Learning from success has never been the Nintendo way

We are less than one month away from the launch of Nintendo’s newest pride and joy, the Switch. The system doubles as a tablet-screen portable machine as much as it does a traditional TV-linked home console. The company has put a tremendous amount of marketing muscle behind the March 3rd launch, going so far as to purchase ad space during the Super Bowl. Billboards, magazine articles, web promotions and more have been offered up by the Kyoto company in the hopes of getting back to their winning ways after the WiiU failed to connect with anyone beyond the most diehard Nintendo supporter.

Their attitude toward the Switch’s launch is not necessarily “do or die” but there is a genuine feeling of earnestness and even urgency that was not present during the launch of Nintendo’s two more recent systems, the 3DS and the WiiU. Both of those launches came on the heels of the tremendously successful DS and Wii. Though Nintendo would never admit it, gamers of all stripes interpreted many of their moves during the 3DS and WiiU launches as arrogant and presumptuous. There was a hubris to it not seen since Sony strutted onto the E3 stage to announce a $600 PS3 back in 2006.

And yet, the WiiU was not the first time Nintendo thought they could do no wrong.

After reviving the video game market in the west with the NES and solidifying themselves as a two-generation champion with the SNES, Nintendo approached the mid-90’s with the feeling that anything they offered the world would be scooped up with no questions asked. That theory was put to the test first with the Virtual Boy and then with the N64. The former was a failure so epic one of the primary forces behind Nintendo’s video game successes was forced into exile. Gunpei Yokoi, who created the now-standard “D-Pad,” led the development on the Gameboy and created the Metroid franchise resigned in disgrace from Nintendo when the Virtual Boy flopped, selling less than one million units (I had one and, bizarrely, “really liked” it!).

Then came the N64. After refusing to partner with Sony on a CD add-on for the SNES (actually they double-dealed them, but that’s for another discussion) the PlayStation was released as a direct competitor to Nintendo in 1995. Using CD-ROM technology allowed for impressive full motion video and more robust audio, wowing consumers itching to try something new. Nintendo responded with an arrogance they felt was deserved after the success of the NES, SNES and Gameboy. They refused to support CDs with their next console and instead went with traditional cartridges. They were worried about piracy as much as they were loadtimes, but whatever their reason, though the N64 was more powerful than the PSX in almost every way, the glitz and glamor of games like Resident Evil and Final Fantasy (which could not be easily reproduced on an N64 cart) won the day. Nintendo’s 64-bit machine ended up with an impressive—albeit small—library of titles, some of which are looked back on today as the greatest of all time. At the time though, the sales just weren’t there, and the N64 ended its run selling only 32 million consoles (half the number sold for NES and 20 million fewer than the SNES).

Incidentally, the system sold 20 of that 32 million in the United States, whereas in Japan the machine only sold about 6 million units. Did the company revise their thinking to accommodate the western market? Nope, instead they doubled down, humbled only slightly by the N64’s struggles. They released the Gamecube in 2002, a year after Sony’s PS2 took the world by storm with its DVD capability. Instead of following the trend, Nintendo went different for the sake of it. Worried about piracy more than price they opted for a proprietary mini-disc that held less than half the memory of a standard DVD. As with the N64, the system struggled to appeal to casual gamers due to many third party games skipping it in favor of Sony’s (and now Microsoft’s) machines.

If you’re keeping score that’s twice Nintendo’s paranoia over piracy led them to make poor hardware decisions. Sony may have had more piracy trouble with the PSX than Nintendo did with the N64, but in the end Sony made so much more money on their system than Nintendo did on theirs, they weren’t complaining a bit about someone having a bootlegged copy of Crash Bandicoot.

In hindsight, the Gamecube is one of the best systems Nintendo ever produced. It has arguably the best library of games ever released for a Nintendo hardware, a controller so ergonomic it almost melts in your hand, a great variety of first party games and, though it didn’t get all the AAA third party titles (Final Fantasy, Metal Gear Solid 2-3, GTA), it got enough that purchasers were never without a big new game for very long.

Still, as great as the Gamecube is in hindsight, at the time it was a failure. It was Nintendo’s first third-place machine, selling only 21 million systems, well short of the 25 million sold by the first Xbox and not even in the same conversation as the PS2’s 155 million units.

And even though the Gamecube only sold 4 million units in Japan, making Nintendo’s home console market look nearly-dead in their home territory, Nintendo still did not tweak their marketing or their development-focus to appeal more to the western market. Instead they doubled down on the “Japanocentric” with their next machine, the Wii.

And, at least initially, it seemed to pay off.

In hindsight, the Wii has not aged well. Its graphics are muddy, a product of SD output on HD televisions. Its central gimmick is no longer novel, as “motion control” is now unaffectionately dubbed “waggle.” And many of the games in its library are worthless, shovelware cash-grabs designed to take advantage of the system’s appeal with “nongamers.” At the time, however, it was exactly what Nintendo proudly boasted: A revolution. Though it competed with the powerhouse PS3 and the seemingly ubiquitous Xbox 360, it outdid them both, selling 20 million more units than either offering from Microsoft or Sony.

But for Nintendo, with success comes arrogance. The company failed to see, objectively, that the Wii was not a revolution the way they wanted it to be. It was “revolutionary” but it did not usher in the next era of video gaming. Instead, its great sales success can be chalked up to one simple and timeless truth: fads sell.

The thing about fads is, they are great when the bubble is growing. Everyone wants to be in on the hot new thing. Nintendo priced the system at a low-low price of $249, due simply to the fact that they could afford to: the technology was mostly old and inexpensive. It worked out in a way they didn’t expect since the machine became such a fad and fads only work if it doesn’t cost much to invest in them. A $250 machine that lets grandmothers exercise at home, and lets parents bowl with their kids is going to fly off the shelves. And it did.

I bought a half-dozen during that first Christmas and flipped them online for as much as three-times the MSRP. I regret nothing.

But the other thing about fads is, when the bubble bursts there’s nothing you can do to recapture that magic. It’s a passing trend and once casual people have moved on to the next fad they have little incentive to come back. There’s no loyalty there because they aren’t really interested in the product, only in being part of the popularity of it. It takes self-awareness to realize that your hot product was just a passing trend and Nintendo made too much money with it to allow for humble self-awareness.

Source: Digital Digest

As you can see, while the PS3 and Xbox 360 grew their base over the years, the Wii fell sharply after its first could years on the market. Once the casual buyers moved on, all that was left was hardcore Nintendo fans who had already bought the machine on launch day (and would have regardless of its popularity), and non-Nintendo gamers, who were put off by the low quality graphics and paltry third-party releases.

But with their next system, Nintendo decided to double-down on the Wii, hoping to catch lightning in the bottle again. They named their next system similarly, included backwards compatibility with the Wii, and even allowed for peripherals to transfer over. Then, they unveiled the system’s big gimmick: It can stream the game to the controller allowing you to play at home without being confined to your TV. Naturally the marketing focused heavily on the screened-controller, which backfired terribly.

Nintendo hoped they could market the WiiU to casual Wii buyers from half-a-decade ago and convince them to re-up for the newer model. Instead those buyers walked away from Nintendo’s ad campaign thinking the the WiiU was just an add-on for the Wii. All the integration with the Wii Nintendo had meant to ease the transition to the WiiU instead made the console look like a glorified Sega 32X. And why wouldn‘t casual fans think it was an add-on? The name was almost the same, the system itself was usually hidden in the background during commercials…commercials which featured a bunch of people waggling Wiimotes around while one person played on the tablet controller.

Poor marketing was just one problem, but it combined with a $350 price tag and a pack-in game (NintendoLand) that lacked the casual appeal of Wii Sports. Together those two problems doomed the system from day-one. Still, though it failed to win over casual buyers, there was still a chance for it to attract more serious gamers. Unfortunately the system was designed with only slightly more power than the PS3, making it instantly weakened when the PS4 and Xbox One hit the markets. Nintendo argued that the streaming tech ate up most of the cost, and that was the tradeoff: streaming for power. The problem is most fans would have preferred power. The ability to stream is nice in concept (even if the system’s ability was terribly limited in range) but in the end it was a solution in search of a problem. Hardcore gamers were not impressed enough by the gimmick to justify spending money on a low-powered machine. Thus they ignored it and simply waited for either the PS4 or Xbox One to release a year later.

That left only Nintendo’s die hard fans. The floor should have been 20 million sales, based on how the Gamecube sold plus the expansion of the market since the turn of the century. Instead the system sold only 13 million units. Its library is the sparsest in Nintendo’s video game history (not counting the Virtual Boy which was essentially abandoned by Nintendo as soon as it released) with the best-selling game (Mario Kart 8) moving only 8 million units.

Even the N64, with its expensive cartridges and limited install-base compared to the PlayStation, had 300 different games produced for it. The Gamecube had over 500. In contrast, the WiiU has had barely 150 games made. Fans weren’t buying so Nintendo and other producers had little reason to invest in IPs. Die hard fans, who previously would buy Nintendo systems and first party games almost instinctively took a second look and many decided to pass on the system, and on the company that persisted in ignoring what they wanted. Third parties made all the right promises as the launch neared but as soon as they saw the machine struggling, they pulled their resources and concentrated on systems with bigger installed bases. It created a cycle of failure that doomed the system from the beginning: Consumers wouldn’t buy it till more games were out, and producers wouldn’t make more games till the base of consumers was bigger.

With the WiiU now discontinued and all eyes (and hopes) pointed to the Switch, Nintendo themselves are the ones making the promises. For their part, third-parties are once again talking big, but whether or not they sink money into the system, longterm, will depend on whether or not the thing sells. Thanks to much better marketing and much better hardware, the potential is there for the Switch to be a bigger seller than the WiiU and the Gamecube, and possibly a more consistent seller across its lifespan than the Wii.

As a lifelong Nintendo fan, I hope the company succeeds with the Switch right out of the gate. And if they do, I hope they learn the right lessons from success.

History doesn’t have to repeat itself, after all.