The Wii-U is a failure. For Nintendo fans this statement is a hard one to swallow, but from a purely business standpoint, it’s true. When Nintendo released the Wii-U in November of last year, they hoped to repeat the success of the original Wii in 2007. Unfortunately, the market is a very different place today than it was at that time. The problem is that everyone seemed to understand the situation except for Satoru Iwata, the current president of Nintendo.
In 2007, the iPhone was introduced and began a new handheld revolution. As consumers continued to embrace their smart phones and later tablets, their expectations for gaming software changed dramatically. With introduction of games like Angry Birds, consumers began to realize they could have fun, well produced games on devices they already own at little or no cost. Because of this, the old model of “High Cost = High Quality” fast deteriorated, creating huge losses for handheld and home console markets. But since Nintendo’s market is mostly casual gamers and those under 18, it can be argued that Nintendo is feeling more of that impact than any other console maker.
Nintendo’s latest console, although innovative, stubbornly tries to target the casual gamers and parents while ignoring their desires. The Wii-U is a type of portable gaming device that is awkwardly tethered to the living room, which is completely understandable considering that Nintendo doesn’t want to step on the toes of its own handheld market. So this tethered system in combination with the high cost of software, has many casual gamers and parents turning to devices that are not only portable, but are also multi-functional like iPods, smart phones, or tablets. But the question remains, is it really necessary for Nintendo to continue making home consoles? Or even portable devices in general? No, not really.
Many Nintendo fans will tell you, the allure of the company is in the games. Their simple beauty and elegant design has been the driving force behind Nintendo’s hardware sales for years. The fact is that few third-party titles have ever done as well and many of those companies have stopped producing software for Nintendo’s platform. If we look at the launch of Nintendo’s portable handheld 3DS it’s easy to see when their key franchise titles are not available at launch, Nintendo more than any other console maker, suffers.
One of the biggest problems for all console makers though is the cost of producing the machines themselves. The time and money invested in creating a new console is staggering and may not be recouped at the point of purchase. For Nintendo, this means selling their Wii-U at a loss, then limping into the black once a separate game is purchased. Other types of companies use this model, but it’s usually because there’s no other way for them to clear a profit. But Nintendo has a choice that many have been demanding, sell the games on other platforms. I would go even one better and say stop making hardware all together and focus strictly on game development.
What if we imagine that Nintendo decided to stop making hardware? Is there an exit strategy? Here’s a scenario that might work:
Stage 1 – Porting classic handheld titles to Android and iOS
The library of titles that Nintendo has is immense. And most of those titles are well made and hold up in today’s “retro-stylized” game market. Companies like Square are offering there classic titles on iOS for prices over the $10 mark. Nintendo cult favorites like Pokemon have the potential to outsell some of the top selling iOS and Android titles currently to date.
Stage 2 – Make peripherals for Android and iOS devices
One of the biggest complaints for gaming on a touch screen is the controls and one of Nintendo’s biggest targets when making games is user experience. Making a snap on or lock in case with a controller system to be used with games could solve the problem. Nintendo could sell this type of peripheral for their games and license the technology to other game makers. This type of product could sell for anywhere from $9.99 to $29.99 without any argument. As I mentioned earlier, Nintendo knows how to make software to sell hardware, so this is almost a given.
Stage 3 – Porting classic home console titles to Android and iOS
Once the peripherals user base is large enough, start selling classic home console titles that require (or greatly benefit from) the use of a controller. Other than increasing the number of titles available to consumers, this will also push those lagging behind into purchasing the peripheral.
Stage 4 – Porting the same classic home and handheld titles to other home console marketplaces
With solid footing in the portable device market, moving into Xbox Marketplace or the Playstation Store would be the best move to continue reaching new customers and increasing sales. With no need for a peripheral, the cost would mostly be invested in the porting process. But the main reason for this step is to begin the final stages of transition away from hardware.
Stage 5a – Porting last generation titles to other home consoles with peripherals
Although PS3 and Xbox 360 have movement based control systems, making a peripheral for Wii games may not be necessary but should be done to ensure the quality of the experience for the user. This connectivity is delicate work for programmers porting the games and should not be taken lightly. One game with faulty controls could cause a fear within the market that future titles will suffer from the same issue.
Stage 5b – Porting last generation titles to Android and iOS devices
This stage coincides with Stage 5a
Stage 6 – Port delayed Wii-U titles to other home consoles
Porting Wii-U titles to other home consoles with a delay of at least one year will give owners of the Wii-U the feeling of exclusivity while still maintaining the transition away from hardware manufacturing. Also, at this point every game made for Wii-U should also be designed with other control schemes in mind so that porting will be more cost effective.
Stage 7 – Porting delayed 3DS titles to Android and iOS
The benefits of delaying the sale of new titles on Android and iOS are the same as mentioned in Stage 6, but, the lack of 3D technology on most Android and iOS devices is a problem…albeit a small one. The 3D fad is coming to an end with little complaint from most. If the loss of 3D is a burden to users, they can always purchase some of the 3DS remaining stockpile.
Stage 8 – Announcing the end of hardware manufacturing
As with layoffs, announcing the end of hardware manufacturing has to be timed well enough so that late adopters don’t feel shorted and long time fans don’t feel cheated. Of course, any early leakage of this information could send sales of still available systems plummeting.
At this stage there should be a renewed focus on software development geared towards follow-up titles and new franchises.
Stage 9 – Quick release of key franchise title for non-Wii-U home consoles
A quick release of a key franchise title would solidify Nintendo’s new direction and help motivate current Wii-U owners and Nintendo fans to buy other home consoles. Therefore increasing Nintendo’s future customer base.
This is a very rough strategy, but the possibility is there. Going the software-only route kept Sega from going under, but it could help Nintendo flourish. And with Nintendo’s stocks hovering around $15 per share, it seems like the perfect time to make the jump.
Will Nintendo do it? Eventually, but by Satoru Iwata own words, not while he’s in charge.