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Nintendo woes: Iwata says no to ‘Mario on mobile’, $1.2 billion cleaved from market value as shares plunge

Nintendo has fallen deeper behind in the industry, as the recent announcement of a surprise $336 million profit cut prompts company shares to plunge.

Mario

Nintendo was once a titan within the gaming industry, all-but saving the medium from fizzling out with the introduction of the NES. Now, decades later, the once-mighty pop culture icon finds itself overwhelmed in a turbulent sea of competitors–all of which threaten to sink Nintendo’s faltering ship altogether.

The signs of failure have become readily apparent as sales of the company’s flagship console, the Wii U, curtailed and flopped on the market for three consecutive years.

Last week, Nintendo’s acting president, Satoru Iwata, revealed another grim setback for the company: in light of poor sales of the Wii U, they were forced to cut estimated hardware sales by over 70%, forgoing $336 million in projected profit.

The forecast prompted a staggering blow to Nintendo’s finances, as their shares fell by 6.2 percent to 13,745 yen, cleaving off an estimated $1.2 billion from the company’s market value. This decline is the sharpest nosedive since early September, and it may not be the last.

Nintendo's president, Satoru Iwata, holding the ailing Wii U's tablet-esque GamePad
Nintendo’s president, Satoru Iwata, holding the ailing Wii U’s tablet-esque GamePad.

During the shareholders meeting, Iwata admitted that he had misjudged the threat posed by mobile gaming. Nintendo needs “a change” and to “propose something that surprises our customers”, the president reflected. Iwata also was quoting saying that the company is considering “a new business structure”.

“The way people use their time, their lifestyles [and] who they are have changed,” Nintendo’s Satoru Iwata said during the shareholders meeting. “If we stay in one place, we will become outdated.”

Nintendo’s downward spiral brings to mind the unfortunate demise of Sega with its ill-fated Dreamcast console. Sega was the first to enter the sixth gen of consoles with the Dreamcast (like Nintendo with the Wii U), and was quickly overshadowed by Sony’s upcoming PlayStation 2 console (as the Wii U has been overrun by the PS4 and Xbox One).

Nintendo Chars 3D
Nintendo has a galaxy of iconic characters that are prime for multi-platform games.

In order to survive the blow from the Dreamcast’s commercial failure, Sega had to adapt; and that meant bringing a plethora of its console-exclusive franchises into other systems. Amid toil and strife with diminishing Wii U hardware sales, will Nintendo be forced to adapt in this way–will we see Mario on iPhones or Donkey Kong on Android-powered devices?

Could this be what Iwata meant when he mentioned a new “business structure”?

Gamers and analysts alike speculate that Nintendo could potentially solve its financial woes by bringing a slew of its strict platform-exclusive franchises to other mediums including smartphones.

Michael Pachter, an analyst from Wedbush Securities, delivers his take on Nintendo’s turbulent trends:

“Iwata has to take responsibility for the Wii U missing the mark,” Pachter began.

“He will be under pressure to make dramatic changes. If he can do so while remaining in charge, more power to him, but they need to make some changes.”

iwata
Iwata agrees that Nintendo has to change, and that new business structures need to be considered.

But Nintendo President Satoru Iwata doesn’t think that is a viable solution. It’s not that easy. Instead, Iwata says that the mobile market should be tapped to advertise Nintendo products and pique the interest of consumers, rather than deliver interactive content:

“The spread of smart devices does not spell the end of game consoles. It’s not that simple,” Iwata declared during a recent conference. “The key is to figure out a way to use smartphones to make people aware of Nintendo’s games, and encourage them to try out the console version of the games.

“It doesn’t mean that we should put Mario on smartphones.”

Iwata’s words reflect Nintendo’s long-running strategies in providing unique content-driven experiences with innovative hardware–the Wii, 3DS handheld and Wii U exemplify this quite well. Porting over a Mario game to a touch-screen-only smartphone may jeopardize the company’s overall brand, and that’s something Iwata doesn’t want to risk.

Mario Wii U
Future partnerships such as the one between Nintendo and SouthWest Airlines may be beneficial to the company’s current financial woes.

Nintendo may be down, but it’s not out; reports suggest that Nintendo is investing heavily in research and development, which may indicate that another console or system is on the rise.

With the advent of micro-consoles, Steam Machines, mobile gaming as well as innovative cloud-gaming solutions with Sony’s PlayStation Now service, Nintendo will have to be quite flexible if it wants to keep up with the current shift in the gaming sphere.

The silver lining in the Wii U’s demise is that Nintendo can learn from its mistakes in terms of hardware, cost-effective sales and production, and use that data in order to fashion new business models as well as a new hardware ecosystem–one that embraces smartphones and matches the flexibility of rival hardware.

It will be interesting to see what Nintendo has up its sleeve, and how Iwata plans to turn around the company’s current dire stance in the market. With Nintendo, anything is possible–VR tech perhaps, or even a Virtual Console service akin to PS Now?–but hopefully they can ride out the storm in time to launch something new.

Via Wall Street Journal, Bloomberg

Derek Strickland
http://www.vrzone.com
Derek is an avid fan of gaming and everything geeky, and is compelled to make his mark in the field of games journalism. When he's not gaming on a console (everything from SNES to X360) you can find him reading about ancient civilizations or enjoying a fantasy epic or two.

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