29 July 2011

Nintendo announces major losses

The news for Nintendo is bleak. Sales are down 50% year-to-year. They posted a first quarter loss of $327 million. They’ve dropped their profit forecast by 82%. And they’ve slashed the price of the 3DS 32% in dollars (even more in yen).

As a gamer with a DSi XL and a Wii, none of this particularly surprises me. Nintendo have made a series of disastrous mis-steps.

Problem #1 is that they gave up on serious gamers. In fact, it seems like they’ve given up on the Wii entirely. Looking at Metacritic’s game releases by score, broken down by year, is instructive.

In 2007, the Wii’s first full year, there were 19 “green zone” games (those with aggregate scores of 75 and above). The list included some killer games including Metroid Prime 3, Super Mario Galaxy and Super Paper Mario. I had a lot of Wii-related fun.

In 2008, 42 “green zone” games. In 2009, 64. But then in 2010, we were back down to 44; and at least half a dozen of those were WiiWare mini-games. Take out the sports game annual re-releases and suddenly the catalog was looking pretty thin; the Wii had already peaked. Now we’re in 2011, and there have been just 6 “green zone” games in the first half of the year. And none of them have been by Nintendo. (Nintendo in the USA has so little interest in the Wii that they haven’t even bothered to ship the much-loved Pikmin 2, even though it was localized into English for the UK. Forget about unlocalized games, they’ll never ship.)

Problem #2 is that the few decent games being released on the Wii are being buried under mountains of shovelware. Try walking into Gamestop and finding a copy of “de Blob 2”, for example.

Problem #3 is the 3DS. It’s a gimmick. I tried it, and I was unimpressed. Poor battery life, the 3D quickly fails if you play a fast-paced game and hence don’t keep the console in exactly the right position relative to your head, and it isn’t all that impressive when it works. The 3DS was also way too expensive, and had no good games that weren’t ports of games everyone interested in Nintendo has played to death before. (Yes, I liked Ocarina of Time. No, I wasn’t interested in paying $300 to play it again.)

Problem #4 is competition from mobile phones. The DS had made some inroads into the casual gaming space; even my mother has one. But that space is rapidly being taken over by smartphones.

Now, I happen to think that Nintendo could have competed in this area. What killed them was a combination of their utter inability to make the DSiware experience tolerable, and their inability to engage with independent developers and make it easy to develop for Nintendo platforms.

I’ve bought some DSiware games. Since most DSi owners probably haven’t, let me describe the experience.

First you have to find out which games are good. Forget about using DSiware’s own browser to do so, that just gives you a scrolling list of games in no useful order, with minimal information about them. The official web-based catalog is pretty much the same thing with screenshots; no reviews, no user ratings, so you’re on your own.

So you head off to Metacritic or read reviews. Suppose that you decide, as I did, that you want to buy the Jason Rohrer game compilation. Well, now you discover that it’s 200 points. So you go to buy 200 points of credit.

And then you find out that you can’t. Nintendo won’t simply sell you the game you want. You have to buy at least 1000 points of credit, which will cost you $10. Games cost anything from 200 to 1200 points, but 200 and 500 seem typical. So it was that I found myself sitting down with a notepad, making a list of games that I was interested and how many points they were going to cost, and then shuffling my selection until I had 1000 points’ worth.

Then you need to enter your credit card details on the DSi. No buying from the web using a computer with a keyboard, no keeping the credit card on file. Then your account gets credited with the points, and you can actually buy the games—which of course means that you have to use the horrible DSiware scrolling list interface to find them.

Overall, the process is painful when compared to Android or iOS. So much so that if you’re a casual gamer, you’d be mad to use DSiware unless there was a platform exclusive that you absolutely had to play.

Problem #5 is online gaming. I tried it on both the Wii and the DSi. It was a horrible experience on both. “Friend codes” are a usability disaster, there’s no web integration, and most games lack the ability to just go find someone to play online with. And I’m comparing it to PSN and Steam; not to Xbox Live, which I’m told is even slicker than the networks I’m used to. So Nintendo completely missed the Internet and online gaming trend.

So in summary: Wii hardware sales are dead, there are no good Wii games selling in big numbers, the DS has been announced to be obsolete, there’s competition from smartphones, and nobody is buying the 3DS. The only thing keeping Nintendo afloat is DS software sales, and since big N themselves have lost interest in the DS and are trying to move everyone to the 3DS, that won’t last for much longer either. I’m betting Nintendo’s executives are pretty nervous right now.

What’s on the horizon? Well, the one big Wii release planned for this year is Legend of Zelda: Skyward Sword. Assuming it ships, and assuming it sells as well as Twilight Princess, 10 million copies at 45% profit on a $50 game won’t even be as much revenue as Nintendo bled in losses in Q1. And those are some pretty damn optimistic assumptions.

Will the 3DS suddenly sell now that it’s $170? Hard to say, but my gut reaction is no, based on the fact that the design issues remain, and there’s still no must-have software. If sales do ramp up, it probably won’t be until Christmas, and that’s if Nintendo can deliver a dozen or so really good games by then—and I don’t mean shipping Mario Kart and Star Fox again.

Finally, there’s the Wii U. That won’t ship until 2012, and even when it does, Nintendo have lost the goodwill of serious gamers at this point. I predict that people will take a wait-and-see attitude like they have with the 3DS.

With all that in mind, I’m actually surprised that Nintendo are predicting any profits at all this year. I’m no professional pundit, but I expect them to make an overall loss this year.

© mathew 2017