Nintendo: Once Again Back from the Brink In the Fall of 2012, Nintendo released Wii U. This gaming device was designed to replace the very popular...

Nintendo: Once Again Back from the Brink

In the Fall of 2012, Nintendo released Wii U. This gaming device was designed to replace the very

popular Wii which was then 6 years old. But the release did not meet Nintendo's expectation for sales

and profits. A gaming device is useless without exciting and enthralling games for it. It seems that

although the device was great, the games were not. Nintendo competes in an industry where the

games drive the devices. The misstep in 2012 forced Nintendo to re-evaluate its marketing strategies.

Enter its latest device, Switch, released in 2017. By April 2018, Nintendo was back on top of the global

video game industry with sales of 15 million Switch devices and 63 million games. How did they get

there?

The success of Switch surprised many analysts who believed that the future of video games was on

smartphones not on consoles. Gamers though found the Switch's versatility and design very attractive.

The device is sleek, portable, and easy to use. It retails for $299.99. However, the successful launch of

Switch was also the result of a carefully crafted marketing strategy that began a few years prior. The

weak sales of Wii U along with the demise of companies like Sega and Blackberry, caused Nintendo to

consider whether it should stop designing consoles and focus on licensing its games on rival systems,

specifically smartphones. The company culture just couldn't imagine abandoning the core craft that had

contributed to its historical success. However, pressure from investors caused it to continue to explore

the mobile (smartphone) platform. Nintendo partnered with Niantic Inc and this resulted in several

apps - Mario and the extremely popular Pokémon Go. Nintendo's game creators are artisans. New

hires learn the craft from senior personnel, essentially working as apprentices. So, in 2015, Nintendo

was back on the radar with its new mobile games. It then introduced a low-price gaming system, NES

Classic Edition, without any additional games. NES Classic Edition was launched with 30 of Nintendo's

most popular games and sought to rekindle some of the passion of the 80s. By the time Switch

launched, millions of people had re-connected with their favorite childhood Nintendo characters and

enjoyed the new versions on their smartphones. These included The Legend of Zelda: Breath of the Wild

(named game of the year by the Academy of Interactive Arts & Sciences), Mario Kart, Super Mario, and

Pokémon Go.

Although the picture for Nintendo is rosy, it faces very stiff competition. Microsoft remains at the top of

the online gaming world with its Xbox One and Xbox360 Games with Gold. Tencent, a fast growing

Chinese video gaming company has its MOBA League of Legends and has recently signed a deal with

Danish toymaker, Lego, to develop online games. So, Nintendo is not standing still. It is already

evaluating options for future growth. Some of the launches already planned include more mobile games

and an online subscription service for Switch that allows gamers to compete against one another*.

Other products being tested include (a) a toy line which consists of cardboard assembly kits that allow

gamers to transform the Switch detachable controller into motion-sensitive objects like mini pianos and

(b) an expansion of its network service by hosting a tournament game for Mario Tennis Aces. Some of

the trends impacting the gaming industry include the increasing popularity of eSports in which players

compete in organized gaming events and the potential for breakthroughs in virtual reality that drive it

mainstream.

*Bloomberg's Business reports in its October 1, 2018 issue that Nintendo is having problems with its

online subscription service. According to this article "Users have had 18 months to try the service for

free, and they haven't stopped complaining, even at that price. Built on the cheap, Switch Online lacks

the must-have features for today's multiplayer titles."

Sources: "The Legend of Nintendo" by Felix Gillette, Bloomberg Businessweek, June 25, 2018, p. 54-59.

"Gaming trends to watch out for in 2018" by John Stevens, The Next Web,

https://thenextweb.com/contributors/2017/11/30/gaming-trends-watch-2018/ accessed August 16,

2018

"Top 12 online gaming companies powering this global industry" by Technavio, June 30, 2016,

https://www.technavio.com/blog/top-12-online-gaming-companies , accessed August 16, 2018

1. Using Exhibit 3-1 as your guide, analyze Nintendo's internal and external market environment.

2. Evaluate the four opportunities described in the last paragraph of the case in terms of their

potential for profitability and fit with Nintendo's core competencies.