Iwata and Nintendo: How Did It Come To This?

4 min

Satoru Iwata has a long history of success at Nintendo.  He oversaw a hardware run that included Game Boy Advance SP, the Nintendo DS, the Nintendo DS Lite, the Wii, the DSi, the DSi XL and the 3DS.  The time spanning those consoles has not always been bright and shiny, but it has been generally successful for Nintendo, it has also represented very little change.  The 3DS is very much akin to the DS, risking very little in its design and the games that have been released all follow along the same franchise trajectory that has been the key to Nintendo’s recent success–and Iwata’s.

When Iwata took the reigns of Nintendo in 2002, the company was coming off a handful of beatings in the the latest console races.  The Nintendo 64 had been battered and bruised, being significantly outsold by the Sony PlayStation and the GameCube had joined the original Xbox in being grotesquely outpaced by the PlayStation 2.  Nintendo was looking for a new model, one that worked for them and Iwata seemed to have the Midas touch.  While Nintendo had long tried to fight against it’s “baby-console” moniker it somehow got during the GameCube era, Iwata embraced it.  Iwata saw how video games had long been dominated by young men and attempted to build Nintendo into a company that could appeal to families as much as it appealed to the same markets as Sony and Microsoft.

The idea was a success and for years Iwata and Nintendo rode the strategy to solid profit margins by offering consumers they could understand and trust.  For years Nintendo has not been the sexiest piece of hardware on the market, but it has always made itself easy to set up and run.  Following this notion, Nintendo’s systems haven’t stressed online functionality, instead focusing on the core on console play, basing the majority of its multiplayer games around getting friends or family into the same living room.    The marquis franchises have relied on familiarity, the promise that your purchase will ensure your children have the same gaming experience that you had.  These games played on the fact that a parent could look at Zelda, Animal Crossing, Mario, Metroid, or Donkey Kong and instantly know what their children wouldn’t be playing anything too violent.

The idea worked wonders, until it ran out of gas.  It was not a question of “if” just a matter of “when”, like all good things Nintendo’s run had to come to an end.  It was not the lack of enthusiasm people had for the umteenth million iteration of Mario or Zelda that surprised people, it was the way that Nintendo approached it with blinders on, forging ahead as if nothing was wrong.  The 3DS should have been the first indication that there were issues.  Riffing on the the DS’ success the handheld failed to pick up true sales until Nintendo gave into the waiting game with a decent price cut.  Clearly Nintendo was starting to create fatigue of it’s own products by failing to deliver any sort of new experiences.  Even the raging success of the Wii started to cool down as third-party developers began to skip over it’s wonky controls and pedestrian tech.

The WiiU has been a shocking wake up call, for both Iwata and Nintendo.  The system that Nintendo viewed as the next must-have for every family’s living room was a massive failure for multiple reasons.  One of these reasons being that Nintendo’s long time image of “a thing for the whole family” is derailed when you create a system that only allows one person to use the center of the experience.  It’s not a big stretch to imagine parents seeing fights break out as their children argue over the only gamepad while everyone else gets the lesser-controllers.  But the real issue with the WiiU is in its name.  Wii-U.  It’s not that the name is all that confusing, it is that it is slavishly named after former hardware, still conjuring images of dated graphics and fad-driven mechanics.  Nintendo has clung to its recent successes so desperately that they have failed to see any sort of future.

Suddenly Nintendo is a relic, a company that has entrenched themselves so deep in the past that they cannot adapt to an ever-changing environment.  Video games have always been a place that, while often paying homage to its past successes, has existed on the promise of what comes next being better than what came before it.  Digital sales, online multiplayer, and social interaction mean more in video games than they ever have before, things that were experimented with and achieved while Nintendo was busy focusing on the using the Wii remote to play Mario Kart.

It feels like Nintendo is their own villain in an apocalyptic movie, the one who finally looks out across the landscape, sees the climatic monster terrorizing Manhattan–it’s always Manhattan, isn’t it?–and says, “My God, what have I done?”  Nintendo recently cut their sales expectations for the 2013 fiscal year, most importantly adjusting the forecast of WiiU sales from 9 million to 2.9 million.  Due to this acknowledgement of the console’s failings, the company is now predicting a loss of 35 billion yen. It’s yen so it’s not as bad as it sounds, it’s still bad though.  Calling the lack of WiiU sales a “surprise” is a bit of a joke, the only one’s who might be surprised at this point is Nintendo.

So what is Nintendo’s plan for escaping this little hole they’ve dug for themselves?  Iwata has tried to help everyone keep things in perspective, assuring the public that there are no current plans to dump Mario on smart phones, or end Nintendo’s work in the console space.  What is troubling, is that Nintendo seems to think that their lack of profits have something to do with their competition in the mobile space.

Speaking at a press conference in Osaka, Japan, Iwata said “We are thinking about a new business structure.  Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. It’s not as simple as enabling Mario to move on a smartphone.”

Iwata went on to stress that they are not looking at porting Nintendo classics to your favorite iOS or Android device, but mostly seem to be thinking of ways to grab consumers in the mobile space and direct them to Nintendo’s consoles.  The problem is that the most successful aspect of Nintendo’s fiscal year has been the 3DS.  While the handheld market may not be what it once was, the 3DS continues to be the go-to handheld.  What this mobile-strategy talk does not address is the paltry market value of the WiiU.  The WiiU is not yet a sinking ship, but their are plenty of holes in the hull. Nintendo needs a new strategy for this product and they need it fast.

Let’s be clear, Nintendo isn’t going anywhere.  The company has operated in the profit margins long enough that they lack any debt and has about $8 billion tucked away in a war chest for leaner times.  It is not Nintendo that finds themselves on the chopping block as much as it is Iwata and his long-term strategy of “stay the course”.  It is insane to comprehend how a man who has seen this company through so much success could find himself on the raggedy edge, having multiple analysts calling for his head.

Lessons in humility are important.  Sony went through one of these lessons with the release of the PlayStation 3 and rebounded all the stronger.  It will be interesting to see if and how Nintendo could do the same.

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