The Issues Facing Nintendo in the Smartphone Age
Diluting the Value of Its IP
On the whole, Nintendo has demonstrated a very conservative stance when it comes to using its IP, the very opposite of franchise milking. However, has it been too conservative?
While we are now seeing more “core series” titles using the Mario and Zelda IPs (as opposed to games like Mario Party), apart from very select properties (such as Metroid), Nintendo has never fully leveraged its back catalogue and player memories from the “glory years” of the 80s and early 90s. Unfortunately for Nintendo, it may now be too late to do so.
Back when consoles were the only games in town for many people (given the high cost of PCs at the time), this conservative approach made sense. But with digital distribution, more platforms and freely available developer tools, games are everywhere and more commoditized than ever before.
In a commoditized industry, competition is based on price. Nintendo’s brand is a weapon that the company has not managed to utilize fiercely enough to bring players over to its hardware. By being so conservative, Nintendo has allowed other studios to clone its hit games. These clones are close enough to the Nintendo experience that players are satisfied with their current console and/or smartphone.
Ultimately, Nintendo placed itself in a sort of no man’s land by neither fully leveraging its strengths and back catalogue to create a truly differentiating strategy nor entering the commodity fight altogether.
Game consoles have seen the integration of broader technology and richer feature sets, transforming themselves from toys in the late 80s/early 90s into all-in-one entertainment solutions embedding state-of-the-art consumer technology. As time goes on, companies with more experience and resources in the greater realm of consumer technology (e.g., tablets, smartphones and computers) will gain more and more of an advantage over Nintendo in the areas of hardware quality, pricing and supply chain speed. Can Nintendo compete against companies the likes of Sony, Microsoft and Apple (not to mention a host of other potential competitors such as Amazon and Samsung, that could attack Nintendo via microconsoles)?
In its latest earning report, Nintendo discusses the “blue ocean” opportunity for health-related products and software. Apart from the alarm bells this raises around company focus, again the issues of hardware quality, costs and supply chain come up. Can Nintendo produce devices with sensors that are granular enough to create truly meaningful experiences at a palatable cost?
Adapting the Culture
If Nintendo decides to start producing games for other platforms, it will need to start by asking a number of questions pertaining to a major cultural shift:
Can it work with other platforms where it doesn’t have a say in the design? Not having any input into the design of the hardware compatible with its games would be a massive change for Nintendo.
If Nintendo were to move to mobile, given its extreme commitment to quality, polish and new gaming experiences, there should be concern about how well it would adapt to the fast moving mobile world—characterized by the launch of lean, quick development timelines (compared to AAA) and the “games as a service” approach.
Given these challenges, what opportunities exist for Nintendo?
For one, it should be feverishly anticipating the long-rumoured Apple TV refresh that will make gaming a focus with a physical controller.
Why? There will undoubtedly be an huge install base (especially if there is cable-box functionality), a price point well below any current generation console, and a trusted payment system with user information locked in for many of those users starting on day 1. The strength of it IP, coupled with the ability to play on a TV with a dedicated physical controller right out of the box would allow Nintendo to maintain premium pricing for its titles in the face of sub-$5 and freemium competition.
Nintendo may also be able to re-engage with adults who grew up on the NES and SNES but no longer purchase dedicated game consoles.
Additionally, Nintendo should consider the opportunity offered by “connected” toys, via NFC (near field communication), augmented reality and mobile devices. For example, taking the Skylanders figurine concept and applying it to Pokémon is a natural fit, or interactive Mario Bros. playsets that connect with tablets via a companion app. An innovative concept and killer app could even revitalize consumer and developer interest in the Wii U’s moribund gamepad.
As long as there exists a market for dedicated home consoles, Nintendo can survive. It owns beloved IP, is incredibly committed to quality and has toy company DNA going back many decades. All that gives it a unique take on hardware. However, given the proliferation and rising popularity of smartphones and tablets for gaming, the question may no longer be “Can they build what people want?” but “Do people want them to build anything at all?”.
Gaming as both an industry and a medium—would less vibrant without a strong Nintendo. The company has been in trouble before, but rebounded with the innovative Wii and DS. It will be interesting to see if it has the courage to make similar and potentially even bolder moves in the future to survive.