The end of 2013 was marked by a much needed wrench in the cogs of the video game industry, a console war. After the long lives of the Xbox 360 and the Playstation 3, the gaming world needed a breath of fresh air. Sadly, we didn’t really get that. The Xbox One and Playstation 4 are both impressive consoles in their own right, but neither has brought truly innovative positive changes to the gaming world. Both Microsoft and Sony plagued social media networks with unending ads, Microsoft tried to bribe YouTube users to endorse the Xbox One, and a stream of negative media ruled supreme as the two companies seemed to be arch rivals. During all of the news storm, redesigning of consoles, and removing controversial features (Microsoft), one company was surprisingly out of the spotlight.
Nintendo, the videogame powerhouse from Japan and the world’s largest videogame producer, suffered a pretty tough year in 2013. Its next generation console, the Wii U, had been released well before the other two company’s entries. One would think that this would have given Nintendo a huge edge on the market. Sadly, this was not the case. Wii U sales pretty much doubled over the course of the year, from 3.06 million to 5.86 million units but this number pales in comparison to the sales of the Xbox One and PS4 in the first few months. Microsoft sold 3 million consoles while Sony managed 4.2 million. These numbers are extremely impressive, but even these statistics don’t come anywhere close to the 100 million units that the Wii sold during its lifespan.
After announcing these poor numbers, Nintendo shares fell more than 3 percent on the morning of Thursday, Jan. 30. The struggling company said that, despite poor sales of their home console, they would continue to fully back its continued development. After a slight jump during the middle of the day, shares tumbled again by the end of the day.
After the company forecasted such surprising losses, an announcement was made that execs at Nintendo are considering a new business model. Satoru Iwata, Nintendo’s President, has announced that he will be halving his pay for the next coming months and the rest of the executives at Nintendo will be receiving 20-30 percent pay reductions. This is not the first time Iwata and executives have taken pay cuts, a similar strategy was implemented after the 3DS was unable to find initial footing in the market after release. This pay cut in the upper echelons of the company is also allowing them to prevent any layoffs or company closures, a move that Sony and Microsoft should well look into. Many gaming studios based in the U.S. and Canada closed their doors over the course of 2013.
Nintendo will also spend approximately $1.2 billion to buy back shares after the poor sales last year. This lump sum will allow them to acquire about 8 percent of their outstanding shares. After the ridiculous amounts of shunning that the Wii U saw over the holiday season, nothing else could really be expected at this point.
Now, after looking at all of the issues that the company has faced over the past year, it becomes an interesting task to name the problem with Nintendo. This is most likely because it is an unlucky combination of a few factors.
The Wii U was an innovative and interesting console that grabbed a lot of people’s attention early in its marketing because of the two screen capabilities that allowed gamers a whole new way to play games. But this new console also brought with it a lot of questions. Many people initially thought the Wii U was an updated controller for the Wii, a new touch pad device form Nintendo, or many other odd things. With so many fundamental questions swirling through the air, many people took the easy way out and just stuck with what they had or waited until Microsoft and Sony put out their new consoles.
One would think that Nintendo would have responded quickly with answers and a strong marketing campaign, but this was not the case. Nintendo has often suffered from poor marketing and development conditions, under-marketed ideas are often pushed back and filled with issues upon release. Countless online issues plagued the Wii U for users in the U.K. as well as here in the U.S. Destined to fail, the Wii U really had nowhere to find firm footing. To rub salt on the wound, many of the games on the Wii U have received nearly perfect reviews. Failure by the gaming media to report on Wii U titles and slander writing put the company in a tough spot.
On the back of an iffy new console, the nearly $100 billion dollar a year casual gaming market that skyrocketed the Wii into astronomical sales figures had since migrated to the simple to use, easy to buy mobile gaming market. All of the horrible issues with mobile gaming aside, the market has seen tremendous growth recently. Casual gamers abandoned the Wii U for Angry Birds on their phones and iPads.
Nintendo has been quiet in the mobile gaming market, sticking to their guns and their time honored franchises on the home and handheld markets. Iwata did state that the company is studying new ways to revive sales after having ruled out the possibility of licensing out their beloved character roster. A jump into the mobile gaming market might not be a terrible business decision, after all. With that move would come the more than likely degradation of some of the most fantastic and perfect gaming franchises of all time. Mario, Zelda, Super Smash, Donkey Kong and many others have held the Nintendo flag high for decades now, there has to be something that Nintendo can use to help revitalize the company.
While previously blaming low earnings on the high cost of the development of the Wii U, there are obviously bigger issues. One interesting fact, however, is that Nintendo is the only company of the three, Sony and Microsoft being the other two, that is not in tremendous debt. Sony has posted operating cost losses in the billions in almost every division and the huge financial burden of creating the Xbox One has left Microsoft in a deep dark pit.
With some great content being overburdened by a poorly designed console, Nintendo needs to cut their losses and get back to what they do best, making good Nintendo games. They must properly market some of the great games on the Wii U, or try to wrangle the casual gamers back in. Whatever Nintendo does, they may want to figure out a solution sooner, rather than later.