When it comes to video games, there’s something both iconic and endearing about Nintendo. Increased competition in recent years has caused the company to no longer be at the top of the flagpole, but that doesn’t diminish their staying power & legacy. Originally founded to make playing cards in 1889, Nintendo released its first Nintendo Entertainment System (or NES) to the United States in 1985. At the time, home video game consoles were on a major decline in the US. The NES was not a rousing success right off the bat but sales began to pick up in 1986 once the NES was bundled with the blockbuster Super Mario Bros. In its heyday, the NES could be found in one of every five homes in the United States. Characters like Mario and Luigi, Yoshi, and Donkey Kong are part of our cultural lexicon. But most would say that Nintendo’s heyday has since passed. Unit sales for Nintendo branded video game systems has been on a steady decline since 2010. Increased competition from Sony and Microsoft (home of the PlayStation and Xbox, respectively) have eaten away at Nintendo’s shares.
Console innovation is at the core of market share gains
Console sales are cyclical events. It takes many years for a manufacturer to develop a console innovative enough to replace their last system. Typically, following the introduction of a new well-featured console, share for that brand will spike. While getting share is one thing, maintaining market share well into a product’s maturity becomes difficult for the major players. As such, console makers rely not only on new consoles but also proprietary games (like NES’s Super Mario Bros. or Xbox’s Halo) to drive sales well into the product’s life cycle. Nintendo’s last successful and innovative product run was the Wii – which launched in 2006.
The success of the Wii was due to its innovative control system. The Wii not only made the case for motion-sensitive controls, but it appealed beyond hardcore gamers – to the more casual crowd (case in point, my parents love Wii golf.) Many of the games released with the Wii took advantage of the motion sensing controllers to introduce games that anyone could enjoy. Games appealed to more casual gamers, certainly, but more dedicated gamers weren’t left out—suddenly the controller could be a stand in for a character’s sword as easily as it could a tennis racket.
The Wii U(h-oh)
Following the success of the Wii, the introduction of the Wii U was something of a disappointment. While the integrated tablet and controls in one was innovative, there weren’t any major use cases for the system. Despite advertising that you could play games on the control screen, rather than on the television, users were still tethered to the console, if not the television screen. Additionally, Nintendo strictly limited games from outside Nintendo’s developers. With no major blockbuster games from Nintendo and very few games from outside studios, there was little reason for anyone except hardcore Nintendo fans to invest in a Wii U.
Switching things up
Things are brightening for Nintendo with the introduction of the Switch. Per TraQline’s market share tracker of 600,000 annual surveys, in Q1 2017, Nintendo claimed 23% of the unit share for video game systems. The Switch, which can be both a dedicated console hooked up to a television or a portable gaming device, delivers on the earlier promises that the Wii U made. Additionally, the Switch supports multiplayer games even when being used as a portable gaming device. Nintendo has also relaxed its stance on 3rd party games, and already slated content from popular developers. TWICE Magazine notes that there’s been a better than expected demand for the Switch, and that the company is expecting to sell more than 20 million physical games for the console this year. Additionally, several popular franchises, from Minecraft to Pokémon announced Nintendo Switch compatible games at this year’s E3 conference.
Nintendo as the innovator
Nintendo has stayed focused on innovation and fun, rather than the hardcore gamer. Games for PlayStation and Xbox skew hyper-realistic as compared to the more cartoonish, stylized graphics that characterize Nintendo’s game catalogue. While Sony and Microsoft can play down to Nintendo’s graphics capabilities, Nintendo is unable to play up to theirs. This limits the capabilities of the system, and the audience, thus forcing a greater emphasis on innovation and a strong catalogue. When they miss on innovation (such as controls, interactivity, or other) or top games, the impact is felt on the bottom line.
On the other hand, Nintendo tends to be the real innovator in terms of gaming systems. The original NES brought video game consoles to the mainstream. The N64 was groundbreaking for its time. Even missteps, like the much-maligned Wii U, or the Virtual Boy, an even earlier flop, were still unique takes on game play. Ultimately, Nintendo appeals to consumers by playing to its strengths instead of trying to compete in areas that it tends to be weaker. As gaming preferences shift, will this storied brand will find new ways to delight, or be relegated to history? Let us know what you think—either leave us a note on LinkedIn or tweet us at @TraQline.