It has been a bad weekend for Nintendo. On Friday the company announced that it expects to make a loss of some $335m for the financial year ending 31 March 2014. It also altered its sales forecast for its Wii U games console. Originally Nintendo estimated it would sell 9 million Wii U units but it has now cut its forecast by nearly 70% to 2.8 million units. The company also reduced the sales forecast for its 3DS console from 18 million to 13.5 million units.
As a result of this bad news industry analysts have renewed calls for Nintendo to release its games on smartphones and to abandon the production of consoles. Nintendo is the creator of some of the most iconic games and characters including Super Mario and Zelda that would likely be very popular on mobile platforms. The good news is that it looks like Nintendo’s President Satoru Iwata is considering the move to mobile.
“Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business,” Iwata said during a press conference on Friday. However he did add that “it’s not as simple as enabling Mario to move on a smartphone.”
In the past Nintendo has only released games with its key characters on Nintendo hardware. Back in June Iwata told the Wall Street Journal that the company’s decision to not release Nintendo games on smartphones could be the reason why the company will survive over the next 20 years. In the past this trick worked well and helped boost demand for the original Wii, which sold more than 100 million units. However the launch of the Wii U was marred by delayed game releases from Nintendo itself.
If we think 20 years down the line, we may look back at the decision not to supply Nintendo games to smartphones and think that is the reason why the company is still here.
The advent of powerful smartphones and tablets capable of sophisticated 2D and 3D gaming has changed the gaming landscape. Since the original 2006 release of the first Wii the consumer electronics market has seen some radical changes with the iPhone launch in 2007. By 2011 all the major consumer electronics companies including Samsung, LG and Sony released popular smartphones and tablets. Like the declining PC market, the latest results from Nintendo show that some business models from before 2010 really don’t apply today.
Michael Pachter, an analyst with Wedbush Securities in Los Angeles, ran some numbers by Bloomberg and he calculated that Nintendo could release 10 games a year at $5 to $10 a piece and generate somewhere between $2.5 billion to $5 billion a year without the expense of making consoles. Nintendo has a library of around 1,500 titles and it would likely sell millions of copies of its most popular games.
Nintendo wouldn’t be the first console maker to exit the hardware market, Sega did the same in 2001 and today it is a very profitable games developer with its releases available on the Playstation, the Xbox, the PC and on mobile devices.
As Nintendo is considering the impact of smartphones on its business model, some analysts are already predicting that Mario is coming to mobile.
What do you think?