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A Fan’s Audit on Nintendo’s Current Troubles

Panic ensued last Friday with the Nintendo universe when the company slashed their projected forecast pretty heavily and president Satoru Iwata stated that they would be announcing some big changes with the company. In this article I will tell you what were the forecasts, try to decipher what Iwata said after posting those changes and offer some ideas to turn around the company if I got the impossible chance to be in Iwata’s shoes.

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The Facts

This while situation started because Nintendo heavily modified their sales forecast for the fiscal year, which ends this March. Iwata’s main goal was that he aimed for a 100 billion yen profit (approx. $1 billion), but modified it to become a 25 billion yen (approx. $250 million) loss.

The main focus of this loss was that the market just didn’t accept the Wii U. Due to this lack of consumer interest, Nintendo has slashed their forecast from 9 million Wii U consoles to only 2.8 million and Wii U software sales from 38 million games to 19 million.

Even the 3DS, which succeeded in becoming not only the U.S.’ highest selling system in crucial month of December, but all of 2013, had to cut its forecast. Nintendo is now anticipating 13.5 million 3DS system sales versus the initial 18 million and cutting software from 80 million to 66 million units.

These cuts were mainly focused in the Western front (U.S., Europe) because the market is evolving into one obsessed with smart devices. Not only that, Nintendo has failed to adequate the tastes, marketing and buying practices in these territories.

Iwata has mentioned that no member of Nintendo management will be fired over this, including himself. He did say that he would mention his next steps to change the company at their Corporate Management Policy Briefing on January 30th.

On Monday, Nintendo shares dropped 6% on the Tokyo Stock Exchange due to this announcement. That results in about a $1.2 billion drop in market value.

What Iwata Said

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On Friday, Iwata had a press conference discussing the forecast changes and brought along a new strong quotes. Members of Bloomberg and Wall Street Journal were there to share those quotes with the public.

“The way people use their time, their lifestyles, who they are have changed. If we stay in one place, we will become outdated.” The way people played games were that they needed a console, handheld or PC and buy games for that specific machine. However, smart devices has broken that tradition because they now have these things that can allow people to read an article or play a game while waiting in line for your coffee or when you watch TV. Not only that, but these games are much cheaper, if not free, and can do more than what a console game alone could do, like link with social media or offer small microtransactions. Microsoft and Sony are attempting to leverage a similar feeling with their new consoles, but even they can’t utilize those features as fluidly as an iOS game.

“We are thinking about a new business structure. Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. It’s not as simple as enabling Mario to move on a smartphone.” This quote’s focus is that Nintendo is hoping to use smart devices as sort of a bridge to their own. It doesn’t mean Nintendo’s going to start making games for mobile devices (hopefully), but to take advantage of the device’s technology to spur their own devices. For instance having an eShop app where you can buy things right on it and let your Wii U auto-download it, though I thought something like that was in the works already.

“We cannot continue a business without winning. We must take a skeptical approach whether we can still simply make game players, offer them in the same way as in the past for 20,000 yen or 30,000 yen, and sell titles for a couple of thousand yen each.” What Iwata is saying is that making a game machine for a couple hundred bucks and selling packaged games for $40-$60 might not be a successful business model anymore.

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“We were unable to sufficiently take advantage of the weaker yen.” Last year, Nintendo’s losses came from not only the Wii U’s R&D, launch marketing and its poor sales, but because every dollar made in the U.S. was lost in the exchange rate to yen because of how strong the Japanese currency was. Throughout 2013, the yen became very weak, so every dollar made actually more. However, because of Nintendo’s lack of sales on the hardware and software fronts, they couldn’t take advantage of a situation that could have been a sort of comfort zone for them.

The Wall Street Journal stated that Iwata admitted that he misread the markets and hadn’t issued “the appropriate instructions.” One of my biggest gripes with Nintendo is that they never really take any initiative towards rallying Western games on their devices. They are super-aggressive in Japan as they pretty much dried up any momentum Sony had with the success of the PS2 and PSP there. Dragon Quest and Monster Hunter were two of the biggest multimillion-selling games on Sony platforms and their latest installments have been Nintendo exclusives. They also get a lot of Japanese support by the likes of Sega and Koei, which the latter got the chance to develop a Zelda spinoff for Wii U based on their Dynasty Warriors games. They act exactly like Microsoft does here garnering support and paid exclusives, but Nintendo has done nothing to do the same with publishers like EA, 2K or Bethesda.

The WSJ also mentioned that Iwata said the company needed to change and “propose something that surprises our customers.” The Wii and DS took the world by storm because new, easy-to-use tech really excites people, as did the iPhone and now the PS4. The Wii U excited no one, even the most hardcore of Nintendo fans. Casual players have no clue what the device is (handheld? Wii add-on?), even core gamers who play on other platforms still call it a Wii as if it’s meant to pander to that same crowd. If that isn’t enough, Nintendo has done nothing to make the argument that the Gamepad was worth revolving the system around it (I wrote an article explaining just that in July and it still stands up today).

What Should They Do?

Bring Their IPs to Different Mediums

Wedbush Securities analyst Michael Patcher tweeted “if [software] remains proprietary, sales are limited when they sell fewer [hardware] units,” and I agree with this to an extent. Nintendo’s games are only going to be seen and played by Nintendo’s current customers and no one else, so they need to use other methods to widen that demographic. The thing is that I don’t agree the solution is to put their games elsewhere, but put their IPs elsewhere and in non-gaming ways.

Just like how you see a game based on a TV show or movie, you should see more TV shows and movies based on games. There’s no better way to get people to buy your product than if you entertain them elsewhere to the point that they want to experience more. Case in point: almost every video game-based cartoon.

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Despite Pokémon being an amazing RPG series, it wouldn’t have gotten to those best sellers charts as fast if it weren’t for the anime that debuted alongside the games. Ash’s adventures have now captivated generations of kids and anime fans alike, as well as provide a type of strategy guide to them at the same time to help lessen the learning curve on the pretty complex games. It is proof that Nintendo can gain customers on their proprietary software and hardware as long as you teach them with TV. If the show isn’t enough, Pokémon has topped box office charts in movie theaters and has a successful trading card game that continues to this day, so if there’s one series that knows how to get its name across, it’s ironically one of Nintendo’s.

My other example is one of my strongest, not only because it’s the path I think Nintendo should focus on the most, but it’s the way that I entered the video game realm as a lifelong Nintendo fan, and that’s with Mario. Back in the 80s, you would see shows based on toys all over the place, heck it’s the way Hasbro got on the map with shows based on IPs like Transformers, G.I. Joe and My Little Pony. Nintendo was no different than Hasbro because they too knew that was the direction for brand recognition, and so they had shows on their franchises. We saw the corny Zelda cartoon and Captain N: The Game Master, a cartoon about a gamer who gets sucked into “Videoland” and must fight villains like Mother Brain and King Hippo alongside heroes like Simon Belmont and Pit, but more importantly we saw The Super Mario Bros. Super Show.

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The flagship Nintendo show not just got the word across, the Super Mario Bros. Super Show did a few more things to further broaden its viewership. First was that the show featured hit songs of the time Like “Magic Carpet Ride” or “Danger Zone” (which in the 80’s were much easier and cheaper to do), as well as casting Captain Lou Albano, a former professional wrestler and current wrestling manager at the time, as Mario. Albano’s connections meant stars like Rowdy Roddy Piper and Sgt. Slaughter could guest star on the show without much of an issue, so they were able to get WWE fans to watch the show.

We’ve also seen similar success with gaming stars like Kirby (Kirby: Right Back At Ya!) and Sonic (Sonic X, The Adventures of Sonic the Hedgehog), but the point is that people will buy products on stuff they see on TV, and there is no longer and better way to get on TV than with having a TV show. A new show based on Nintendo games, especially Mario, would be super influential to getting people reeducated on Nintendo products and franchises. Imagine a new Mario show today with today’s cartoon tech backing it up? Or Animal Crossing? It also doesn’t have to be exclusively TV shoes either, like how about that oft-requested Zelda or Metroid movie that every fan’s been asking for? Granted movies are tougher because you only have one, expensive shot at getting it right, a good movie would not only totally bring in some new fans, but increased revenue from the movie’s eventual sequels and merchandising.

Now I focused this point on more on making TV shows for Nintendo IPs, and that because it’s been historically successful. However with the advent of new media, Nintendo can utilize those for their benefit as well, such as streaming gameplay of unreleased games or tournaments that they could do at conventions like PAX. The name of the game here (and all this section) is brand recognition and having people share that stuff as much as possible. The Nintendo Directs that we get one day’s notice early in the morning and nothing for another twenty-something days just isn’t enough.

Get Rid of the Gamepad, Drop Wii U’s Price Below $200 ASAP

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Now for a quicker method of driving console sales, the Wii U needs a big price drop to compete against the PS4, which is only $100 more and can offer a lot more. As I said in my feature, I don’t think the Wii U’s controller was worth the risk of having an expensive underpowered console since no games past, present or known future utilizes it to a respective extent. So I really think a huge price cut should be in the works by cutting the Gamepad for a Pro Controller.

You can get a Wii U for $250 today by getting the Skylanders SWAP Force Basic Set, so without Skylanders (which is already a minimal cost in the system’s price), and the Gamepad (arguably the most expensive thing in that box), you should be able to make a Wii U with a Pro Controller for about $150-$170. If that’s the case, than price it as cheap as possible because a $150 console is a good impulse buy. The thing is that this more “traditional set” must have all the patches in-box for any game that needs rework for Gamepad-only games like Sniper Elite 2 and LEGO City Undercover. Obviously some games need the Gamepad like Zombi U and Nintendo Land, so those must explicitly say that they can’t work on this without the Gamepad (which would be sold separately).

A $150 price point is super favorable because Nintendo can market the system around its currently solid lineup as well as expressing the fact that this is the easiest, cheapest way to playing games like Assassin’s Creed, Call of Duty, Skylanders, Batman and Watch_Dogs because the Wii U is more powerful, yet cheaper than the aging Xbox 360 and PS3. I remember that was a reason some people bought a GameCube, because it still had stuff like Madden, Timesplitters and Need for Speed without having to spend $300, and then bought Metroid Prime and Mario Kart Double Dash. That’s right, the biggest push for a Nintendo console should be revolved around its third-party content. Which brings me to my next point.

Start Publishing Wii U Versions of Third-Party Games

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Ok, so the biggest push on a Nintendo console should be revolved around third-party games, but what happens when they refuse to make Wii U versions? Nintendo needs to step up and staff those studios to make one. Under Nintendo’s dime, these folks could port any effort onto the Wii U while Nintendo gets a cut of the Wii U sales alongside the original publisher. So for instance, if Nintendo wanted games like Destiny, Minecraft or next round of EA/2K Sports titles, they should be the ones to do something about it.

I took this idea from EA actually because they have a label called EA Partners to do exactly that. EA published games like Rock Band, Fuse and the upcoming Titanfall under this label because they wanted as much coverage of genres and upcoming titles to please stockholders while sticking it to their prime rival Activision (who may have had some previous relations with some of those developers). Nintendo’s reasons are not too different since they need to please stockholders, current/future Wii U owners and third-parties alike.

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Having a “Nintendo Partners” label, while sounding new, isn’t to Nintendo, as they published or localized third-party games in the past. Nintendo published the Wii U version of Ninja Gaiden 3: Razor’s Edge (which ended up being a multiplatform game), and paid WB and TT Games to make the LEGO City Undercover games to Wii U and 3DS. Nintendo has also brought popular games on Nintendo devices to regions that were believed to be unprofitable like Monster Hunter 3 (in Europe only), the most recent Dragon Quest titles on DS, Fortune Street, and all six Professor Layton games to the West; and in return brought Goldeneye, Epic Mickey, Rayman Legends and the Just Dance games to Japan. The only difference is that Nintendo should be also doing this with Western multiplatform games, and paying the developers to make the Wii U versions.

Stop Doing Things that Upset Their Fanbase

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This one should be obvious, but Nintendo tends to find new ways to upset a portion of their crazy-loyal fanbase. Taking down “Let’s Play” videos on Wii U games, almost preventing streaming of Evo’s Super Smash Bros. Melee tourney (which was an extremely high voted contest, for charity no less), region locking their systems, having their digital games locked to one system, still not utilizing online fully in both their systems and games, and the list goes on. Heck this last week, Nintendo did a cease and desist on Marcus Lindblom’s book on his experience localizing Earthbound, in which the book would detail a lot of localizing the cult classic in the 90s with as much freedom as Nintendo allowed.

While it doesn’t seem topical at first, I mention this because it’s these moments that not just make Nintendo lose fans (and thus sales), but cocoon themselves amidst an active industry that wants to include them. It’s again brand recognition, and one that requires no effort on Nintendo, except to not be the bad guy. If Nintendo doesn’t embrace the fact that there is a competitive community for Super Smash Bros., especially what we seen last weekend at Apex 2014, the biggest annual Smash tournament with Melee, Brawl, the original, and even the Brawl hack Project M, then the community will not support the new Wii U iteration if it is not as good as those games. This also means that they have no uses with the Wii U or Super Smash Bros. for it.

Let’s go further into this and announce another obvious point: When you announce something – Do it! Where’s the GBA games promised on the Wii U Virtual Console? Heck, when are you going to release the ones you gave away on the 3DS during its price cut? I have them, so anyone else should be able to willingly give you money for these things. Where’s the capabilities for two Gamepads? Third-parties probably could have made good software with that functionality.

Make Big, New IPs

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I can actually argue with someone on the point that Nintendo never makes new IPs, because they have actually made some nice new ones. Dillon’s Rolling Western, Pushmo, Freakyforms, Sakura Samurai, and HarmoKnight are all new IPs from them on the three-year-old 3DS alone. The problem is that people never heard of these, because they were made for the 3DS eShop with very little promotion. I think Nintendo is afraid to make a killer new app that gets people’s blood flowing, much like how they can with some of their staples.

The last time they banked a lot on a new IP by basing a lot of their system on it was the Wii games. Wii Sports and Wii Fit specifically were all big investments for the company and they won big time with them. They did it with Pokémon as well with a huge marketing push and the TV show and made it the second biggest gaming series in history. I think the issue lies with games like Pikmin where Nintendo pulls the trigger on it to be a system seller and they don’t achieve that level of success.

Right now games like Titanfall and Destiny are making gamers salivate because they succeed at exciting people with new looks, new worlds and new ways to play a familiar genre. After watching people play the Titanfall alpha this past weekend, I could honestly see myself playing this for a while. Nintendo doesn’t have that sort of hype train outside of Super Smash Bros. for Wii U/3DS (thanks solely on Masahiro Sakurai’s daily posts on the game) because Nintendo has this sort of mentality of making games that not just sell well at launch, but to sell for years on end. For example, Mario Kart DS has been selling 6-7 digits in sales since its launch in 2005. So hyping a game for a day one purchase may feel like a waste of effort on their end, but it’s simply not true.

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I really believe Nintendo should make Monolithsoft’s new RPG X their next big thing. Granted it looks and feels a lot like Xenoblade, but a spiritual successor doesn’t require the original to be played. Plus they can really show off the system and it’s coming out soon-ish. Nintendo really needs to learn that Western gamers LOVE riding hype trains, and X really needs some good promotional love. Two trailers in one year don’t cut it.

Embrace the Chinese Console Ban Lift – Now!!

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A few weeks ago, China lifted the ban to sell video game consoles, meaning that Nintendo, Sony and Microsoft can now market their systems just like any other territory. While they were always ways to get the consoles there with the gray market or team up with a Chinese company, like how Nintendo released their handhelds there, these companies can market and distribute these systems for this big market. However, Nintendo can now release the Wii U, and more importantly the Wii, to that market using traditional means.

Releasing the Wii and Wii U to those markets mean adding hundreds of millions of potential customers. The Wii is very important because Nintendo can make it for dirt-cheap and release a ton of already finished software for it, thus taking on the market hard and fast. The Wii U is still a bit expensive and Nintendo would have to launch with everything at once to stay competitive, so until they redo their market strategy, the Wii U would be a bit tough.

Get More Third Party Apps

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Nintendo has a saying that they don’t just compete with Microsoft and Sony, but anything that takes up time from their products such as web surfing. That’s why they implement stuff like StreetPass, so that you take your 3DS with you and regularly check it. It was also a reason they got Netflix, YouTube and Hulu on their devices. Well it’s pretty half-assed of them to not go above and beyond with that idea with the Wii U, because Sony and Microsoft have. Not only did they get the same Hulu and Netflix, but also HBO Go, Xfinity, Facebook, Twitter, Crunchyroll, Rhapsody, various TV network apps and the upcoming WWE Network (which has been gaining traction due to its innovative broadcast options). On a Nintendo system, these apps could take advantage of Miiverse, especially the other social network apps; thus utilizing features of the platform and providing reasons to use their products. If these apps came out and used the Gamepad in cool ways, it would have been a saving grace for the useless controller, but sadly it’s too little too late.

Don’t Go Third-Party

Anyone who’s saying that Nintendo should go third-party is just foolish and it very destructive long-term. Can anyone really believe that less competition really could result in bigger industry? Absolutely not. You really think Nintendo would take advantage of the other system’s capabilities? If the Wii U becomes a product not worth saving, I’d rather see them then take full advantage of the 3DS with all their studios and make that an even bigger system.

Let’s not forget many of those things you have on these controllers were innovations from Nintendo. Even your PS4 controller wouldn’t have a gyroscope and a touchpad if it weren’t for the Wii Remote and the Wii U Gamepad.

So Now What?

In all honesty, we can only wait for January 30th and see what Iwata does to take the company in a new direction. As a fan, we can only hope that the company goes in a scary direction that they can’t go back from.

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If anything, Nintendo fans need to put their money where their mouth is and buy games for the Wii U, specifically third-party titles. Rayman Legends, Assassin’s Creed IV, Deus Ex: Human Revolution and Batman: Arkham Origins are great AAA games on the system and many of them use the Gamepad in some neat ways. You guys need to show Nintendo and everybody that they’re worth having, because buying a Nintendo system for only Nintendo games won’t and can’t cut it.

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