Dear Nintendo: Now that you’re not making money anymore, it’s time to join the mobile industry

Nintendo has just posted their first operating loss. For a company that’s been chugging along since 1889, that’s rough. But there’s still hope. The Nintendo brand and all the characters that they’ve created over the years are still loved throughout the world. That being said, times have changed, and people don’t buy $50 games for $300 consoles anymore. Instead, they buy games that usually don’t cost more than $5, and they run on smartphones that cost $600 or more, but thanks to operator subsidies that figure is more like $200. So what should Nintendo do? They should bring videogame economics to the smartphone industry. Apple and Samsung captured 95% of the profits that the mobile phone industry created during Q4 2011. How are those two companies similar and how are they different? Apple controls their software, but they depend on companies like Samsung and Qualcomm to supply their components. Samsung lets Google handle their software, but they make their own screens, processors, and memory chips. Both companies sell devices for more than it takes to manufacture them, that’s their business model.

Videogames don’t work like that. Consoles, otherwise known as gaming machines, are typically sold at a loss or are sold for as close to break even as possible. Money is made by charging publishers for developer tools and the rights to publish their titles for the specific gaming machine in question.

With that in mind, here’s a suggestion: Why doesn’t Nintendo jump into the smartphone (and/or tablet?) game, create a device that sells for between $400 to $500, but instead of making money off that single transaction, sell said phone for a loss. And when it comes to the games, or in this case “apps”, offer developers a 50/50 split instead of Apple’s famous 70/30 split. By putting the phone in more people’s handsets by swallowing a bit of a loss in hardware, money can be captured by an incredible volume of software sales.

Back in February I proposed that Sony should do the same thing, though in that article I touched more upon the hardware and how often it should be refreshed. Will either of these companies listen to me? Doubtful, but I hope that companies understand that the only way to throw Apple off their game is to hit ’em where it hurts: hardware margins.

  • Skinhat

    I think theres a few technologies that should have jumped on the Android bandwagon such as RIM and Nokia. If Nintendo did there own Android phone would be cool.

  • Ben

    I am sorry Stefan but your arguments are weak. You say no one buys $50 games any more except the 20 million who have bought call of duty, the 25+ million who have bought mario Kart Wii and countless others selling nearly as much. Every month another $50-60 game sells in the millions. People still buy expensive games and people still want to buy expensive games.

    Too many of you none gamer reports and bloggers fail to realize that those who buy games on iphones and andriod are not gamers. They are casual impulse buyers (yes they are a source of income but not a source that lasts) Take anyone of those gamers who play “cut the rope” or “angry birds” on their phone and give the a 3DS or Vita and play the same game on it. They will never play a stupid touch screen phone game again. The controls are terrible, the game-play just as bad, and in most cases the production quality pales in comparison to the true game studios.

    If Nintendo sold their games to those platforms, they would make tons of money, for a year or two, then it would all go away. Why, because those who love the games will rush out and buy the, then realize who crappy they are to play on their iphone, and never play them again. Then Nintendo would be left with what? Nothing.

    • Did I touch a nerve?

      • Poor logic, straight-line projections, and logical fallacies, do tend to rub people the wrong way.

      • bezem

        Yah, the nerve that is tired of articles popping up telling Nintendo to develop for phones and tablets.  Ben’s comment is closer to accuracy then your article.

    • Vinny

      He’s right, Stefan. There’ve been so many articles just like yours over the past months, and they’re all dooming Nintendo to forty years of darkness, and they’re all flawed for the same reasons.

    • Anonymous

      I think there’s a solid middle ground. Yes, there are still a lot of people willing to buy an expensive game but that audience is much smaller than the “casual” non-real gamer audience that’s willing to buy a game on their phone to kill time on the bus. I think Nintendo’s problem is that it believes that core gaming audience is enough for it to succeed like it did in the past. 

      On the console side of things, Nintendo is way behind when it comes to graphics and multimedia capabilities. The Xbox 360 (and to a lesser extent, the PS3) are great gaming machines but Microsoft’s box in particular is the best entertainment box you can hook up to your TV. I get Netflix, ESPN, HBO Go and more to go along with the Xbox Live madness.

      I don’t think Nintendo needs to abandon its core competency but its refusal to enter the mobile space is short sighted. That casual market is going to exist whether Mario or Zelda is on it or not and I think Nintendo is giving up a huge revenue opportunity. How quickly would a Mario game – even a port of an old Super Nintendo game – shoot up the App Store charts? Throw in in-game purchases (Tanooki suit?) and you’re looking at a nice, new revenue stream. 

      • Intravenus

        …PS3 to a lesser extent? I guess you’ve never owned one. I dont even touch my 360 anymore. It pales in comparison.

        • Anonymous

          I’m looking at one right now and after it does 1 million updates, it still can’t get me ESPN, Xfinity and some fo the other multimedia stuff that the Xbox can. That’s what I was talking about. You can make the argument that the Blu-ray makes up for it but I’d prefer streaming

    • Anonymous

      And touchscreen/mobile games don’t have to be bad. I tend to find that most of the ones with bad controls are the games that are ported from consoles and just given on-screen controls. Designing a game from the ground up with these controls can lead to some fun stuff and Nintendo is probably best positioned to know how to make great games with different control schemes. 

  • Anonymous

    The time Nintendo moves to phones, it’s already doomed. It is like, I am an aerospace engineering wanting to have a job as a history professor.

  • Gcndoug

    You’re an idiot.  One year of losses; with 100 Billion in cash reserves.  Yeah… they should just call it quits.

    • Guest

      10 Billion*

  • Alen more

    Nintendo please buy SEGA, she has lot of experience and same ting you loss , and stop making consoles, do games for PS3 and XBOX and PC and PS VITA, Even you listening or not i am not buying Wii U! 

  • Anonymous

    When I buy a game I want it to be universal.  I want to be able to play it on my computer, on my console, and mobile.  Someone, probably Apple, will come out with this feature. 

    • sellin355

      Apple isn’t a gaming company so they probably won’t.  Check out Onlive.  They’ve had that going for a while.

  • Nintendo has never operated from a position of weakness by making knee-jerk reactions to short-term difficulties.

    If Nintendo did that they probably would have closed up shop in 2003 with the GameCube supposedly dying and the PSP supposedly poised to destroy Nintendo’s viability in the portable space.

    Heck, if Nintendo operated like that, there was literally no sensible reason for them to even attempt to launch the Famicom in the US, where the game console market was so bad they had to disguise the NES as a “toy robot” to get retailers to stock it.

    A Super Ninten-Phone might sound like a neat proposition on paper, but it’s probably not going to be anything along the lines of a magic solution that will “modernize” Nintendo and would probably suck more of Nintendo’s money to put out and do “properly” than I imagine them making back.

  • Anonymous

    First operating loss in 123 years…..and now on the brink of disaster they should make a ‘smartphone’? I got a good chuckle out of that.

  • Klaptrap

    Nintendo, It’s time to bring virtual reality back!! you need to take the Virtual Boy idea and launch it with today´s technology. Imagine motion controls, virtual reality glasses, endless oportunities. Horror games, Shooters, Adventure games, It’s the only way I’m telling you, it’s the only way. Team up with Vuzix and see what you can do. Playstation is heading that way with their own technology.

  • what this guy wrote, ”
    Dear Nintendo: Now that you’re not making money anymore, it’s time to join the mobile industry”what  i read, ” I’m a retard and am just going to write herp derp a bunch! i win potato!”

  • Shirondale Kelley

    I liked reading this article and would love to have 3G enabled DSi/Nintendo Phone if they would actually be competitive in a way that differentiates them greatly. That and to have 8 hours or greater battery life at max usage. There is one line in there that I see in articles across the web that bugs me.

    “Consoles, otherwise known as gaming machines, are typically sold at a loss or are sold for as close to break even as possible.”

    That’s really competitors to consoles. Traditional Arcade/Console companies usually sold their products at cost or for a profit. The best examples are Atari, Nintendo and Sega. The hardware loss strategy was introduced when competitors to traditional consoles appeared with their hybrid pc/multimedia consoles. I.E. Sony and Microsoft. They sell systems that have more in common with the original legacy free pc’s than they do with actual consoles.

    That’s why Nintendo’s Wii could sell like crazy without having much of an effect on the battle between the 360 and PS3. Competitor’s to consoles are typically sold at a loss in order to compete with consoles. Ever notice that the iPhone didn’t have an affect on DS sales until Nintendo started to change their strategy? It’s not that iOS and Android have become major competitor’s to the portable consoles (PSP, DS), it’s that those consoles have decided to chase after the market of non-console gaming and giving us hybrid devices that fail to completely satisfy both markets in the process.

    It’s the reason that the 3DS’s price had to be cut early on in its’ life – it ceased to offer an amount of value that either market considered to be worth the price of entry. Those sales are up because they finally met that level, which isn’t a completely good thing. That’s why they had to post their first annual loss ever. Greed without focus. They over-valued 3D and tossed to the side the values of handheld gaming that they helped to craft and understand over the years. I would like a Nintendo phone but would prefer to come from a company of the mindset that created the DS/DS Lite/DSi.

  • Wrong, Nintendo’s properties and licenses are very valuable. If Mario games are on the iPhone, what incentive will there be to purchase a 3ds?
    Remember what happened to Sega, they gave up on consoles and became a minor player, subjugated to making deals with Nintendo that favor Nintendo. The same would happen to Nintendo is it’s games were on Android and IPhone.

  • RT

    Haven’t you guys heard? There’s a rumor that Wii U will be able to run Android Apps. Join the mobile industry? You mean the mobile industry that Nintendo created in a sense with Game & Watch, then the Gameboy?
    With Wii U and Android Apps, they’re bringing the mobile industry to their playing field.

  • You

    Nintendo maybe losing the console war and the portable war against smartphones but the 3DS is still outselling the Sony Vita by a large margin. Better to be No. 1 somewhere rather than nowhere at all.

  • You

    Nintendo maybe losing the console war and the portable war against smartphones but the 3DS is still outselling the Sony Vita by a large margin. Better to be No. 1 somewhere rather than nowhere at all.

  • Bang on re Nintendo. Although, as a point of interest, Nintendo are the only games manufacturers to never sell their consoles at a loss. Ever.

    You’re right in saying that selling the machines at a loss is an industry standard, but Ninty have always bucked that trend which actually, makes this turn of events even sadder.  

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