Market Overview

Is Nintendo Smart to Ditch Smartphones?


Contrary to popular belief, Super Mario and Angry Birds are not the same.

Last week, Nintendo made it crystal clear that it does not have any plans to develop for the Apple (NASDAQ: AAPL) iPhone or Google (NASDAQ: GOOG) Android platforms.

This news came as a shock to some. “If Nintendo was forward-looking, they'd put content on iOS and Android,” one colleague remarked. He is not alone in that line of thinking.

But that belief is flawed for a variety of reasons:

  • (1) It is based entirely on the assumption that iOS games will continue to prosper.
  • (2) It assumes that iOS games will become the dominant player in gaming.
  • (3) It assumes that, if iOS games achieve that dominance, they will maintain that dominance for many years to come.
  • (4) It assumes that all game console manufacturers will jump on board. (Thus far, Sony (NYSE: SNE) is the only manufacturer moving in this direction, but it is doing so with games that are more than 10 years old. New Sony games are still exclusive to PlayStation 3, PlayStation Portable, and the forthcoming PS Vita.)
  • (5) It assumes that, since iOS and Android development would expose Nintendo to millions of additional customers, Nintendo will automatically sell more games and make more money.
  • (6) It ignores the fact that Nintendo currently enjoys a per-game MSRP ranging from $30 to $40 for Nintendo DS/Nintendo 3DS games and $50 for Nintendo Wii games. On the iPhone, Nintendo would be expected to sell games with a much lower MSRP.
  • (7) It disregards the limitations brought on by iOS/Android development, most notably the lack of buttons and weaker hardware. While Apple is quick to brag about the processing power of the iPhone 4 and iPad 2, the resulting games still feature the same kinds of finger-swiping gameplay gimmicks that we saw three years ago, as well as virtual* on-screen buttons and D-pads, which are awful.
  • (8) It disregards one very painful reality: by developing games for any platform other than its own hardware, Nintendo would inevitably cannibalize the sales of its own game machines (people specifically buy Nintendo hardware to play Nintendo games).

*Note to Apple and Google: If iOS/Android gaming didn't need buttons, D-pads, or thumbsticks, game developers wouldn't keep trying to emulate them on the touch screen!

Nintendo hates conformity. Even now, when online gaming and online downloads have proven to be a vital part of the industry, the company refuses to launch a full-fledged app store for the Nintendo Wii or Nintendo 3DS. Instead, the company continues to stand by its inferior eShop and Wii Shop Channel services. eShop is slow, cumbersome, and inefficient. Its updates are a snore, its presentation is a bore, and its download system – where users are defined by their hardware, not by an actual account – is prohibitive to the company's growth.

Yet Nintendo, with its stick-in-the-mud behavior, has managed to prevail in the video game industry. It has produced more handheld hits than any other game company in the world, including the newcomers in the iOS realm. Angry Birds may have sold 100 million units, but it did so at $0.99 per download. Nintendo, meanwhile, celebrated 2010 by selling 4.2 million copies of Donkey Kong Country Returns, 6.15 million copies of Super Mario Galaxy 2, 6.58 million copies of NEW Super Mario Bros. Wii, and 10.21 million copies of Wii Sports Resort – all at fifty bucks a pop.

The differences between a $0.99 iOS game and a $50 Nintendo game are enormous. Consumers are fully aware of this difference. That is why they continue to buy Nintendo games and Nintendo systems. While you will hear reports that the Nintendo 3DS' poor sales are a sign of things to come for traditional game machines, the truth is that the system came to market without a single decent piece of software. Nobody wants to spend $250 on a useless device, and another $40 on games they don't want to play. That is why the Nintendo 3DS is currently failing.

Consumers will, however, spend $0.99 on absolute crap. Why? “It's only a buck,” is a common response people give when explaining their iPhone purchases. That's a hard statement to argue with; no one cares about a dollar here and a dollar there. But why would Nintendo wish to downgrade itself to a business model that is based on the whims of bored iPhone or Android users? Why shouldn't the company continue to sell millions of high-end games to consumers with very high expectations?

That would be like asking Apple to develop its software for Windows, Window Phone 7, Android, and Linux. Just as Nintendo makes money at every step in the retail space (first you buy Nintendo machines, then you buy Nintendo games, Nintendo controllers, and anything else the company can sell you), Apple profits not by selling consumers one item, but by selling us everything.

It is in Apple's best interest to ensure that when you want to access iOS, you must do so by using an iPhone, iPad, iPod Touch, or some other Apple-manufactured product. Similarly, it is in Nintendo's best interest to ensure that when we want to play the latest Mario and Zelda games, we buy a Nintendo system.

Follow me @LouisBedigian

Posted-In: Android Apple eShop Google iOS iPad iPhoneTech Best of Benzinga


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