Nintendo Tribulations: Fiscal Year Ended 2014 Edition

So. More bad news for Nintendo recently. Slow Wii U holiday sales leading to a forecast revised for an annual loss has people once again saying words like “mobile” and “third party” or whatever. I don’t think I’m gonna go over what specifically I think Nintendo should do this time, but rather take a more general look at what’s going on.

I think one of the most important quotes you can gleam from Iwata recently is this one from Wall Street Journal: “In Japan, I can be my own antenna, but abroad that doesn’t work,” “abroad” meaning outside Nintendo’s native Japan. I think that strikes at the core of what’s going on with Nintendo right now.

Possibly the Wii U’s biggest problem right now is that most of the important games in the console space right now aren’t on it. Third party publishers generally don’t care about the Wii U, especially western publishers. Part of this has to do with Nintendo’s long-standing modes of operation.

To put it flatly, Nintendo has actually never had great relations with third parties. Even when the NES and SNES were getting great third party support it was because Nintendo was almost the only strong platform in town (in Japan at least), being not far away from a monopoly on consoles at the time the SNES launched. This forced third parties to put up with Nintendo’s draconian policies if they wanted to release any console games back then. Nintendo started facing problems as soon as any legitimate competition for developer support showed up in the Japanese market and hasn’t recovered since. Today Nintendo still doesn’t play the same game Sony and Microsoft do with third parties.

I don’t know if this still holds true, but years ago people at Nintendo were quoted as suggesting they simply wanted to wait for third parties to come to them by making appealing hardware. That doesn’t seem to have worked. Furthermore, what Nintendo wants to do with console gaming seems to be at odds with the wishes of the most powerful third parties in the market today.

The very fact Nintendo wanted to make the Wii and Wii U small, low-wattage consoles for Japanese living rooms might have been mistake number one. Who else even cares about that? Making a cheap console has its merits but at some point you have to make hardware on which third parties actually want to develop, which right now means hardware that can actually run EA’s, Ubisoft’s, and Epic’s graphics engines. That brings me to how people at Nintendo (almost 15 years ago admittedly) might not even like the idea of multiplatform development, which is pretty much the norm now with everyone except Japanese developers.

In a previous post I went over how the big western third parties including the PC developers who’ve come up on consoles in recent years might be totally lost to Nintendo, but that was more about what could have been. Other than Japanese developers — who are having trouble on consoles and are being forced to retreat from a shrinking handheld space onto mobile, Nintendo might not have anywhere else to go.

What I’m trying to get to is, some of Nintendo’s conservative policies are holding it in a place where no one else wants to be anymore. The reason I bring up the general Japanese market here is because Nintendo still seems to have this desire to be successful there first despite North America being its biggest market. North America being its biggest market even has a big effect on Nintendo’s profit margins, as all that money is in dollars which is affected by exchange rates when it translates back to yen. Even the third party publishers and developers Nintendo has gotten tight with have been pretty much all Japanese and low-end. The 3DS has such a strong library entirely because of Japanese developer support.

Look at how Sony has responded upon running into the same problem. Japanese console design philosophy is what caused the PS3 to have an exotic architecture that was hard on developers. Furthermore, what happened to Japanese console game development (including Sony Computer Entertainment Japan’s studios) really hurt the PS3’s library — the PS1 and PS2 were mostly built on Japanese third party exclusives which disappeared during the PS3 era. Sony responded by bolstering its western studios and essentially turning the PS4 into an American operation. We’ll see how the Japanese market receives it come February.

That’s not at all to say Nintendo should run itself the way Sony and Microsoft have, because they absolutely cannot. Nintendo doesn’t have other businesses to fall back on and right now it’s probably the most financially stable company in gaming — Nintendo can most definitely afford its current losses and much more. Nintendo should definitely remain the financially prudent company it is. But that said, whatever it does it needs to do geared towards a global audience. It needs to actually think about what consumers and developers outside Japan want.

I imagine Nintendo will probably still want to do something new and different to surprise consumers. Nintendo loves giving people something they didn’t know they wanted, but I don’t think Nintendo has successfully done that for developers in a very long time. The company needs to reconcile what developers want with what it wants to do and what it’s able to do.

BULLETS:

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