What If… Nintendo Leaves the Console Market
If market trends turn against a loyal fan base who will be left standing?
by David Clayman

December 1, 2005 - If there's one thing to be learned from working in an office populated by longtime video game fanatics, it's that Nintendo is one of the few companies that has forged a lasting personal connection with its consumers. It isn't often that a brand is established so completely in the market. At one time, playing “Nintendo” could be used by the masses as a reference to using any type of digital entertainment. There were other offerings, but Nintendo was the gold standard and everyone knew what it meant.

More recently, the number one slot has been occupied by Sony followed distantly by Microsoft. The face of the industry has changed dramatically. Many of the speeches at the past two U.S. Games Developer Conferences predicted that the cost of remaining a major player in the video game industry would rise exponentially. This forces the largest companies to absorb smaller developers and effectively ends the days of independent game designers.

Not to suggest that Nintendo is small potatoes on the playing field, but have we reached a point where not even third place is enough to maintain a hardware presence on the global market? Nintendo has built an empire on solid games that include loveable characters, clever mechanics, and original design. However, these factors are only part of what makes software marketable. The masses want high definition, the prettiest graphics, and a console that does infinitely more than play games.

We already know for sure that the Revolution will not support HD or measure up to the competition in sheer processing power. Instead it offers an original experience through the controller and library of classic Nintendo software. My question is that if Nintendo is essentially focusing on great software and a unique peripheral as a selling point, then is it necessary for them to remain in the console market? The company profits the most from handheld sales and opening their games to a wider market would result in a larger audience.

Handhelds and Cell Phones
Nintendo's shifting focus was displayed during Satoru Iwata keynote speech at TGS 2005. I had a unique experience viewing the speech due to the time constraints of the show. I was specifically at the press conference to cover Robbie Bach's comments and the impending launch of Xbox 360, so I was only able to listen to the first half of Iwata's presentation before running out to file a story and take a meeting with one of Microsoft's newly announced partners.

The first segment of the speech was a detailed analysis of the recent sales of Nintendogs and Brain Builder. Some would argue that this was merely filler before the earth-shattering revolution controller was unveiled, but some telling information was hidden amongst the graphs and pictures of puppies. Iwata stated that the Game Boy Micro was released in part to grab a chunk of the gigantic cell phone market. On the subways in Japan a large number of passengers tinker with their cell phones, a gigantic area of the “handheld” market that Nintendo wants a piece of.

The sales figures for Nintendogs were also telling in the fact that the company proved it could charm a large chunk of gamers with original software ideas. Meanwhile the PSP still has a beautiful wide screen but hardly anything worth playing on it. For now it looks like the company will maintain a stranglehold on a three-pronged handheld market by paying attention to cell phone popularity, high-end portable gaming (DS vs. PSP), and the industry standard (GBA). In my opinion this is far more impressive than a new take on a control pad, but certainly not in the setting of a trade show press conference.

So of course, the most reported news from that day was the revelation of the Revolution controller. Major news publications went so far as to say that Nintendo stole the show. The announcement was exciting but it was difficult to rally behind something still in a conceptual stage when confronted with Microsoft's large number of playable titles. Later that same day at a meeting with Robbie Bach, he mentioned that in terms of competition, Microsoft's only real rival is Sony. He stated that Nintendo has carved out a niche in the home console market and seems to be comfortable in this capacity. All of these factors combined have convinced me that the Revolution will certainly be popular but not the mass market hook that Nintendo fans are hoping for.

The Uncertain Future
In terms of console sales the Japanese market is saturated. This is true of video game hardware in general, not just Nintendo's offerings. This forces companies to attempt to break into global markets, which requires more capital. To accomplish this we've seen a number of mergers including Sega and Sammy, SquareEnix, and even Nintendo working more closely with Bandai. The big players in the video game industry are only going to get bigger.

Since the point of these articles is to imagine drastic changes to the gaming landscape, let's take a look at an extreme scenario. If Nintendo's hardware falls too far behind their competitors in terms of a user base it might force the company to take a look at what really keeps them competitive. In short, Nintendo has the capability to become one of the most successful producers of cross-platform software in the world. Why not let the larger corporations handle the costly task of producing hardware and then focus completely on bringing the world classic Nintendo titles?

Of course this means losing a certain amount of control over their content, something that is an especially sensitive area to many of our readers. This discussion comes down to whether the company wants to make more money sharing profits with a larger user base or stick with their controlled but smaller loyal user base.