Most of us here at Infendo probably remember a time when Nintendo dominated the gaming market; a time when the name “Nintendo” was synonymous with video games; a time when Atari was dead and (literally) buried, Sega was just an insignificant blip on the radar, and companies like Microsoft and Sony were nowhere near the industry. Fast forward to today, and the king is a ghost of its former self, trailing so far behind in the industry they themselves built, struggling for a toehold. So what happened?
First of all, it is important to note that the company itself is far from folding. Nintendo have banked enough over the past few decades to keep their heads above water until mid-century. Also, while their hardware sales have been lackluster lately, their software and merchandise revenue continues to be strong. Why, then, do their consoles continue to exist in the shadows of the PlayStation and Xbox?
Nintendo are frequently criticized for being behind the times, and for good reason. They were several years late in adopting optical media, online multiplayer, high-definition graphics, downloadable content, digital distribution, smartphone integration, and other key components of their more successful competitors. Uninformed gamers and armchair CEOs mention these deficiencies as things the company must embrace in order to remain relevant, and while they’re not entirely wrong, they are forgetting one very important difference between Nintendo and the others: Nintendo are, first and foremost, a toy and game company. They make games and the toys that play them. Outside of that, they’ve really known very little about hardware, software, operating systems, or online infrastructure.
On the other hand, Sony is a multinational consumer electronics and multimedia conglomerate. They make TVs, computers, stereos, movies, music, software and countless other products besides video games. They helped develop every major media format of the last forty years. They knew going into the gaming industry how to get the most out of their PlayStation systems. Likewise, Microsoft has been the leading developer of computer software for decades. They were already fluent in hardware, operating systems, and the Internet when they entered the market with their original Xbox.
Furthermore, both companies rely on more than just video games for revenue. They purposely sell their hardware at significant losses, while Nintendo do not. This is because for every hundred dollars Sony loses on a PlayStation 4, they make it back on a new ultra hi-def TV, a new smartphone, or a new James Bond film. For every “XbOne” sold or Red Ring of Death in need of repair, another business purchases 1000 copies of Microsoft Office. Until very recently, Nintendo’s video game earnings were self-sustaining. They’ve rarely sold their hardware at a loss.
Then we have Nintendo’s initial hesitance in the online gaming world. When Sega tried pushing the Internet on game systems, Nintendo shrugged. When Xbox and PlayStation started investing heavily in it, Nintendo said it was a fad. Offline multiplayer was the biggest and best feature of the N64, and that focus was carried into the GameCube generation. Why would anyone want to play games with someone who isn’t in the same room? Where’s the fun in that?
Obviously, Nintendo were wrong, and by the time they realized their mistake and jumped onboard with the Wii, they had about five years of catchup to play. Add to that the fact that no one at Nintendo had any experience with online infrastructure and interfaces, and they fell even further behind the technology experts at Microsoft and Sony. Then there were the storage and memory requirements for maintaining a healthy online environment, which the Wii was clearly lacking.
By this point, Nintendo had generated the appearance from outside their devoted fanbase that they were out of touch, and didn’t care about the so-called “core gamer”. While they’ve continued to release critically and commercially successful first party software, with some of the highest attach rates in the industry, their competition continued to pull ahead in market share and general consumer confidence.
Now we come to the present, wherein Nintendo are trailing well behind Microsoft and Sony, while still making quality products and respectable profits. They are working hard at regaining lost ground, and although we know that they have plans — the DeNA partnership, Project NX, Universal Studios attractions, potential movies and television shows — they have not divulged any details regarding what most of those plans are. We here at Infendo are curious, and excited, about these plans, and in my next entry I will go into more details about what they could be, and what I think they should be.