Since January 17, 2014, several articles have been published on sites varying from IGN to Bloomberg, lamenting the death of Nintendo after the company reported a shocking loss. This, as opposed to their earlier projections of a hefty net profit, has only contributed to the near-rabid hyperventilation that occurs when analysts begin spouting out the words “iOS and Android” in the same sentence as Donkey Kong. Anyone who can do basic math can see that this isn’t just a minor hit to the pocket that Nintendo is bracing for when their fiscal year ends in March. To project net profits of US$530 million and then sheepishly have to admit that in reality, you’re girding your loins for a loss of US$335 million instead is perhaps the biggest chunk of humble pie that any corporation’s been forced to choke down in recent memory. It is thus no surprise that people are saying that the writing’s on the wall, the nine have left Minas Morgul, the enemy is within, or basically: Nintendo’s world is crashing down around its ears. How did we get here? Who’s running this rodeo? Alas, this is a tale as old as time, one of boardroom betrayal and the business foresight to adapt to the unstoppable force that is change.
Picture this: somewhere in Japan. The 90s are raging all around us, and over some sake and sashimi (I’m just speculating here), the head honchos at Sony and Nintendo are working on their CD-ROM expansion concept for the Super Nintendo. It’s a beautiful day outside and there are smiles throughout the room.
At some point during their negotiations, the President of Nintendo reaches over with chopsticks for the last piece of sashimi, just as the President of Sony extends his own chopsticks for the same piece. Perish the thought. Convinced that he has rights to the sashimi (I mean, it is HIS office building), Nintendo’s prez goes right ahead and eats it! Sony balks; how selfish! Anyway. Enough of that. The bottom line is that a dispute over contract details derailed the evolution of Nintendo’s hardware offering. Sony said “It’s not me; it’s you,” and in 1994 the PlayStation burst onto the scene as Sony decided to enter the gaming industry all by its lonesome. It was grey; it was slightly sleek; it sported CD-ROM technology, which garnered Sony serious third-party backing and some kick-ass triple A titles. Nintendo, banking on its position as industry leader and wizened veteran of the gaming streets, released the N64 two years later, opting to keep its game cartridge format, a decision that lost it much third-party support that it had held in the past. But Nintendo still had Smash Bros, the fabulous Golden Eye and Mario Kart, all of which capitalized on the 4 built-in controller ports on the N64, providing hours of game-play and destroyed friendships.
At the same time though, they couldn’t possibly keep it together against the likes of Solid Snake, Lara Croft and a game series you might have heard of called Final Fantasy. Developers saw the future; the future was CD-ROM.
It took the House of Mario until the launch of the GameCube in 2001 to abandon the game cartridge. Today, I find myself filled with “shoulda, coulda, woulda” scenarios as it pertains to Nintendo. What if they had followed through on that Sony partnership? Would we even now have an XBox One vs PS4 ‘war,’ or would it be a brutal brawl between three strong competitors on the battlefield? Personally, I don’t think so…because Nintendo made a second strategic decision around the time the Wii launched that I believe began a sort of domino effect that’s led up to this month’s “holy freaking hell, we’re bleeding money” panic attack.
Any good marketing professional will tell you that target markets, as they relate to certain industries, are not static. They change, and while it may not be frequent, it is inevitable. With the success of the Wii (released in 2006), Nintendo decided that they would stick to family-oriented games and maintain their Pikachu-cute image across all marketing campaigns which, admirable though it may be, was in complete contrast with the gamer population’s mind-set at the time. Their entire brand image remained tied to the legacy characters of Mario, Princess Peach and Link, and unfortunately, 2007 brought with it a little game called Call of Duty: Modern Warfare. I know; Modern Warfare was available on the Wii. I’m not talking about availability, though. I’m talking about image, and how the associations formed in your consumer’s mind are often more important than how you see your company. See, Nintendo reminds me of a grandparent or other older person who refuses to admit that the world has changed and bread will never again cost 10 cents at the corner store. The 12 year olds on XBox Live (who have all done unspeakable things to my mom, bless her) don’t concern themselves with the kind of nostalgic image Nintendo is adamantly holding onto. They are not us, as we were at 12, fascinated by the ‘blood’ in Golden Eye. Call of Duty and Halo are what they know and love, and their parents (who were Nintendo’s ‘original gamers’) have also matured. I hear more stories of fathers playing Halo with their sons and daughters than I do of them playing Smash Bros. So what did that ‘strategic decision’ mean? It meant that Nintendo made a conscious choice to flat-out ignore changing attitudes and appetites with regards to their branding. Couple that with a complex platform and their exclusion of third-party devs in the development stages of the Wii-U (a name I still hate to say) and you’ve got a recipe for the cluster in which the House of Mario is currently drowning.
Despite last week’s loss warning, CEO Iwata says he has no plans to resign. I find this an interesting decision, mostly because I think he shot Nintendo in the foot by expecting their handheld segment to shoulder the burden brought on by the Wii-U’s production costs, heavy losses and low sales. In the same breath, he also says that he’s not too keen on having Nintendo titles (such as legacy Mario and the still-popular Pokemon) released for other platforms. This is the third time that Nintendo is faced with a deep chasm before them and the bridge across is guarded by a troll who asks the question “Will you change?” Is it too late to make the turn-around? Do I think Iwata is right for staying on as CEO and resisting the calls for his company to develop games for other platforms? There is no right answer to that question. He is an executive decision-maker faced with perhaps the most significant challenge in Nintendo’s history. It would sting to see classic favourites cavorting about on platforms other than those carrying the Nintendo brand, a brand that feels like an old friend no matter how much time has passed since you last played a Mario game. It might be their undoing; the research alone that would have to go into such a solution would be daunting. Iwata has to carefully write the next chapter of this tale or face an abrupt, Sopranos-like ending. I just hope he doesn’t resist change, whatever form it may take, because as much as I’ve never wanted to own a Wii-U, to quote a friend…I don’t want to live in a world without Nintendo. Until next time…