Nintendo’s $1.2B Loss Leaves Super Mario Begging for Coins

Super Mario and Wii U
Photo Credit: Nintendo Life

Things aren’t looking so good for Nintendo in the early going of 2014. A massive 2013 loss precipitated a massive stock dive, forcing the Mario factory to start looking for answers.

Last week, Nintendo revealed that Nintendo lost money in 2013, for the second straight year. The announcement of the operating loss caused a crash in Nintendo’s stock price the day after, knocking out $1.2 billion in value. Worse still are the reasons why this is happening – the Wii U, released in late 2012 (a full year before the Xbox One and PlayStation 4) has not been selling well. Nintendo, which originally forecast 9 million Wii U units sold for 2013, is now looking at only 2.8 million sold. Lifetime, that makes roughly 4 million units sold since it came out (the Bloomberg video below misplaces a decimal point – Nintendo would be awfully pleased with 39.1 million served in a little over one year, I think).

Why is this bad, stock price-sundering news? Mainly because the PlayStation 4 has sold 4.2 million units since release, with the Xbox One coming in at about 3 million. With a one year head start, the Wii U was passed up (or almost there) within two months of the release of the competition. That’s disastrous news, especially considering that the Wii U has been criticized for having a disappointing library of games and that future projected hits – a new Mario Kart and a new Super Smash Bros. – have unconfirmed release dates. People are running out of patience, and it looks like there’s an awful lot of fun to be had over in the Sony and Microsoft camps in the meantime.

But, Nintendo’s woes go deeper than a lack of treasured first party franchises on the new console. The decision-makers at Nintendo seem to have made three crucial mistakes that might mean a short life span for the Wii U. First is the touchpad controller. There’s a lot of potential there, when you think about using the touchscreen as a new way to interact with a game. There are arguments to be made that few games have made good use of the controller, but I think that misses the bigger problem. Nintendo has, for a while now, maintained a commitment to local multiplayer. So, it seems counter-intuitive that only one touchscreen controller can be used at a time, with everyone else using old Wii remotes. I’m not saying that there’s no fun to be had there – it’s easy to imagine games where the touchscreen-less team up to take down the one with the gamepad, who has access to a little more information. But, the Wii U’s big new innovation was supposed to be this touchscreen gamepad – if it’s too expensive to allow four player multiplayer with gamepads, was it really worth it? In theory, it’s possible to use two gamepads at once, but Nintendo themselves have admitted that this would cause a frame rate drop, and there hasn’t been much of an inclination on the part of game developers to test those waters. With these nasty side effects, it’s hard not to interpret the gamepad as a great idea that was implemented too fast and too soon.

But, local multiplayer is still fun on a lot of Wii U games. That’s great, but Nintendo has still by and large neglected online multiplayer, making it clear that it isn’t a priority. It’s not an approach that is going to serve Nintendo well. The stubbornness is curious – what baffles me the most is the implication that building up a solid online multiplayer infrastructure would somehow take away from local multiplayer. These aren’t mutually exclusive. I get that, culturally, Nintendo wants gamers to enjoy the company of other gamers, but that’s not always possible, and people rightly want to play with some of their far-flung friends sometimes. Besides, online doesn’t make anyone forget how much fun it is to throw parties and binge on gaming until 4 AM in someone’s living room. The consistent failure to embrace online – even thermostats are embracing online – is not going to be a sustainable approach for Nintendo. They’re not going to gain any new customers by ignoring online. Attrition will take its toll, and Mario and Zelda aren’t going to be wildly popular forever.

The other folly, as is well documented, is Nintendo’s dedication to family-friendly, casual gaming. Again, this is strange because Nintendo can have their cake and eat it, too – you can make a high-powered game console, attract mature games from third party developers, and still make terrific family-friendly games at the same time. Instead, Nintendo is trying to cultivate the same kind of image as they did with the Wii, by trying to attract people who might not have been interested in gaming before. That worked wonders for the Wii, but it’s not going to work for the Wii U because those people see gaming as an occasional distraction, not a hobby. With so many cheap and free mobile games available on tablets and smartphones, why would they pony up hundreds of dollars for a Wii U and its still pretty expensive games? They won’t, by and large. Now, Nintendo is stuck with a console that is underpowered compared to its competitors. That turns off increasingly ambitious third party developers – the sheer scale of games made for the Xbox One and PlayStation 4 make it so they can’t be ported to the Wii U. And, with poor sales, it doesn’t seem like many third party developers have the incentive to try, either.

Although the gamepad was an interesting new idea, from a business standpoint, Nintendo tried to capture the magic of the Wii in the same exact way with the Wii U. They tried to rely on one innovative tweak to use as a hook, then ride their family-friendly, casual image gleaned from the Wii to market success. This time, they misread the market badly. The phenomenon of the casual game has moved on to mobile – Nintendo should have been able to figure that out when Wii sales started flagging badly near the end of its life span. Failing to implement a consistent, reliable online service can only be described as obstinate in 2014. And, sad as it might be, Nintendo needs to realize that their core franchises aren’t going to be popular forever. Someday, and maybe that day isn’t today, but someday, not enough people are going to care about Mario to save Nintendo from itself.

But, it’s not all bad news. The Nintendo 3DS was the top-selling console from last year, coming back from a lackluster start of its own. Of course, the 3DS does online multiplayer a lot better than the Wii U does, but at least it shows that Nintendo still knows how to control its own share of the mobile gaming market, even against the rising tide of cheap and free mobile games. And, the 3DS picked up once the games started coming in. Maybe it will be the same for the Wii U – that’s entirely possible. But, the Wii U has some severe limitations compared to the PlayStation 4 and Xbox One. If there’s going to be a turnaround, it’s going to need to start this year, and Nintendo is going to need to start getting some AAA titles done. Otherwise, it might be time to go back to the drawing board, if they haven’t done so already.

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