Talking Point: Nintendo's Resilience Against Wii U Criticism Emphasizes Its Longevity

As the critics attack, Satoru Iwata simply looks ahead

It's been, overall, a tough couple of weeks for the Wii U's image in the online land of gaming enthusiasts. The focused attention of many outlets is, unsurprisingly and quite correctly, on the upcoming launches of the PS4 and the Xbox One, with Super Mario 3D World just about grabbing some coverage as the most significant upcoming release on Nintendo's system. That's all normal, though there have been a number of particularly negative reports in recent days that some may have seen around the web, so we think a relatively brief counterpoint and call for sanity is in order.

We're very aware, in the Nintendo Life team, of some views in the community — for the editorial team does read comments and forum posts — that state we often report "negatively" on the Wii U. Anyone is welcome to that opinion and can share it — constructively, in an ideal world — and we'll reserve the right to disagree. We're all enthusiasts for Nintendo, which naturally leads to accusations of excessive bias — there's no way to satisfy every viewpoint, as we're sure you appreciate. We devote so much of our lives to writing about Nintendo because we're passionate about its systems and games, but rather than slip on rose-tinted spectacles and pretend everything is 100% perfect, we'll cover legitimate and reasonable news that's critical of the company, and we'll certainly write editorials to call-out areas where the big N could do better. It's not to bash Nintendo but actually to try and, in our own small way, contribute; sometimes honest and critical opinion is more valuable to a business than simply saying "worry not, everything is hunky dory".

We are picky in terms of what we report, too, and have recently declined to post some articles that have circulated widely elsewhere. One in particular suggested that Nintendo may be forced to discontinue the Wii U in 2014 — a bold claim to put it lightly — while well-known industry website included the Wii U in a video list of the five "worst Holiday tech gifts", delivered with a suggestion that people only want one of two consoles this year, and Nintendo's is not one of them. It's becoming common fare for Nintendo to be covered in such a manner, but that doesn't mean a logical response can't point out flaws when these reports surface.

A welcome counterpoint has recently been published by Games (via its sister-site, which makes some valid points to highlight just why the "Nintendo is doomed" rhetoric is perhaps rather narrow and short-sighted. Some key games industry facts are cited in that article, summarised below:

1985 - Retail sales of around $100 million ($213 million in inflation-adjusted dollars)
1990 - Retail sales about $5 billion (close to $9 billion adjusted for inflation) — Nintendo accounts for roughly 90% of those sales
2013 - The Gartner Group projects total worldwide revenue for games at $93 billion for all of 2013. Nintendo is projecting its revenue for the current fiscal year (ending in March 2014) at 920 billion yen, or about $9.3 billion dollars. Nintendo this year represents about 10 percent of the game industry.

Any use of such large-scale and broad figures can be debated on some level, but the overall trends bear out. Consider the 1990 percentage alongside the projections at the time that Nintendo faced trouble — of course it did, because the marketplace was being invaded by a determined, strong competitor in the form of SEGA. Nintendo's market share subsequently fell as a result, but it was the share of an increasingly lucrative industry, as highlighted by the 2013 estimated worldwide revenue of $93 billion in 2013. In the current day Nintendo's business is challenged by phones, tablets, the Vita and others in the portable space, while in the living room we have Microsoft and Sony's systems joined by young microconsoles and, to a degree, some tech-savvy consumers that are hooking tablets up to Smart TVs for large screen gaming; Steam Machines from Valve are also on the way. It's a bigger pie with an ever-increasing collection of corporations eager for a slice, so Nintendo has grown since those days of a borderline monopoly, which ultimately accounts for a lesser overall impact on the market.

We'd also like to reiterate a point that we've made frequently in the past about Nintendo's audience and the issue of third-party support. In an ideal world we'd love Nintendo to be brawling with Microsoft and Sony over all of the biggest third-party games while still delivering that distinct first-party library, but that's not the reality. We're pleased when big multi-platform games make it to Wii U, and frustrated if any of them turn out to be sub-par in execution, but self-awareness as Nintendo enthusiasts surely dictates that we consider this state of affairs in context. Nintendo, after GameCube failed to prosper in a technological arms race — lest we forget — has changed tack and focused on innovation, accessibility and enjoyable gaming experience; it's a strategy that's flourished with DS, Wii and, increasingly, 3DS.

That's how things are, and there's an audience of Xbox and PlayStation gamers that are either lost to those brands or, in some cases, will invest in a Nintendo system in addition to another, especially as the Wii U is the second home console in a row to prioritise a new gameplay approach over raw horsepower. We can look back to the arm-wrestling bit-wars of the SNES vs Mega Drive / Genesis with fondness, but that's a strategy that Nintendo's left behind, with the GameCube teaching it that a three-way tech-war allied with a "kiddie" image isn't a route to success.

It's often the case that Nintendo and the Wii U, particularly, are in an odd no-man's land in media coverage. The latest system is sometimes left out of "next-gen" coverage and thinking, yet can often be considered part of the battleground when assessing sales potential and the upcoming "console wars". The console's thoroughly disappointing first year of sales have contributed to a largely negative perspective — not always unreasonably — around its chances, yet when mapping out its Holiday prospects it's arguably superfluous to say it'll lose out to PS4 and Xbox One in terms of emptying shelves. For one thing, both of those systems are likely to be pre-order / launch window sell-outs, or close to it — as was the Wii U in its first month, racking up over three million sales in quick order. As we've observed many times and Games Industry's piece also articulated, we're also talking about different target audiences, with families and enthusiasts that favour Nintendo's approach being the focus — Nintendo's worldwide Holiday period results will truly be clear in its next financial reports at the end of January 2014.

And we're not suggesting that Nintendo's getting everything right. We stand by our record for being critical of the company when we feel there's cause, and there's no guarantee that the Wii U will secure a large audience beginning in this Holiday season. Perhaps the console, its bundles and titles such as Super Mario 3D World will do the trick, or perhaps it'll fall to the likes of Mario Kart 8 and Super Smash Bros. in 2014. We think it's a strong possibility, as suggested during our financial results coverage, that the home console will miss its yearly target of nine million units sold, and without being able to see the future it's hard to predict whether the system will ultimately surpass lifetime sales of the GameCube, Nintendo 64 or beyond — perhaps big future releases and inevitable further price cuts will be integral to that fate.

Ultimately, however, even if it's a fact that scuppers doom-sayers and those that want to see Nintendo ditch hardware, the company is on sound footing to have modest performance and continue regardless. The 3DS has secured a firm place in the market for now, while the latest financial accounts show cash and deposits of 463,187 million Yen (around $4.6 billion) and total net assets of 1,233,906 million Yen (over $12 billion). Despite struggling to hit its targets the company is still making small profits and sticking to its projections for this year, while looking to the future Nintendo can, in theory, have a system that struggles — it's been there before — and simply go again with new hardware.

Naturally, the future is full of doubt and major challenges. As suggested earlier, the market's never been so competitive or crowded, and Nintendo must find its place to succeed in the industry. It's done so before, however, and with strong convictions and years of profits to use as crutches in tough times, predicting short-term disaster that'll fundamentally change the company seems frivolous. Nintendo has and will keep making mistakes, like every company, and for our part we'll share critical opinion when it's merited. Yet we won't say Nintendo is doomed, because it's a long way from that.

Perhaps the company benefits from aspects of its corporate culture in Japan when it comes to staying on course, and perhaps its biggest strength right now is a belief in its roadmap. You may not agree with it or think it will succeed, but in an industry where some technology companies scramble from one policy to the next to try and please everyone, Nintendo primarily focuses on game consoles that provide fun experiences.

The closing word should perhaps go to Satoru Iwata, who said the following when addressing a question about cutting costs and the size of Nintendo's workforce at the recent investor Q & A:

If you believe that there is no possibility of Nintendo’s results improving, then you would be right about it being necessary to review the structure of the workforce and the company itself to match the scale of the business. However, I believe that there are upward and downward swings in the video game business, that Nintendo has the potential to be a larger-scale business, and that in order to achieve that potential, good developers, localization capability and the ability to sell overseas are necessary. We need a company with a lot of muscle, but a company that also has no excess fat – one that makes smart spending decisions. Restructuring the workforce is not the first option we consider even when cost cutting is required. I would like you to understand that this is because we do not see a dark future for Nintendo.

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