Blog Post

Is Nintendo Headed For A Rough Patch?

imageNintendo President Satoru Iwata says the company isn’t worried about competition from likes of *Sony* and *Apple*, but judging from some of the latest press, there’s a growing sentiment that Nintendo’s choke-hold on video game hardware and software sales might be coming to an end.

The NYT digs into why news that Japanese PS3 sales eclipsed sales of the Wii for the first time, should actually give Nintendo pause: it could be the first sign that the market for casual games — which the Wii thrives on — is softening.

The Wii, with its motion-sensing controller and suite of easy-to-play games, has enjoyed tremendous success here in the U.S., but Japanese consumers started the trend, something that often happens with new technology. As KBC Securities analyst Hiroshi Kamide told the NYT: “The usual idea is that whatever you see happening in Japan, you tend to see overseas two to three years later.” If the shift away from family-friendly, casual games in Japan (where game industry sales are down 18 percent overall) is more than just a Q1 anomaly, then Nintendo is going to continue to hemorrhage sales to Sony (NYSE: SNE) and even Microsoft, over time and across the globe.

Meanwhile, Cowen and Company analyst Doug Creutz told Gamasutra that the Wii’s sales numbers represent “fool’s gold” for investors wanting to jump into video games, because the scope of best-selling Wii titles has been very limited: “There is a very clear correlation between game quality and unit sales on the 360/PS3, while there is very little correlation on the Wii, at least for third-party games … You’re rolling the dice on succeeding in a market which has proved very resistant to generating meaningful hits away from Nintendo titles and the music genre.” (And the music game genre is facing its own headwinds.)

Then, there’s competition from Sony — not from the PS3 — but from its predecessor, the PS2. Sony exec John Koller recently said that the company was aiming for potential Wii-buyers when it slashed the price of the PS2 to $99. And with industry execs hyping the iPhone as the next great gaming platform, Apple (NSDQ: AAPL) is emerging as a credible player in the casual video game market.

But to hear Iwata tell it, Nintendo isn’t stressing out over competitors or fickle consumers: “We are a company that has sought to create entertainment products for as many people as possible … if we were only doing what mobile phone games can do, then handheld games would have disappeared a long time ago. Our job is to come up with things that other devices can’t do.”

Photo Credit: DsWii

5 Responses to “Is Nintendo Headed For A Rough Patch?”

  1. Jamie Poitra

    Wow Morne,

    All I Can say is I definitely disagree. As both a casual and former (when I used to have the time) hardcore gamer. I have really enjoyed what Nintendo has done with the Wii. I've enjoyed what Sony and Microsoft have done with their systems too of course. The XBox Live marketplace was a brilliant move and some of my favorite XBox games are the downloadable ones.

    Casual gamers aren't going anywhere. The growth may have slowed. But the growth in all markets eventually slows. It is silly to imply that the market is going to dry up. Casual gamers are always going to be there even if they buy in a less addictive than a hardcore gamer does. And I think the idea that hardcore gamers don't enjoy casual games is equally silly.

    The market is going to continue to exist. And to ignore it because they aren't addicted would be dumb.

  2. Tameka Kee

    Nice dialogue. I don't think Nintendo is about to fold next year — or even in the next three years. But I do think it will be interesting to see if the pendulum swings back from the "casual revolution" that took hold in the past year or so.

    I think everybody loves games. But not everyone has time to play them (myself included), and that time factor will influence whether I buy another console, or just make do with the one I have, or download quick games on my PC or to my phone.

  3. mornelithe

    Sorry Jamie,

    But what's happening here, is Nintendo is basically raping the gaming world of the types of games that made Nintendo what they are today. The problem with the Wii, isn't it's gimmicky controls. Isn't it's child/family friendly nature. It's the games themselves, which represent a step backwards in time. Rather than a step forward. Look at Sony and MS…they're both able to release retro stylized games, while still maintaining a strong portfolio of games that attract the hardcore gamer. Basically, Nintendo gained its fame from hardcore gamers, and then gave them the finger when the going got tough.

    Say what you will about the changing landscape of gaming, fact remains that the Hardcore gamer, is the one that keeps coming back for more. The casual gamer, is just that, casual. They don't live, breathe, eat and $hit games like the hardcore fans do. As such, Nintendo can't keep milking these people for garbage IP, DLC etc… They eventually lose interest, as is the case with the friends I have, who have Wii's. They lost interest, because there's nothing there really to keep them enraptured.

    And…you know, Wii Fit? I mean, let's take human nature into account here. They want instant gratification, for the least amount of work. Why diet, when you can play a game and lose weight? It doesn't denote a rise in casual gaming, simply a continuation of the sloth that is perpetual in todays society.

    That aside, the Wii has how many units sold, to date? Now…how many Wii titles, break 10 million units sold? Think on that. Such a monstrous install base, should basically mean every single IP that hits, should result in some tremendous sales figures. But they don't. Only the gimmicky activity based games, and the old-school (HARDCORE) IP, really go anywhere. Speaks volumes for the quality on Nintendo's side.


  4. Jamie Poitra

    Nintendo has an advantage over Microsoft in that they also have an extremely successful portable system. All of their eggs are not in one basket.

    And of course I don't think Apple is really competing with them on the Wii front. A portable system best enjoyed on your own is not the same as a group oriented system best enjoyed with friends in your living room.

    And they have an advantage over both Microsoft and Sony in the fact that when they sell a console they actually make a profit. I think they are in a pretty good position provided they don't do something silly.

    There was a lot of doom and gloom about Nintendo when they had the relative flop of the game cube. If anything they've shown that they can react quickly and intelligently to a problem in their strategy. Hopefully they don't loose that ability.

    More importantly games are meant to be fun. Fun doesn't necessarily equate to graphic violence and high end graphics. Nintendo hasn't ever lost sight of that and it has served them well.

    But other end that Sony and Microsoft cater to is never going to go away either. There's easily room for both as I see it.

  5. I think we need to take a few things into consideration before we start saying it's the end of Nintendo. The first is that the PS3 in Japan had some major releases, while the Wii (in Japan) didn't. "Hardcore" games like House of the Dead and Madworld didn't make it over there.

    Next of course is realizing that we are at the beginning of Nintendo 3rd party support. Sega was kinda leading the way, they still are, but EA is going to follow suit with Dead Space, then Capcom, already working on Monster Hunter 3 and hopefully working to get Tatsukano vs Capcom over here, and then of course there are many other publishers who are jumping on with the Wii.