On Nintendo

I’m a Nintendo fan. Now, don’t read that as me saying I’m a Nintendo fanboy. I like to think I’m not a fanboy of anything, though I proudly proclaim to be an anti-fanboy towards certain things. Like many, a lot of my gaming history and literacy was formed on Nintendo platforms. I didn’t start gaming on the NES but I owned one and loved it to death, as I did the Super Nintendo. Both of these systems are the subject of many a Retro Flashback. I skipped the N64, got back in on the GameCube which I quite liked and own a Wii and a Wii U which I also really enjoy. The company’s history is varied and fascinating, having began over 100 years ago as a playing card manufacturer before evolving into the household gaming name they are today. They have brought a ton of innovation to the industry and take risks where others fear to tread. It’s safe to say without hyperbole that a lot of what the game industry has evolved into today can be traced back and credited to Nintendo.

The last couple of years, all has not been rosy however. After attaining stratospheric levels of success with the Wii and the DS–the latter of which is the best selling dedicated gaming system of all time–they’ve been on a pretty rocky path. They just recently reported their first yearly loss ever (remember, they’re 100+ years old), their stock has dropped substantially (though they are still one of Japan’s biggest companies), 3DS sales have picked up nicely after a very poor launch but are below expectations and the Wii U is doing very badly at the moment. More than a few in the press and in the “professional” analyst field have been decrying the company’s failures, saying Nintendo doesn’t know how to compete in the modern games industry, that they can’t sustain a hardware business and just need to start making games for already oversaturated and teetering mobile platforms. This culminated in last week’s announcement that they are not going to be holding a press conference at E3, instead holding media specific events and running a number of their Nintendo Direct streams, most of which are aimed at core fans. Indeed, many say the end is nigh for this gaming juggernaut.

Certainly, their challenges are many but a lot of this can be tied into the press needing something to write about in the void between now and E3 and their insistence that there always be someone to hate. It used to be Sony. They certainly provided a lot of fodder for that during the early years of the PlayStation 3 but with that company seemingly firing on all cylinders these days, Nintendo has come under the hateful gaze of the “enthusiast” press. There’s certainly a lot of valid criticism and many lessons that Nintendo has yet to learn. However, I do think a lot of this sentiment–which has gotten downright vitriolic at times–is uninformed and misplaced.

There are many reasons for that and I’m going to outline them here, just to give you readers some perspective when you’re reading all the doom and gloom on this company.
The first is the kind of company Nintendo are in general. In a business world that has become transfixed in the next quarter at all costs, Nintendo has always taken a long view. They don’t do things just for the next quarter, they build things to succeed over years. Some of their systems have launched strong, others not so much but with the notable exception of the Virtual Boy, every game system they’ve released has made money and often, done so while not being the top dog. The N64 was a distant second to the PlayStation 1, the GameCube was a distant third place last generation, at least in North America. Yet both of these systems were profitable in the end, even when Nintendo themselves called their sales disappointing. That’s because they managed to get good games on them which generated momentum and drove a steady curve upwards. The modern business market doesn’t like this. They like companies that come roaring out of the gate and leap from hit to hit, until they miss once and then they drop them like a hot potato.

The market wants everyone to be like Apple (something even Apple themselves are starting to falter at) and that’s not realistic. While Sony and Microsoft lose buckets of money for years at a time on their hardware launches, Nintendo quietly sits back with their often underpowered machines, slowly letting them grow and grow and usually, turning a profit on day one. The Wii was a huge exception to this rule but it was a fluke, one even Nintendo themselves didn’t see coming. The DS started slow and nearly everyone (chief among them the press) called it a ridiculous gimmick that would never catch on. How did that turn out? Companies that take a slower and steadier approach don’t make for exciting market narratives but Nintendo has stuck to this methodology in spite of that because it works. It’s one of their greatest strengths, not a weakness.

The Wii U has been a big exception to a lot of what I wrote above. The system apparently doesn’t make money on the hardware but Reggie Fils-Aime has claimed that the royalties from one game sale put it in the black. I actually think the system launched with a decent line-up but most of the games were met with a tepid response and while there does appear to be some good stuff in the pipe, they’re being drip-fed and the lack of information (even with E3 coming soon) is a big misstep. People who bought them want games and those who didn’t buy them need a reason to. Every day without more games is another day they give Sony and Microsoft the chance to steal their thunder.

They also completely bungled the message for the system. Naming it anything but the Wii 2 was a huge flub and even company President Satoru Iwata stated that a lot of people think the Wii U is just an accessory for the original Wii, an error you can’t fault anyone for making. The thing is, they can still fix that with good games, primarily from their internal teams. Nintendo has some of the best game developers in the industry and on top of that, they’re led by management that is not only skilled but who actually like and play games. Yes, Nintendo does need to court and nurture both indie and big third-party developers alike but their in-house talent always make games that both sell and show off whatever hardware they’re put on.

The games will come and I think as always, the Wii U will find success. Wii level of success? DS level of success? Absolutely not. But I have no doubt that Nintendo is aware that those days are over. The 3DS has a similarly difficult launch and then as well, many in the press said the era of dedicated handhelds were over and that the public had “moved on” to mobile games wholesale. Similarly, the games came and now the 3DS is doing very well. Now those same press types who should be eating crow are instead shifting their doom and gloom to the Wii U. The cycle continues.

Then there’s Nintendo skipping their E3 press conference this year. Many are saying that’s an admission of defeat and that they are conceding that nothing they show will be able to get any attention versus the big new console announcements Sony and Microsoft have. That was my initial reaction too. Then I thought about it for a bit and realised that I think most people are looking at this the wrong way.

I don’t think Nintendo dropping their E3 press conference says as much about them as it says about E3 itself and how important it really is to them. I said before that the press needs to stop whining about E3’s relevance and to a degree, I still believe that. But think about this for a minute. Sony and Microsoft aren’t announcing their new consoles at E3. They will certainly have a lot to show and talk about but Sony announced the PS4 months ago and Microsoft is announcing the next Xbox in May. These guys aren’t announcing at E3 either, they’re doing targeted, focused events dedicated to that separate from the press conferences. And that’s exactly what Nintendo’s doing. Many people (press included strangely) are acting as if that by not holding a press conference, Nintendo is essentially bowing out of E3 and that couldn’t be further from the truth. They still have a booth, they’re still showing tons of stuff to the press and sure, their Nintendo Direct presentations are watched more by the core than by casual consumers but the core is who ultimately spreads the message for you.

Nintendo knows that them showing games for a system that’s already out won’t get covered on Good Morning America like new systems from Sony and Microsoft will. Press conferences are expensive and rather than spend a fortune on what is frankly, usually a cringe-worthy show anyway, they’re going to spend less and speak directly to the press and their most evangelical fans. They’ll probably get the same amount of exposure at worst but they get to control how much information gets out and they get to do it for a lot less money. I don’t know about you but that sounds pretty damn sensible to me. And lest we forget, Nintendo’s not the only big industry player backing off at E3 this year. I still think E3’s important but Nintendo not doing a press conference says far more about the show than it does about them.

My point with all this is simple in the end: There’s a reason the phrase “Never bet against Nintendo” was coined and I think it still applies to this day. Yes, they’re a company facing difficulties right now but they’ve faced plenty before. They have an extraordinary management team of actual enthusiast gamers, they have some of the most valuable IP and developer talent in the world, they know how to make hardware and despite the fact that they seem to not always pay attention to the industry around them, they are still a humble company that’s learning from their mistakes. I say all this as someone who beat them with a stick about Wii U Virtual Console pricing. They aren’t perfect but they have consistently demonstrated that they can find a way to survive and thrive. For all the companies that have come and gone in the hardware space, Nintendo has been there and personally, I think if this upcoming console generation is the last as many will predict, Nintendo will still find a way to survive in it, even when Microsoft and Sony have left the building. That their business strategy doesn’t jive with the way most of the market wants things to work these days is in my opinion, a failing of the market, not Nintendo. I think more companies should take a long view approach to things and that the current market’s obsession with pump and dump strategies will backfire one day soon.

I admit that I do sound like a bit of a fanboy with how strongly I seem to be defending the company here. Don’t get me wrong, I think they’ve made and continue to make a lot of mistakes and as someone who got a Wii U right near launch, I want games and I want them now. But in their burning desire to always have something to hate on, the press and the analysts who want little more then attention have set their sights on Nintendo, ignoring their history of overcoming virtually all challenges and being a driving force in the games industry, even as those who beat them in the short term crumble and fade away. Dumping hardware and jumping into the mobile gold rush bubble is modern business thinking but doing so would be a long term disaster for Nintendo and in a few years, the same people telling them to do that now would be back deriding them for it. I think this is a company that not only has a lot of lessons to teach about the video game industry but about how to run a business for the long term in general. They may be the target du jour but I think their wisdom is ignored at our own peril.

Don’t count Nintendo out until they’re out. They can still surprise us all.