Nintendo’s investors think the company is wasting time and energy developing for its own devices. Instead, according to Bloomberg, fund managers think Nintendo should turn its attention to developing for smartphones, especially Apple’s iPhone, which has been the most successful development platform when it comes to translating downloads into paydays for software publishers. Nintendo President Satoru Iwata doesn’t seem all that interested in making such a move, but what could the company expect if it did decide to join Apple’s mobile ecosystem?
Where Nintendo is right now
The past few years haven’t been overly kind to Nintendo. Even leaving aside the disastrous launch of the 3DS, which led the company to institute an emergency price cut of nearly a third in the U.S. for the handheld gaming device within six months of its introduction, Nintendo has seen its stock prices steadily decline as the early successes of the Wii and DS gradually wore off between about 2007 and 2008. Share prices are now sitting at a six-year low.
The 3DS has not succeeded in jump-starting Nintendo's flagging mobile efforts.
In its quarterly earnings report in late July, Nintendo also posted its first quarterly operating loss ever. It reported a net loss of around $328 million U.S., and an operating loss of $485 million, down from operating profit of $299 million measured year over year.
Nintendo game sales are down, but that’s just reflective of a general trend. Video game sales in general seem to be slumping lately, and fell for the second straight month in June. Nintendo still has some franchises that are doing well (the 3DS re-release Legend of Zelda: Ocarina of Time saw 283,000 sales in June, despite being an old game that most fans bought during its first g0-around), but milking legacy brands isn’t exactly the best way to attract new customers.
According to Wedbush Securities (via the Los Angeles Times), the DS is bleeding market share, and the 3DS isn’t picking up the slack; that’s where the iPhone, iPad and iPod touch come in.
The state of iPhone, iPad and iPod touch gaming
Claiming that smartphone gaming isn’t having an impact on Nintendo’s business, as Iwata maintains, is just plain burying your head in the sand. While traditional gaining sales see steady declines, tablet gaming is up, as is smartphone gaming, led by the iPhone. Nielsen found that iPhone gamers spend twice as much time gaming on their devices compared to other platforms in a study last month, and app research firm Distimo found that on average, iOS users download 5.1 million games per day. While only 600,000 of those are paid, that’s still an amazing volume for a single day’s worth of business, and lots of those remaining 4.5 million are still taking in other revenues from advertising and in-app purchases.
Analysts estimate that smartphones are currently taking one out of every three dollars spent by consumers on portable gaming, and the problem for gaming-specific platforms is only expected to get worse. The iPhone and the iPad iterate much faster than do gaming consoles and handhelds, with a new model coming out approximately every year. Better hardware and software means more for developers to work with, and more potential for unique game design that catches consumer imagination, as did Angry Birds, for example.
Not uncharted territory
A screen from a recent EA iPhone release, Shift 2 Unleashed.
Nintendo wouldn’t be the first major game publisher to make the jump to iOS. It has the distinction of also being a hardware maker, but it shouldn’t let that detail become a noose around its neck. The company would do better to focus on leveraging its success on the software side in the new and thriving iOS ecosystem, the way companies like EA have managed to do.
EA Mobile’s revenue has been climbing steadily since the introduction of the iOS App Store. Revenue was up 12 percent in 2010 compared to 2009, and jumped again 10 percent during its first quarter of 2011, versus the same period a year ago. An increasing chunk of that growth can be attributed to iOS, as revenue from PSP and the DS fell by 42 percent and 27 percent respectively during the same time frame. iOS revenue for EA Mobile, by contrast, increased an impressive 100 percent during the quarter ending in May, as compared to a year ago.
The key takeaway is this: Mobile game publishers are hedging their losses with traditional handhelds and consoles by investing heavily in smartphone platforms, and iOS is delivering the highest return.
Follow the example of other gaming hardware icons
Will the 3DS or the Wii U be Nintendo's Dreamcast?
Nintendo wouldn’t be the first gaming company to stop making hardware and turn its attention entirely to software if it did change its focus to developing for Apple. Sega made the same move back in 2001, based in part on the same kind of mistake that’s causing Nintendo’s headaches today. Sega created the Dreamcast, an ambitious console that necessitated high sales targets that ended up being unreachable. The 3DS is similar to the Dreamcast in that regard, with one key difference: People loved (and still love) the Dreamcast.
Nintendo also has more reasons to embrace software development for other platforms than Sega did at the time. For one, its characters and franchises are stronger and more widely recognized, with far fewer disappointing titles to dilute the brand. And second, the question of whether or not Nintendo properties can survive and succeed on iOS isn’t really a question; it’s almost a given, considering how well even brands tangentially associated with Nintendo, like EA and Square Enix, have done on the platform.
I’ve loved Nintendo’s hardware since I got my first NES back in 1991. And I’ve owned every Nintendo console or handheld released since, with the exception of the Virtual Boy. But the only way the things I love most about Nintendo, which are its games, will survive and thrive, is by embracing the shift in gaming that the rise of mobile smart devices represents. Let’s hope Iwata, or whoever succeeds him if it comes to that, can come to grips with that.
I believe Nintendo would survive better on its own. If it moves over to the iCrowd, it will also isolate a lot of fans too. I would not buy an iPod or iPhone just to keep playing my nintendo games. I would probably just keep playing their old systems and ignore what they do henceforth. I’m buying a 3DS once the price drop as I know many are. Also, they will have more games come out soon enough, especially for the Christmas season which will draw more people. And the only reason I am not buying a Wii is to wait for the Wii U. I think Nintendo will be just fine.
I can’t help but agree with you. I love Nintendo hardware, always have, always will. But unless they pull something out the bag (not the Wii U), then i’m afraid their hardware days are done for the forseeable future. Mobile platforms would be a natural leap for many of their games seen as they are typically platformers or RPG’s which are not overly strenuous in terms of hardware performance.
The arguments made here aren’t very convincing. People are concerned that Nintendo’s sales are slumping, but the Wii is still the best-selling of this current console generation. Just because they sold their consoles earlier in the cycle doesn’t mean that they’re doomed to failure as Sega was and that they should just give up and turn into iOS lackies now.
I am mostly upset because Google News cited this news article and the Bloomberg article being cited here on their “video games” news page, and it made it appear as if everyone thought Nintendo was going down. When really, it was just one article.
Well-written article, Darrell.
I’d comment further but I haven’t been following Nintendo much … as shown by the layer of dust on my Wii.
Apple fan boys writing about a market they know nothing about…
Nintendo is fine. There is ZERO DEMONSTRABLE PROOF that iOS gaming is affecting any of the other 3 systems.
Nintendo 3ds is suffering from a lack of game and poorly chosen price point. PERIOD.
Get over yourself…until there is a decent input mechanism, iOS will only have casual gamers who pay next to nothing for games. Its not a market nor and industry anyone cares about.
http://www.industrygamers.com/news/angry-birds-one-of-the-most-profitable-games-in-history/
That’s just it, paying for games next to nothing. $60 for a game is too much dough. Kill them by quantity (Example: Angry Birds). iOS has an input mechanism…it’s the phone/tablet. Seems YOU know nothing about it. You have got to be out of your mind to not see the bite Apples app store has taken out of the video game market.
He’s talking about physical button input. All any iOS platform has is a touch screen and that simply isn’t sufficient for anything more than casual gaming. Touch screen emulated physical controls simply aren’t as responsive or accurate.
The arguments that are made here are anecdotal at best. Nintendo is not in any sort of risk of failure as Sega once was, and the example of EA in the iOS market is too early to prove useful. I Nintendo goes onto that hardware its exclusivity and MSRP will go down for good. Speaking of sega, look what happened to Sonic now a days. They should expand business perhaps but this article shows no compelling reasons to change their development and busines strategies.
There’s no reason they can’t do both. Same thing happened to Digidesign (now Avid), makers of the recording studio standard DAW, Pro Tools. They had a successful hardware-driven business model for two decades. It was chiefly their software that users wanted. But to run their software, you had to use their hardware. As other hardware manufacturers brought enviable products to the table, pressure increased until, last year, they finally released a version of their software that can be run with third-party hardware. They didn’t want to. But it became inevitable. Nevertheless, their hardware line remains strong, because, while it doesn’t meet everyone’s needs, it’s great stuff and a good value. All the console game manufacturers could follow their example and be better off, I think.
I agree that Nintendo should do both. It can then better understand the unique strengths and weaknesses inherent in each platform and design better games and consoles. Then sell more effectively to the target demographics for each platform.
NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Nintendo is better on it’s own. It would be terrible as an iOS devoloper!!!!!!!!!
Id want nintendo to make games for both nintendo devices and iOS devices, they would sell twice as much, although they could just make a nintendo phone running android and thats it
I agree.
This reminds of John Dvorak’s argument that Apple should get out of the hardware business. Also, have you followed Sega post-Dreamcast? The company went from being a console giant to an insignificant publisher.