The Wii U’s poor sales performance is hardly news anymore, but last month’s arrival of the Xbox One and PlayStation 4 brought Nintendo’s predicament into sharp relief. Sony and Microsoft touted their new machines as the best- and fastest-selling consoles in November, respectively, whereas Nintendo simply chose to tell the world that Wii U sales were up 340 percent on the previous month. Given that October figures were said to have been around a dismal 50,000 units, and that November includes Black Friday and the release of the Wii U's biggest and best game to date, Super Mario 3D World, the statistic is less than reassuring.
As ever, some commentators have greeted the bad news with proclamations that the death knell has been sounded for Nintendo as a hardware manufacturer, and the sooner the company follows Sega’s lead by transitioning to a software-only model the better. But such analysis reveals a fundamental misunderstanding of Nintendo’s business, strategy, and motivations. The Wii U may well be a failure, but it’s not likely to budge Nintendo from its current plan.
"The company is far from being at risk."
The 3DS handheld system is selling well, buoyed by a lineup of extremely strong titles such as The Legend of Zelda: A Link Between Worlds; Nintendo moved nearly 770,000 3DS consoles in November. "The company is far from being at risk or in any type of trouble of having to transition to becoming a software-only company," says Jesse Divnich, VP of insights and analysis at EEDAR. "They can and will thrive off of the success of the 3DS and reinvest the gained resources to improve their home console strategy going forward."
Those resources also include a large war chest accumulated from the stratospheric sales of the original Wii and DS. Although CEO Satoru Iwata’s forecast of ¥100 billion in operating profit this fiscal year seems optimistic in the extreme, the company is not in dire financial straits by any means. Suggesting Nintendo make smartphone games is a red herring — the real worry should be how the company managed to drop the ball so spectacularly with the Wii U after getting so much right with the Wii.
Make no mistake — the Wii U’s performance is an embarrassment for Nintendo, and the company needs its upcoming titles not only to sell well, but to sell new customers on the console. But what would be a business-ending disaster for Sony or Microsoft doesn’t quite apply here; Nintendo’s standards for success are different. With no designs on expanding an ecosystem or pushing other hardware, the company simply prefers to make games the way it wants to. Those games need to make money, of course, but Nintendo has a lot more time on the clock than many people are giving them credit for.
"Our philosophy that Nintendo games are best played on Nintendo devices has not changed."
That’s not to say that mobile devices are off the table entirely. "It’s a topic that comes up all the time. It’s a debate that’s constantly had," said Nintendo of America president and COO Reggie Fils-Aime in an interview with Seattle’s King 5 News this week. "We recognize that there are billions and billions of smartphones and tablets out there, and so what we’re doing is we’re being very smart in how we use these devices as marketing tools for our content." Although Nintendo says it is "experimenting" on such marketing that includes simple gameplay elements, these will be designed to entice people into buying Nintendo hardware. "If we can motivate you to have a little taste of a Nintendo experience and drive you towards the Wii U or 3DS, we’ve won."
"Our philosophy that Nintendo games are best played on Nintendo devices has not changed," continued Fils-Aime. "This is all about the consumer experience. This is all about making sure that when the consumer plays Mario Kart, that they have a great experience. And candidly, it’s tough to do without input devices, it’s tough to do when all you’re doing is touching the screen, and so it’s this maniacal focus on great consumer experiences that focuses us on having our products on our devices."
Fils-Aime is skeptical of Nintendo’s ability to make money on mobile devices even if it were to make the switch. "The issue is that if you have games that are out there on all of these smart devices for very small amounts of money, it’s very difficult to monetize. And if you look at all of those companies that are trying to do it, there aren’t many that are doing it profitably for the long term. And so for us we really do believe that what’s best for the consumer, these great experiences that play wonderfully on the Wii U or the 3DS, is also great for the company."
Like Apple, Nintendo believes in a symbiotic relationship between its hardware and software. The difference is that whereas Apple creates great software to drive high-margin hardware sales, Nintendo designs its consoles to enable the games that run on it. It’s why Super Mario 64 was made possible by the Nintendo 64’s analog stick, why Nintendogs needed the DS’ touchscreen, and why Wii Sports introduced the world to the Wii Remote. Nintendo didn’t invent any of these underlying technologies, but in each case was able to package them in a novel way that subverted the entire video games industry.
The question, then, is what on earth Nintendo was thinking with the Wii U, a home console built to exploit the potential of tablet-style gaming long after the iPad ship had sailed. The GamePad controller doesn’t offer customers anything new on the surface — its low-res resistive touchscreen is less advanced than the one in most peoples’ pockets. And, while this would normally be where Nintendo steps up with a host of unique and original games to justify its hardware decisions, the software just isn’t there.
The bundled mini-game collection Nintendo Land is the closest thing the system has to a Wii Sports, but it’s a much harder sell to the mainstream. The mini-games all revolve around Nintendo’s vaunted "asymmetric gameplay" concept, where the player with the GamePad sees something different than those using the TV screen; this can be a lot of fun with friends, but it’s nowhere near as approachable as swinging your Wii Remote like a tennis racket.
Nintendo’s tablet controller is a costly albatross around the Wii U’s neck
At least Nintendo Land attempts to make use of the Wii U’s capabilities. Titles like Super Mario 3D World and the upcoming Mario Kart 8 could easily have been designed for a regular controller, and Nintendo doesn’t have anything on the horizon that feels truly native to the hardware. That’s not to say the GamePad is useless — the ability to play the full game with no need for a TV is great. But you can do that on a PlayStation 4 and PS Vita, too, and employing the feature on Wii U usually stops developers from doing anything more interesting, control-wise. Without games truly designed for the GamePad, Nintendo’s tablet controller is a costly albatross around the Wii U’s neck.
At this point, it’s clear that the Wii U was simply a bad idea
At this point, it’s clear that the Wii U was simply a bad idea. Nintendo found itself in the rare position of looking to competitors for inspiration, and launched a me-too system with nothing in the way of compelling software to set it apart. What’s Kyoto to do? In all likelihood, nothing. As Super Mario 3D World demonstrates, the Wii U is more than capable of delivering gorgeous experiences that hold their own against the next-gen systems — Nintendo’s simple, colorful art direction works in the company’s favor when compared to the endless war zones and zombies found on competing systems.
And in fact, it might be wrong even to think of the Wii U as a competitor to the PlayStation 4 and Xbox One; Nintendo certainly doesn’t have the same intentions to take over the living room as part of a broader ecosystem, and appears wholly unconcerned with market share. The GameCube — commonly thought of as a failure — quietly helped Nintendo turn a profit while Microsoft sank billions of dollars into the original Xbox, which only sold about 2 million more units worldwide than Nintendo’s diminutive console. And the Wii U may even make sense as an alternate system for those who want to play Mario Kart in HD as a palate cleanser between rounds of Battlefield. "Nintendo still needs to position themselves as that second console," notes Divnich, "especially since the game content and digital-service offerings between the PlayStation 4 and Xbox One are similar."
If one thing has never been in doubt about Nintendo, it’s the company’s ability to deliver excellent games — and those games are only ever available on Nintendo hardware. The Wii U may have been a misfire, but it’s built on decade-old technology that won’t drag on the company’s bottom line too much. At the very least, it’ll be a welcoming home for first-party titles until Nintendo decides the time is right for a successor. "Nintendo isn’t one to go with the grain; they’ve built a successful company off of introducing hardware that revolutionizes the way we interact with game content," says Divnich. "They may not win the living room this generation, but I wouldn’t count them out in the future."