Rob Fahey Contributing Editor Friday 9th August 2013 Share this article Share

Companies in this article Nintendo

Here's a great Nintendo conspiracy theory which I offer for free to any swivel-eyed forum wonk who wants it: the Wii U is selling terribly badly right now, and suffering from a software drought that's impressive even by Nintendo's standards. It also transpires that the console is still being sold at a loss, with the company taking a hit on every unit of hardware sold (even despite the weakened Yen). Now, let's add two and two together to make whatever number we fancy, and decide that Nintendo actually has fully-fledged Zelda and Mario Kart games for the Wii U sitting in a darkened room somewhere in Kyoto, but is waiting for the hardware to be profitable before unleashing them. There you go! One Internet-forum ready conspiracy theory. Use it as you wish, although in a peculiar twist on the notion of Creative Commons, I'd really rather if you didn't attribute it to me.

This is the kind of daft thinking that, while unquestionably in the realms of the silly, almost starts to make sense when we're talking about Nintendo. This is not a company that really fits with the rest of our industry. It plays by very different rules - in fact, it's at its most successful when it completely ignores what everyone else is doing and goes off on a tangent, both creatively and commercially. The firm's lowest ebb, commercially (though by no means creatively) speaking, was arguably the GameCube - I'm ignoring outright failures like the Virtual Boy here, obviously - a console that was quite lovely in many ways, but which simply didn't offer enough to distinguish itself from the competition. It was square and it had a slightly different controller, but functionally there wasn't much to choose between a GameCube and a PS2 (or latterly an Xbox), so it foundered. A generation later, Nintendo ruled the roost with a console that looked and acted nothing like a PS3 or Xbox 360.

"Pundits who engage with Nintendo do so at grave peril - this isn't a company whose motives can be gauged in the same way as other firms in the games business"

This is, in large part, why making predictions about Nintendo is a fool's game. Pundits who engage with Nintendo do so at grave peril - this isn't a company whose motives, thought processes and reactions can be gauged in the same way as other firms in the games business. It's also not a company whose market is terribly well understood by most games business commentators and analysts. In fact, I often wonder if Nintendo's market is terribly well understood by Nintendo itself, at least outside Japan.

I don't mean to make Nintendo sound like some kind of mysterious black box whose workings can only be hinted at, never understood. It is nothing of the sort. It is, however, radically different from any other company in the games industry. Unlike Sony or Microsoft, Nintendo is a pure game company whose platform strategy features no broader objectives or ulterior motives - it simply wants to make money from each game console it launches. Unlike any game publisher (and Nintendo remains pretty much the world's largest game publisher, a factor we should never overlook when thinking about their strategy), Nintendo is a hardware company - its entire philosophy is founded on the notion of creating hardware and software in a somewhat symbiotic, complementary process, on owning and controlling a platform for which it then releases its world-beating game software.

If those differences are obvious, then others, perhaps, are not. For one thing, Nintendo has a long-term outlook that's quite unusual in the games business. It does not answer to shareholders and investors to the same extent that other games companies must, thanks to a combination of large shareholdings by individuals and organisations connected to senior management or to the Yamauchi family, and general passivity on the part of Japanese institutional investors. It is sitting on an enormous pile of cash, easily enough to fund years of loss-making activities, or indeed the launch of an entire new console platform. It could launch new platforms several times over before the accountants started breaking a sweat, in fact, which sets Nintendo apart from much of the rest of the industry - and crucially, makes it into a very different proposition from early 2000s SEGA, for whom the Dreamcast truly was the last roll of the dice.

"Nintendo could launch new platforms several times over before the accountants started breaking a sweat, which sets it apart from much of the rest of the industry"

Like many others, I am a proponent of the argument that as a consequence of those and various other cultural differences, Nintendo doesn't actually act like a game company - it acts like a toy company. It evaluates the performance of its products and the necessity of tweaking its strategy from the standpoint that these products are expensive toys, a seemingly minor difference of perspective that ultimately yields very different decision making. I've also argued before that Nintendo views IP quite differently to other platform holders - where Microsoft, for example, sees Halo as an IP that can be deployed to help launch and sell a platform, Nintendo views Mario, Zelda, Pokemon and their ilk as the company's crown jewels, with platforms being built to support those and other franchises, not vice versa. The notion of rushing out a Mario game to support the launch of a console is largely alien to Nintendo, for whom a failed console launch is better than a failed Mario game, in the long term.

What this all means, and why it's all particularly relevant right now, is that "failure" means something different to Nintendo than it does to the rest of the industry. We're talking in terms of the Wii U being a failure right now - and right now, it is, on anyone's terms. It had a damp launch that even the excellent ZombiU couldn't rescue, has stumbled through the first half of 2013 and has just posted jaw-droppingly poor figures for sell-through in the second calendar quarter of the year. Wii U is a failure right now, by the standards of the games industry and, to some extent, by the standards of Nintendo.

To some extent. That's important, because while the rest of the world may see what happens from now as last-ditch rescue attempts by a company with its back to the wall, I don't think that Nintendo itself harbours too many doubts about its ability to make the Wii U into a viable platform for its games. As my daft conspiracy theory illustrated, so far Nintendo has barely brushed the Wii U with its key franchises. Indeed, the extent of the company's enormous focus on the 3DS this year has arguably left the Wii U genuinely neglected, which is simultaneously a case of dropping the ball (a new console launch needs support) and of quite sensibly making hay while the sun shines (the 3DS is a money-printing machine right now).

If there are people in Nintendo HQ right now thinking, "Wii U can languish for a bit - when we release really big software for it, people will pick one up at that point," then they may be a little bit arrogant but they do have over 20 years of history to look at and conclude that they're absolutely correct. In the end, Wii U at its very worst will probably sell GameCube level numbers, perhaps even Nintendo 64 level numbers, because those numbers represent the people who are happy to go out and buy a Nintendo console in order to play Nintendo's biggest and most beloved games, even if third-party support is utterly lacking and the console isn't getting mass-market traction. They're the core Nintendo fans, and there are a whole lot of them - many of them the kind of people who play on other game systems most of the time, but wouldn't dream of missing out on each generation's Zelda, Mario or on any of the other quirky, beautifully crafted games Nintendo releases.

"Nintendo's launches are toy launches, not the setting out of decade-long grand visions for home entertainment, and a failed toy can always be replaced by a successor next year"

If we're asking, "what does failure look like for Nintendo," we might equally flip the question and ask what success looks like. Few people in the games business would call the N64 or the GameCube a success story, yet from Nintendo's point of view, both consoles made enormous amounts of money and helped to launch or cement the reputation of some of the company's most beloved and enduring games. Would Nintendo like to sell over 100 million units of the Wii U, as it has with the Wii? Of course it would. Will it throw up its hands in abject despair if it only sells 30 million units? Absolutely not. 30 million units with a great tie ratio is still a hugely profitable console - and while the markets may abhor the notion of a company's market share declining in this way, Nintendo is far less in thrall to stock price than most companies in this industry.

Whenever I see someone proclaiming the death knell of a Nintendo console (usually accompanied by a statement on the inevitability of their move to working on iOS games or the likes), I'm always reminded of a comment Satoru Iwata made to me in an interview after the unveiling of the Wii controller at TGS several years ago. I asked him what Nintendo would do if the public didn't take to the Wii, and the whole risky idea flopped. He quite comfortably responded that Nintendo would just go back and try something new. The finances support it, and more importantly, the company philosophy supports it - Nintendo's launches are toy launches, not the setting out of decade-long grand visions for home entertainment, and a failed toy can always be replaced by a successor next year. Yet "failure" and "success", it transpires, are relative metrics. If we're going to be using the word "failure", we need to start asking what "failure" is, what "success" looks like - and assessing companies and products according to what they are and how they act, not according to some imaginary contest that makes for better media narrative than it does corporate strategy.