Why Nintendo Seems Determined to Fail

Its management is sending mixed messages to the industry. And following a second holiday season of abysmal sales, a generation of young gamers is aging out of the market with no emotional attachment to Mario.
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Nintendo's empire is beset by obstacles: from the opposition, from within, and from the passage of time itself. Its underpowered, overpriced devices are shoving away both the casual and hardcore players. Its management is sending mixed messages to the industry. And following a second holiday season of abysmal sales, a generation of young gamers is aging out of the market with no emotional attachment to Mario.

Nintendo's product strategy has painted the company into a corner. Both of its flagship platforms made a bet that consumers would find value in new gimmicks slapped on old devices. The Wii U boasts a controller that promised to bring to the living room the same kind of second-screen, touch-enabled experiences that made the original Nintendo DS transformative. Carrying that legacy forward, the 3DS rode the bandwagon that seized the industry early this decade: the idea that every screen in the house would eventually become a 3D screen.

But in trying to please everyone, Nintendo has succeeded in pleasing no one. The casual market doesn't understand why they should upgrade from their Wii, or even that it's a new product altogether. The hardcore market doesn't want to be stuck playing old games on the newest console.

While the Wii U's hardware underwhelms, what Nintendo may have been able to shave off the cost of the console itself is sabotaged by bundling a weak tablet with every purchase. Microsoft is taking the second-screen integration deeper with its SmartGlass app that works with the phone or tablet you already own, and Sony's PlayStation Vita offers an optional companion experience with strong features like Remote Play, without sandbagging the price of the primary console.

Furthermore, the average consumer's bar for quality is simply higher than it used to be. More than five years after the iPhone showed the mass market how multitouch would change how we interact with handheld devices, the Wii U and 3DS are still using kludgy, imprecise, resistive touch screens from the Palm era.

President Satoru Iwata seems determined to run this race with blinders on. Riding high off the Wii's mainstream triumph over the Xbox 360 and PlayStation 3, he regarded smartphones and tablets as 'the enemy of the future' as recently as 2010. But by 2013, he'd had a change of heart. "If we think 20 years down the line," said Iwata in an interview with The Wall Street Journal, "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."

If the sales figures can't get through to Iwata, his paycheck might. Earlier this month, he told Bloomberg that Nintendo is "studying how smart devices can be used to grow the game-player business," but that "it's not as simple as enabling Mario to move on a smartphone." This, days before his salary was cut in half.

Nintendo's first-party titles, led by iconic characters, made them the household name in gaming for more than 20 years. Even if investors are stuck decoding Iwata's careful dodges regarding future plans, gamers don't really care, and that should strike greater fear than any sales metric into The House that Mario Built.

Nintendo's core market has always been the young, and the young-at-heart. But their die-hard fans aren't 12-years-old anymore -- they're closer to 24. When the latest pair of Pokémon titles goes on sale, they're snatched up by kids in college, not middle school. Today's youngest gamers identify more with slicing peaches in Fruit Ninja than with rescuing Peach from Bowser. The nostalgia invoked by its intellectual property is more valuable to the company than any piece of hardware or software, and as Nintendo fails to submit a relevant product in the next generation of consoles, so too does it fail to leave a lasting impression on the next generation of gamers.

In the '90s, Nintendo won the hearts and minds of children worldwide with a stable of unforgettable characters. The children who once made up that core market are now starting to have children of their own. If Iwata wants Nintendo to survive another 20 years -- or to even keep his job -- he needs to reach today's young gamers where they play: on mom's phone and dad's tablet.

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