Can Nintendo be saved?

A popular Japanese-based game console company is facing new competitors as well as old adversaries in the game industry. It releases a new console product with with some revolutionary features. But despite the superiority of the product, the general public decides to move to other platforms, even when the company cuts the price of the console drastically.

This is not the story of Nintendo and the 3DS console. This is the story of Sega and the Dreamcast. As most of you know, the Dreamcast finally shut down production in early 2001 after  declining sales, the rise of Sony's Playstation 2 console and the promise of another advanced game console, Microsoft's first Xbox, that would be released later in 2001.

This week, Nintendo announced that it had lost nearly $1 billion in the first half of its fiscal year and could end up with its first annual loss in at least 30 years, before the 122 year old company released its first NES game console. The news shocked the game industry as a whole. While Microsoft and Sony have had years when their games division had lost money for their parent companies, that was never the case for Nintendo.

It didn't used to be this way. The leadership team at the game console publisher made decisions that in the end always made money from the releases of its various consoles, even at their launch. Nintendo still has a number of well know game franchises that generates tons of console software sales. Super Mario, Zelda, Metroid and many others helped to make console gaming a mainstream activity. In 2006, Nintendo launched its Wii game console with its revolutionary motion controller the WiiMote. The console and the WiiMote was an instant hit and Nintendo literally couldn't keep up with the demand for the Wii for several months after its launch.

But now it's just five years later and Nintendo seems to be on the ropes as the Xbox 360 outsells every console in the US while the PS3 is doing well in Europe and Japan. What happened and can Nintendo recover from it or will it suffer from the same fate as Sega and be forced to get out of the hardware console business?

The 3DS: A study in overconfidence

In February of this year, Nintendo released its 3DS console in Japan, with the US getting the company's latest portable console a month later. The 3DS's biggest feature was being able to create 3D graphics, with no need to wear glasses to see the effects, on the top screen of the two screen device for games made specifically for the 3DS.

Nintendo has always been the leader in portable gaming; Sony's PSP console was its only serious competitor in the last decade but sales of the PSP were far behind those of Nintendo's various DS versions. But the release of the 3DS console showed that Nintendo executives were perhaps too confident that they could continue their dominance of the portable gaming business.

In hindsight, there were a number of things that Nintendo could have done differently. One was the 3D features. Having such visuals was certainly a big bullet point for the console but many gamers felt that they added little to the games that were made to use the features. Other gamers complained that the 3D graphics hurt their eyes after prolonged gameplay use (the 3DS allows uses to turn down the 3D visuals or turn it off completely).

Another problems was the high price for the console at launch; $249.99 for the US version. In this economy, people were unwilling to pay that much for a console that was primarily for gaming. This lead to yet another issue which is the smartphone industry was embracing gaming for their devices, most of which could be downloaded and played either very cheaply or for free. The success of Angry Birds, a game which would have felt right at home on a Nintendo game console, is a testament to this shift in portable gaming habits.

Other issues with the 3DS included a lack of major launch titles for the console, something which Nintendo executives have since admitted. Finally the overall design of the 3DS, while having some cosmetic differences to the DS line, was considered to be too similar to the older consoles and perhaps even old fashioned in the face of the full touch screen interfaces that many smartphones now have.

In the end, Nintendo realized that the 3DS had some issues and cut the price of the 3DS down $80 back in August to just $169.99. Sales of the console got a boost after that price cut. Also, major Nintendo franchises like Mario Kart, Zelda and Super Mario started appearing on the 3DS. But will it be enough for Nintendo to recover its crown as the portable game leader?

The Wii U: Shown off too early?

In June at its E3 2011 press conference, Nintendo announced that the next version of its major console franchise would be named the Wii U. Furthermore, the console would yet again offer gamers a new way to control games via a tablet-like two handed controller with a large 6.2 inch touch screen that could be used to link to the main game and perform various gameplay actions. One demo showed the screen firing ninja stars that appeared on the Wii U's main TV screen in order to hit its targets.

Nintendo showed off the Wii U's controller at E3 via a number of game demos but Nintendo said that these demos were not going to become games in their own right. That may have been the first error Nintendo made; showing off interactive demos of the Wii U instead of full games disappointed many gamers. Another problem came when Nintendo showed videos of third party games that would be made for the console, including Rage and Aliens: Colonial Marines. But Nintendo later admitted that those videos didn't show those games running on Wii U hardware but came from the PS3 and/or the Xbox 360 versions of those games. That showed that the Wii U's main hardware was not yet ready.

The biggest problem is with the Wii U's controller. Investors were concerned that the costs to make the controller would make the Wii U more expensive than the original Wii, which had a big sales success at first due to its low price compared to the PS3 and Xbox 360. Also, the Wii U will only be able to use one of these tablet controllers at a time, rather than allowing for multiple controllers like other consoles have support for. Finally the tablet controller, despite some interesting features, didn't seem as advanced as the Xbox 360's Kinect motion controller camera which allowed for some Xbox 360 games to be operated with no physical controller needed in the player's hands.

Since E3 2011, Nintendo has not shown off the Wii U but has promised a full reveal at E3 in June 2012. That would seem to suggest that Nintendo plans to officially launch the console in time for the 2012 holiday season.

The Wii: Showing its hardware age

Nintendo also has an immediate problem that it may not be able to fix. The original Wii console is starting to show that its hardware specs, in comparison to the PS3 and Xbox 360, are lacking as customers gravitate to high end games such as the Call of Duty series, Battlefield 3 and more. Once more, both the PS3 and the Xbox 360 are much more affordable than they were when they were launched.

It doesn't help that third party game publishers are starting to abandon the Wii console. While there are exceptions, such as Ubisoft's Just Dance series, both the hardcore gamer and the casual gamer can both be served very well with the PS3 and the Xbox 360, particularly the latter console thanks to its Kinect controller-camera which can let gamers participate in the kinds of party and casual games that the Wii used to serve very well, but without the need for a controller to be held in the hand.

Nintendo's big fall 2011 game release for the Wii will be The Legend of Zelda: Skyward Sword. But while that game, due out in November, will certainly be a big hit for Nintendo fans, it remains to be see if it can compete in terms of sales with the big hardcore game sales of Call of Duty: Modern Warfare 3, The Elder Scrolls V Skyrim, Uncharted 3, and other major titles due out in the same month.

All is not lost

So what can Nintendo do to turn the tide and make itself able to compete once again with Sony and Microsoft? Nintendo's leadership needs to go back to the lessons it learned from the Wii and its DS titles. Thankfully, Nintendo has the time to do just that.

Create a new kind of portable game console

Nintendo needs to let go of its past and embrace the future. When the original DS console came out in 2004, it was unique looking and the use of the touch screen was revolutionary for its time. Nintendo forgot to innovate with the release of the 3DS which looked too similar to the DS consoles that came before it. The 3D visuals were a parlor trick; cool to see at first but boring on repeated viewings.

Nintendo needs to lead, not follow or go down the same steps, in its next major portable console. It needs to come up with hardware that will have features that no other portable game console has and that really enhance the gameplay experience for both game developers and game consumers. It also needs to take a few lessons from smartphone makers who are coming up with new features and user interfaces that are attracting more and more game players.

Make the Wii U games spectacular

Nintendo will launch the next generation game hardware with the Wii U in 2012. We have yet to see what the hardware can truly do, thanks to an ill-timed pre-reveal by Nintendo at E3 in June 2011. Nintendo needs to bury itself into making the Wii U first party games the best that they can be. When the Wii launched in 2006, Nintendo was smart enough to give players a free game, Wii Sports, that showed gamers how to use the WiiMote controller while also making a fun and addictive game in the process. It needs to do the same for the Wii U and its tablet controller.

Back in the day, Sega's release of the Dreamcast brought gamers the best graphics it had ever seen but those visuals were topped quickly by the PS2 when it was released a year later. Nintendo can't make that mistake twice. Not only do the graphics of the Wii U have to be better than the PS3 and the Xbox 360 but they also have to compare well to the visuals of the next generation consoles that Sony and Microsoft are almost certainly planning to release after the Wii U comes out.

It wouldn't hurt for Nintendo to also embrace the idea of the Wii U as more than just a game machine. The Wii does have some non-gaming elements such as a web browser and Netflix support. But Nintendo has always felt uncomfortable, for whatever reason, of making their consoles into full entertainment set-top boxes like the Xbox 360 and the PS3. It needs to let go of that attitude in order for the Wii U to offer its users more than just games.

Nintendo is still a company that likes to travel on its own path and that's part of the reason why it has been so successful. But now it also needs to see that traveling its own path has risks if gamers don't want to follow them on the journey. If it can remember the lessons it learned from the successful launches of the Wii and the DS line, it can compete again with not just Sony and Microsoft but the other growing part of the game industry, the smartphone game community. Nintendo's executive team are no dummies and we feel that it will make the right choices to avoid a second year of losses.

Image via Nintendo

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