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Can Nintendo's lightning strike thrice?
by Jamie Mann on 05/26/11 07:34:00 am   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

For the last few years, Nintendo has been able to do no wrong - at least from a financial perspective.  They've sold around 85 million Wii consoles, together with over 700 million games (not to mention at least 22 million Wii Fit boards and who knows how many Wiimotes/nunchucks, plastic steering wheels and crossbow holsters).  Meanwhile, they also managed to sell over 145 million DS consoles, together with 840 million games.   And between these two revenue streams, they've managed to build up a cash reserve somewhere in the region of $13 billion.

How did Nintendo manage this amazing feat?  There's more than a few factors which could be highlighted, but I'd suggest that the main ones are:

  1. Successful exploitation of novel control systems: the touchpad on the DS and the Wiimote on the Wii.
  2. The penetration of a relatively untapped market - the "casual" demographic, due to a focus on simplified controls and arcade-style, multiplayer-orientated "pick up and play" games
  3. Relatively low-priced hardware: the DS was 25% cheaper than the PSP and the Wii was around a third cheaper than the PS3 or the Xbox 360
  4. Skillful marketing - aided in part by well-publicised hardware/game shortages

Now, Nintendo has lined up a pair of successors to it's cash-cows: the 3DS and the as-yet unnamed followup to the Wii (Project Cafe).  The question is: can these new systems be as wildly successful as the DS and Wii proved to be?

Well, let's take a look at how well the new systems match the criteria laid out above:

  1. The 3DS doesn't have a new control system; instead, the novelty factor comes from the 3D display.  However, gamer response to this feature has so far been muted or even negative.  There's also the AR features but interest appears to have significantly died down once the novelty factor wore off.
  2. Nintendo's appeal to the casual market should remain strong - they have a lot of casual-friendly IP, from Mario to Brain Training.  However, of the eleven "Nintendo-published" titles listed on Wikipedia, only three have been released and six do not have a confirmed release date, implying that there may yet be a significant wait until they're available.
  3. There's still several months until Sony's NGP is released, making it difficult to do a true like-for-like comparison.  As it stands though, the RRP for the 3DS is significantly higher than it's current rivals.  To use some figures from the UK (based on figures taken from game.co.uk and argos.co.uk):
    • 3DS: £239 (actual street price: £159 - 33% reduction)
    • DSi: £149 (actual street price: £113 - 12% reduction)
    • DSi XL: £159 (actual street price: £140 - 12% reduction)
    • PSP 3000: £139 (actual street price: £129 - 7% reduction)
    • iPod Touch (8gb, 4th gen): £193 (actual street price: £167 - 14% reduction)
    • iPod Touch (32gb, 4th gen): £254 (actual street price: £232 - 9% reduction)
    Admittedly, the incredibly steep discount being offered by game retailers makes it a bit more competitive - but at the same time, the scale of the discount implies that the game retailers are cutting margins in an effort to boost sales.
  4. Nintendo have invested a lot of effort into marketing the 3DS, but the impact of this has been diminished by the delayed launch of the machine.  In addition, the 3DS's main "novelty" - the 3D screen - is something that can't be easily demonstrated on 2D media (print, TV); Nintendo has attempted to bypass this by ensuring plenty of demo-units have been distributed, but these don't have the same reach.  And perhaps ironically, unlike the Wii/DS, Nintendo ensured that there would be ample supplies of the 3DS on day 1 (and/or overestimated demand for the machine) and thereby lost out on the free publicity which would have ensued if it had sold out completely.

All told, the 3DS doesn't really look as if it has the potential to be a cash-cow in the same way as the DS was.  And indeed, a look at the Japanese hardware chart (using figures taken from Gamasutra's weekly summary) shows a steady and continuous decline in sales:

Moving on, what of Project Cafe?  Well, since we're still a week or two away from the formal unveiling at E3, any assessment of the console's capabilities and future prospects are pure speculation.  But that's never stopped us before ;)

  1. Project Cafe is rumored to have a touchscreen-based control system.  If true, then aside from the fact that this is no longer a particularly novel feature (e.g. iPad, DS, smartphones - even some laptops now feature a touchscreen display), this poses several questions: this may mean that the Cafe controllers may not be backwards compatible with Wii games (which would imply that you'll need to retain your Wiimotes, nunchucks - and possibly even the Wii itself to play your existing library) and depending on the size of the touchscreen, the controller may not be particularly ergonomic, especially for players with smaller hands. 
  2. The Wii's most popular games can be played with just a Wiimote, by mimicking real-life actions (e.g. swinging a tennis racket, steering a car).  A touchscreen isn't quite as simple and may actually provide a more convoluted control experience: with limited tactile feedback, players may have to keep glancing between the TV and the controller to confirm that they're carrying out the correct action.
  3. Wild guessing time: it's not unreasonable to expect Cafe to be on a parity with the PS3/Xbox 360; this would imply an RRP of between £199 and £299 ($249 - $399 in the US, given the usual european "import tax" markup).  However, this is unlikely to include the price of additional controllers - and with the Wii being just £99 ($149), casual gamers may well opt to stick with the older console unless Nintendo quickly phase it out of production
  4. This partly depends on the controller: the Wii was easy to market, as you could show people waving the Wiimote.  The DS was easy to market, as the touchscreen is next to the main display, allowing you to demonstrate cause and effect.  It may not be as easy to advertise the benefits of a touchscreen controller which isn't next to the main display...

In any case, things are still up in the air for both the 3DS (which is pending on the enabling of online functionality, as well as the release of traditional Nintendo IP such as Zelda and Mario) and Cafe (about which we know virtually nothing).  So it could well be that Nintendo will be able to pull another rabbit out of the hat.

But if the hat remains rabbit-less, what could this mean for Nintendo?  Their share price has already dropped by two-thirds from the peaks it reached in 2008, and while Christmas and while it was briefly bouyed up by the launch of the 3DS; the decline has continued to this day.  If Project Cafe doesn't offer a truly compelling experience, Nintendo's management strategy - and the management team itself - could well be called into question...


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Comments


Sting Newman
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What a bunch of crap... Nintendo is in a precarious place despite their success. If they don't get their act together and get a game library worth having the Wii may turn out to be a one hit wonder.

Brad Borne
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Did you ever actually look at the Wii's software lineup...?



Or did it not have enough brown shooters for you?



Don't worry, Cafe will be HD and have enough horsepower for 3rd party ports, so you'll get all the brown shooters you could possibly stand!

Sting Newman
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"Did you ever actually look at the Wii's software lineup."



Yes yes I did and I found many of the Wii's software lineup underwhelming on release. All the staple first party games outside of Mario galaxy and Wii Sports were rather underwhelming compared to past efforts.

Brad Borne
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Compared to n64's 10 games or the GameCube's 15?

Sting Newman
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@brad



We're talking about game quality of first party games, given the huge lack of third party games on the Wii because of hardware differences.



Twilight princess was awful compared to past Zelda's, Metroid corruption was nowhere near as good as the original Metroid prime. The game quality of nintendo's first party games is getting worse and that is a bad thing.

Brad Borne
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Are they trying to make lightning strike thrice? Sounds like they're going for a different slant with this system, and keeping the Wii for casualware.



The tech for incredible graphics is dirt cheap right now, and Sony and MS are unable to move to the next generation until their 10 year cycles are over. Sounds like Nintendo's in the perfect position to me.



3DS isn't going to sell until the software catches up, like all the titles that are launching this summer. Consumers might also be wary of Nintendo launching a '3DS Lite,' and are holding out longer than they would otherwise.

Jamie Mann
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@Brad: this isn't really about what Nintendo (or at least it's board of directors) wants, but rather about what Nintendo's shareholders will want. If Nintendo's profits continue to decline, shareholder protests could cause some major changes.



(and personally, I tend to believe that Nintendo has some significant development bottlenecks, but that's a contentious subject for another day...)



Beyond that: it's debatable whether or not the Wii is still a viable platform: both hardware and software sales continue to decline sharply (e.g. http://www.digitalspy.co.uk/gaming/news/a319498/wii-and-3ds-us-sa
les-continue-to-decline.html). The planned price drop could help matters, but even that's not guaranteed: at least in the UK, the used Wii market is heavily saturated, suggesting that that a significant percentage of the Wii userbase has lost interest in the Wii.



As regards the 3DS: it was definitely released at the wrong time, and with minimal software support (which begs the question: what would have happened if Nintendo had managed to achieve their original pre-Christmas launch date?). And it's also been hampered by further issues, such as the quality of the 3D image, the cost of the unit and the short battery life. And by the time Nintendo addresses these issues (if they can), the competition will be more intense: the NGP will be available, as will the next generation of iOS devices (and there's also stuff like Android and Microsoft's WM7 phones).



All told, Nintendo had better have some really good tricks up it's sleeve for E3!

Brad Borne
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@Jamie: I don't know about that, I have a theory that they sat this generation out, since Sony and MS went through great lengths to get powerful hardware out this gen (MS's faulty hardware, Sony inventing a chip, huge price). Now that the R700 chipset is out, powerful and cheap enough for Nintendo's style, why wouldn't they want to pump out some fan service?



Viable platform for what kind of software? Software that would make more sense on Project Cafe? Nintendo's between generations, of course profits are going to be down. Doesn't really matter, though, they made a killing with the Wii.



You're definitely right about those bottlenecks, since most of Nintendo's core developers have been working on Mii and Wii Play type games, and the 3DS's built in software. But, it shows, all other causal efforts from other companies, save for maybe Boom Bloxx, are terrible comparatively.



The 3DS definitely has better software coming up, but isn't that how console launches work? What consoles actually launched with more than 1 or 2 must have titles? Heck, the PS2 had what, SSX until MGS2?



Not sure what you mean by the quality of the image, the 3D on the 3DS is fantastic. The cradle addresses short battery life, cost will go down, but I'd say is worth it for the first mainstream device that can play glasses free 3D. NPG will be neat and all, but at this point, how much power will it take to look significantly better than the 3DS? (RE: Revelations looks incredible). And face it, iOS devices can't really compete with Nintendo handhelds until they have Nintendo games on them (never).



You wouldn't call starting the next generation 3 years before the competition can catch up a good trick? heh.

Jamie Mann
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@Brad: we'll have to wait until E3 to see what Project Cafe brings, but based on Nintendo's past behavior (i.e. their tendancy to stick with "withered technology"), it's unlikely that Cafe will be much more powerful than the Xbox 360/PS3 - if nothing else, Nintendo has to make the console multiplayer-friendly: if the controllers are as "high-tech" as the Wiimote was, then the cost of the console will have to be kept low to compensate - one of the thing which has hampered the uptake of Sony's Move is the fact that each controller-pair costs has an RRP of $80, so a 4-way multiplayer setup could cost over $320!



In terms of the Wii being viable: hardware and software revenue has been dropping quarter-on-quarter, at a time when both Sony and Microsoft are reporting increases in both. Again, my personal take is that the casual market is only interested in a few key titles and hasn't moved on to buying additional, more traditional titles; meanwhile, the hardcore demographic is mostly focused on the PS3/Xbox 360. This leaves Nintendo with it's traditional fanbase, but even then, sales for most of Nintendo's secondary IP (e.g. Kirby, Metroid, Zelda) haven't been that spectacular.



3DS: I certainly won't dispute that there's more - and better - games due to be released. The question is whether or not there will still be consumer interest in the 3DS when they do arrive. Again, I tend to believe that "all in one" devices such as the iPhone/iPod Touch and Android phones are proving disruptive to the traditional handheld gaming market and the 3DS is very expensive when compared to these, both in terms of hardware and software.



As regards the 3DS 3D imagery: so far as it goes, it's good, but it's also relatively low-resolution and awkward to use and there's a lot of anecdotal "eyestrains and headache" tales floating around. And having just watched a trailer for RE:Rev, it looks fairly nice (it's on a par with early PS2 games), but the poly-count is relatively low, the action is quite slow and it's graphically blown away by iOS games such as Epic Citadel.



(and according to Wikipedia, RE:Rev will only be anti-alised in 2D mode, so picture quality in 3D mode will be reduced).



And to finish things off, Nintendo aren't starting the next generation 3 years early: if you look at the traditional console lifecycle, it's Microsoft and Sony who have elected to delay the production of new hardware for a few years. The huge deficits both companies have run up is a factor in this, but it could also be that the current hardware is still "good enough", in much the same way as the Nintendo Wii was, back when it was launched...

DanielThomas MacInnes
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If Nintendo appeals to the mainstream with accessible arcade-style games ala the NES (Wii Sports, Wii Play, Mario Kart Wii, Super Mario 5), then they'll be successful. However, if Nintendo abandons that audience, new gamers and retro gamers alike, in pursuit of the PS360's "hardcore gamer" market, they will struggle. It's very simple.



The 3DS is not selling, period. Maybe the second wave of game titles will improve things, maybe not. But the hardware is too expensive in this fragile economy, the 3D hurts many people's eyes, and the games are just tired retreads of tired retreads. We need something new, something novel, not Franchise Sequel Part XXXVII. And that goes double for Nintendo's next console.



We'll discover Nintendo's plans at E3, so I'll look forward to hearing their 2011 strategy. They're under a bit of pressure, and frankly, they have only themselves to blame for their current decline.

Francisco Javier Espejo Gargallo
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I think that all of you is running to fast. Nintendo 3DS is too young into the market that it has still to maturate. When the DS was first released, it did take months until the system become a powerseller. The price point, the design and the software released with the 3DS was pointing clearly to the core gamers, gathering a bit of attention from the mainstream. They're also releasing Ocarina of time and StarFox 64 to get back their core gamers inside. The only game that looks after the mainstream there is Nintendogs + cats, that's being promoted on TV all the day, and I think that with the DS, Nintendo and licenses did killed the DS name with a horror full game catalog. (thousands and thousands of copycat games, lots of them with tons of crashes and blockers-bugs)



I think that right now, they need to focus on the core gamers, and promote greatly the street pass and online mode of Street Figther IV, the coming back of Pilotwings and Ridge Racer, and all of these licenses that appeal to the core gamers, and now that Ocarina is Back, they should burnt it on TV.



I'm just waiting for the E3 tosee more games, but of course, until we see these, we don't know where's Nintendo going.


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