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http://www.nintendo.co.jp/ir/en/library/events/130612/01.html

 

E3 Q&A

 

If one were to take a pessimistic view of the future of dedicated gaming systems due to the rise of smart devices, then one would expect that for structural reasons handheld devices would be hit hardest. But the data shows that this is not necessarily the case.

 

Nintendo 3DS has been gaining momentum since March of this year due to our back-to-back releases of key titles. I think we have been able to take advantage of Nintendo’s unique position of being able to provide markets with a strong first-party software lineup to energize its hardware sales.

Some worry that an intensive release pace this year might result in a poor first-party software lineup next year.

However, our internal software development teams are now at a stage where we can expect software launches without too many intervals. We still have many unannounced game titles. Therefore, we expect to release a sufficient number of first-party titles for the platform next year as well.

 

 

 

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Nintendo: consoling news

 

 

 

http://www.ft.com/intl/cms/s/3/0c289404-782b-11e3-831c-00144feabdc0.html?siteedition=intl#axzz2peR8ivRx

 

 

Licensing characters will do more than China’s lifting of ban on foreign consoles

 

 

 

Now that China will permit the sale of foreign game consoles, suppose Nintendo sells its Wii U at, say, $300 to, say, 2 per cent of the Chinese population. The company’s revenues would double! The 11 per cent pop in Nintendo’s shares following the news is just the start!

 

 

 

 

 

This is utter nonsense, of course, but nonsense of a very traditional sort. When any company enters China, multiply everything in sight by a huge number.

 

In fact, the news from Beijing does not justify Nintendo’s price surge. Microsoft’s Xbox One and Sony’s PlayStation 4, released in November, prove there is still global interest in consoles. The two have sold more than 7m between them. The Wii U, a year older, has done less well, but product problems aside, China would be a more interesting proposition if it were not for its lively grey market. Xboxes and PSes abound, alongside knock-offs and something Lenovo passes off as a “sports machine”. Online gaming also accounts for over half the Chinese market already, PwC reckons, and has grown at 11 per cent a year since 2008.

 

The possibility that Nintendo will licence its characters for use on other companies’ mobile devices is more significant. Few rivals can beat its library, which stretches from Pokemon to Super Mario. However, Nintendo is expected to produce only just over half its March year-end Y100bn operating profit target. It has so far refused to consider licensing but some investors are betting on a thaw. This optimism goes some way to explaining Nintendo’s 70 per cent gain (compared with a quarter for the wider market) since June. And Satoru Iwata, its president, said recently that Nintendo was looking at how to use smart devices rather than considering them competitors. There is now $8bn on the table – the growth in market capitalisation since June – which says that means Mario will soon appear on a smartphone.

 

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http://www.bbc.co.uk/news/business-25805136

 

Shares of Japan's Nintendo have plunged 18% in early trade on Monday after the gaming giant issued a profit warning.

 

On Friday, Nintendo said it expects to make an operating loss of 35bn yen ($335m; £205m) for the financial year ending 31 March 2014.

 

It had initially forecast an operating profit of 100bn yen for the period.

 

The company blamed weaker-than-expected sales of its Wii U console during the holiday season for the downgrade in its earnings forecast.

 

As a result, it lowered its global Wii U sales forecast for the business year from nine million to 2.8 million units - a cut of nearly 70%.

 

Nintendo also reduced the sales forecast for its 3DS console from 18 million to 13.5 million units.

 

The firm's shares fell to as low as 11,935 yen on the Tokyo Stock Exchange on Monday.

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What nintendo needs are several block busters with amazing gameplay. They used to have that with golden eye, conker's bad fur day, perfect dark with the nintendo 64, innovating in every genre. And mario and zelda were actually big innovators too back then. Just seems that Mario and zelda are now titles that mostly get alot of love from nostalgic gamers, and they are missing a complete set of killer games to make up for the lack of graphics. There is sonic and rayman on other consoles that are also platformers, that can easily compete with mario.

 

Ps4 and xbox one both have a solid set of games I would love to try some day, and nintendo is missing that. Seems that if they want to survive, they need to release a bigger variety of amazing indy games to survive, and really kill it in that area. Few people buy a Wii for mario and zelda alone, if they can play amazing games in that genre on the xbox one or ps4. And with the latter they can also play those new story games with amazing graphics.

 

Just look at the titles:

http://www.metacritic.com/browse/games/release-date/available/wii-u/metascore?view=condensed

 

Only 2 unique Wii U only titles in a pretty niche genre that didn't really innovate much.

 

If you look at the ps3 for example:

http://www.metacritic.com/browse/games/release-date/available/ps3/metascore?view=condensed

 

They have a wide variety of classics that are not ps3 only, but also were the first to innovate in story action games with amazing graphics. The last of us and uncharted were reason for alot of people to buy a ps3 alone. The last of us especially was a huge innovation as it felt like a really polished interactive tv show with amazing graphics, but also fun gameplay. And then you also had to option to play alot of other classics as well in a variety of genres like gran turismo, God of war and metal gear solid. As well with the option of playing games that you could play on the xbox and pc.

 

And microsoft innovated online console gaming with call of duty. Had unique titles like Halo, but really were the first to take online gaming mainstream.

 

And looking at the nintendo 64 back then, if you used to be into games, you recognize alot of amazing classics in a wide variety of genres:

 

http://www.dorkly.com/article/28002/the-top-25-n64-games-of-all-time/page:5

 

What they did is they innovated game play mostly. And there is still alot of room left there: alot of large studios are now playing it safe and not taking risks releasing formulaic games with just nice graphics. It seems if they want to survive, they cannot bank on just mario, zelda and pokemon, but they need to take some serious creative risks and come up with classic Wii U only titles in every genre. So far I dont really see this happening yet.

 

Just my 2 cents as someone who likes video games :) .

 

 

Edit: to add, pikmin 3 is another wii u title that claims to innovate on gameplay, but is lagging behind alot in graphics really. Gameplay is really difficult to market, and lagging behind on graphics really is a bad all around marketing strategy.

 

Reviewer who gives this game a 10/10 sums it up pretty well:

"Pikmin 3 might not be the game that gets people rushing to buy a Wii U, but it certainly should be."

 

I do think that graphics are now levelling out, as the added value is diminishing. The play station 4 and xbox one will probably be around longer then their predecessors. And nintendo really has a shot at catching up here if they release a similar console.

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N64 wasn't a financial or sales success, so seems a rather odd example to use. Of the three games you mention, only Goldeneye was a system seller. Conker sold hardly anything and had a limited release right in the last dying hours of the console cycle. Sonic and Rayman are not even on a level adjacent to Mario in terms of sales.

 

Call of Duty is not a Microsoft game.

 

The evidence for graphics as a way to success is mixed at best.

 

NES was not as advanced as MasterSystem but still won big. SNES was more advanced than Genesis but way less than the Neo Geo and won. N64 was more advanced than both PS and Saturn, but lost big to PS. Gamecube was more advanced than PS2 and maybe on par or a little less so than Xbox, but PS2 mopped the floor with the other two. Wii was way less advanced than PS3 and the 360 and won hands down.

 

And as for Game Boy and all its handheld successors... they were always way, way behind the opposition in strength, but no other system has been more than a blip on the radar on that market, really. Game Boy in the early days were up against color screens with 16-bit graphics and still won the day.

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hmm i guess you are right. I grew up upper middle class, and everyone had one. And it seems that if they didnt use the more expensive cartridges and werent so anal to developers (would have gone more quantity instead of quality) it would have had equal sales numbers to the playstation. But quality wasn't the issue there. They did innovate pretty well with the n64. And xbox 360 was mostly used for multiplayer, even tho call of duty was released for all platforms. Xbox live was superior to the ps3 multiplayer system.

 

I am seeing a pattern here tho. Whenever they innovate (and dont do dumb stuff like with n64) they kill. The Wii U doesnt relaly innovate. The game cube didnt really innovate. You cannot simply copy sony or microsoft and expect similar sales. Mario and zelda alone wont get you the killer console sales.

 

If graphics dont matter, then why would people  buy a wiiu over a wii?

 

Gameboy and the DS captured basicly a non existent mobile gaming market. But with smartphones around now, that seems to be a shitty enviroment to be in.

 

I think gameplay by moving around like with the wii and now the xbox kinect is also a no go area.

 

And grahpics do really add something, they can make a game really immersive if it is combined with a decent to good story. Sales of uncharted and the last of us are a prime example. But it needs a good story and decent gameplay attached to it for it to really be a good selling point. Then it is 1+1=3 .

 

So yeah graphics wont add much with wii sports type games, or with crappy all around gameplay and story.

 

How would you say they could innovate?

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I supose the largest Wii U mistakes were:

 

1. not releasing all their blockbuster nintendo titles when they launched the console. Focussing too much on being the first next gen. But they forgot people buy these things for the games

2. No achievements. Social gaming is huge, and nintendo ignored this.

3. poor All around marketing

4. naming it wii U. Alot of people thought it was some upgrade of the wii, without any games. They couldnt even innovate on naming their new console!

5. No new franchise, you cannot milk mario and zelda forever

6. this new console has almost no innovation or added value over the regular wii

7. Not being able to play blockbuster titles like GTA 5. Scaring away all the developers, and focussing too much on too few titles. Why not give people the option to play popular games that are released on all platforms? Unless ofcourse they could come up with their own succesfull franchises...

8. Pricing of the console. This seems to be a recurring nintendo theme, making stuff too expensive when catering to a young audience. And as far as the casual audience, just buying cheap apps on the phone is much cheaper.

 

Seems like some of these mistakes are really large blunders, and might indicate alot of stupid politics in upper management that is preventing them from innovation? It just seems they are out of touch with what people like.

 

But with china coming in, and with alot of their classics finally coming out in 2014, they look to be well positioned to make some nice sales in china? Wouldn't touch it untill it gets really cheap maybe. 

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hmm i guess you are right. I grew up upper middle class, and everyone had one. And it seems that if they didnt use the more expensive cartridges and werent so anal to developers (would have gone more quantity instead of quality) it would have had equal sales numbers to the playstation. But quality wasn't the issue there. They did innovate pretty well with the n64. And xbox 360 was mostly used for multiplayer, even tho call of duty was released for all platforms. Xbox live was superior to the ps3 multiplayer system.

 

In the US perhaps, which is the only major market in which Microsoft has had real success.

 

I am seeing a pattern here tho. Whenever they innovate (and dont do dumb stuff like with n64) they kill. The Wii U doesnt relaly innovate. The game cube didnt really innovate. You cannot simply copy sony or microsoft and expect similar sales. Mario and zelda alone wont get you the killer console sales.

 

If graphics dont matter, then why would people  buy a wiiu over a wii?

 

Because of the touch-screen controller that innovates gaming. Or at least that was Nintendo's aim. An aim which has been severely compromised by brand confusion and the fact that no games actually use the touch-screen for any really immersive or revolutionary gameplay. Anyhow, Nintendo's internal analysis for the last 10 or so years is that each product needs a unique selling point, and good graphics just isn't that. And in addition it's really expensive and therefore high-risk.

 

Gameboy and the DS captured basicly a non existent mobile gaming market. But with smartphones around now, that seems to be a shitty enviroment to be in.

So the story goes, but there isn't all that much evidence that this is what's playing out in the segment as of yet. The 3DS is doing pretty well sales-wise (not as well as the DS did, but that's an extremely tough benchmark) and it has a strong library of critically acclaimed titles with lots more to come.

 

How would you say they could innovate?

I don't know, that's why I'm not a designer at Nintendo. What I do know is that they have the most talented workforce in the business and the most valuable portfolio. What they lack is a viable business model. That's not to say that Microsoft's or Sony's is any better long-term.

 

It's hard to make any insightful analysis. The Wii was looked upon with scorn before release and it's success was completely unpredictable. Same thing with DS. What do you make of that? A post hoc analysis is bound to be extremely flawed.

 

Maybe third-party is the solution, maybe not. I think it would mitigate risk and at the same time allow the company to free up departments to explore new avenues from time to time, instead of just developing pre-existing IPs. Earlier, the company has done a good job of innovating inside their old IPs, but with the current trajectory there seems to be a real risk of stagnation if they have to only keep propping up ailing systems with dependable titles.

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The buyback is probably related to the death of Hiroshi Yamauchi and his stake coming to market. While I don't fault them for making buybacks at this point, it's still disturbing that they have had the chance to do it for quite a while and this stated window for buybacks is just silly. Two months! Bound to make the buys much dearer than needed.

 

This will probably be an interesting business case study in a few years no matter how it turns out. I feel like I may have made a mistake not buying in the $11-$12 range, but after that the fundamentals have in my view deteriorated, or at least not improved, while the stock price has jumped quite a bit. I'm not saying it's not justified, but if there was a margin of safety when it traded just above cash holdings, I have a harder time finding it now. 

 

It will take at least 3 years* before they can leverage revenue and earnings even if they manage to stem the bleeding for now. With a lower price I will be interested again, but for that to happen it seems the tides must turn on Japan again.

 

*Obviously a guess, but if they don't support the Wii U for another few years, they will lose a lot of trust in the market, see Sega for precedent. And anyhow, the R&D on the the upcoming console cycle can't be far along as of yet, if they even know the direction at all.

 

http://blogs.wsj.com/digits/2014/01/29/live-nintendos-strategy-briefing-to-address-future-direction/

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What’s Mr. Iwata going to focus on for the next 10 years? The main theme: enhancing the quality of life through entertainment. The key word is health, Mr. Iwata says. Citing a flood of wearable devices already on the market, he says Nintendo is trying out something completely new: non-wearables to monitor your health.

 

Kooky as always.

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Looks like Nintendo will do games for smartphones. Finally.

 

Finally real games on smartphones/tablets and not the Birds/Candy/Farm crap. Cant wait to see what Shigeru Miyamoto comes up with.

 

I've been enjoying Alto's Adventure on iOS lately, I recommend it.

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no they are not. For starters there is now more easy access to information. Part of the reason disney had pricing power was because often you did not know much about products, and people would pay up for disney products because it was safe. You could not go on the internet to look up reviews like you can now. Some unknown studio can release a new animation film, and be a massive hit, much harder back then. Cost of producing these things has also gone down, so scale is not much of a problem to overcome for competition.

 

And finally they need to release new products. People are not buying the old mario games, they are buying newer versions of the new mario games as new consoles get released. Making these things is still expensive. Allthough they have better margins then other game companies, as their costs are lower.

 

What I find interesting in this space right now is the steambox. It is little known now (will be released this year), but it could be big in the future, and change the console/video game market. Could even be another threat for microsoft, as it legitimizes linux, with the steamOS, with an enourmous library of entertainment on steam.

 

I dont think any entertainment company will ever have an edge as disney had in the past in the internet era. Also part of Disney's edge is their entertainment parks? In general i think the internet has killed a lot of edges companies had because of information assymetry. A company like Nintendo will have to rely a lot more on making quality entertainment. If you create one dud, a competitor can quickly create a better version of your game like happened with this game:

http://www.metacritic.com/game/pc/cities-skylines

 

It will go viral, and be a huge hit. I think they spent little on marketing and it was built by like 10 or 15 people, but will probably sell more copies then the latest sim city game. All they had to do was saying that their version would not suck. If something is bad a lot of people will quickly find out now. And if some better alternative will come a long, people will also find out quickly about that. So that new company will not have to spend a lot of money on marketing and can spend more on making it a good product.

 

I would not want to invest in any game or movie business now really. Seems like a crap business. One screw up and your brand name is severely damaged.

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A thought just popped into my head -- is Nintendo the Disney of video games? A ton of nostalgia-inducing titles that they can repurpose for new formats?

 

I'm surprised Nintendo hasn't just simply copied Disney's business model.  They could've easily started a cable channel, open a Nintendo theme park, license their video game music, etc.  Disney is pulling a Nintendo by entering the gaming market lately.  Maybe Disney will buy Nintendo one day and start their own video game console.  Makes sense.

 

I think Nintendo has the franchises and characters to really become the next Disney.  I wonder why they're not seeing this potential yet!!!

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