possibly even one that could play virtual console games as well. This would mean that if the 'handheld' was out of the house someone else could still sit down to watch Netflix, Hulu Plus, or complete a dungeon in a classic Zelda game.

This melding of home and mobile consoles would also allow Nintendo to focus ALL of their incredible software skills on one platform. Imagine if all of the great games that have come out in the last year for 3DS and Wii U were, instead, for one system. It would be the hottest selling gaming device in history.

I actually think this may already by Nintendo's intention based on some of their comments over the last few months and the direction of the Wii U. They are already trying to combine the game design concepts of the DS with their home system, they just couldn't, or wouldn't push the hardware far enough into the handheld realm to make it a reality. My hope is that the next hardware announcement we hear from them, preferably in the next 2 years, is of a unified Nintendo system that will combine their handheld and home console businesses.

There you have it, my advice for Nintendo. Not that anyone actually asked for it. I hope, whatever their course in the future, that they are able to once again expand their reach and regain a leadership position in gaming. But whatever they choose to do, it's going to be a wild ride.

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