Why Nintendo Will Never Be Great Again

Nintendo Wii Walmart
Nintendo Wii Walmart

I grew up as a Nintendo kid. The day Nintendo's (NTDOY) 8-bit console hit the market was the day I handed over my old Atari and ColecoVision systems. The gameplay was rudimentary in retrospect, but I didn't care as I guided Mario and Link through their rendered worlds.

The games and graphics ultimately got better. The stakes grew higher. Nintendo survived the onslaught of disc-based consoles. Even today, the Wii is the only one among the three major consoles to not play DVDs. It didn't matter at first, as Nintendo's whimsical motion-based controller overcame what the platform lacked in specs.

It matters now, though.

Shares of Nintendo hit a five-year low this summer, wiping away any gains made during the Wii era and through the last couple of handheld DS introductions. Net revenue fell by more than half in Nintendo's latest quarter, with a steep operating loss to boot.

Nintendo went on to shave its full-year fiscal profit target by 82% this summer, after announcing a 32% price cut on the 3DS portable gaming device that it had introduced in March. All this came on the heels of a 25% price cut on its Wii console back in May.

How optimistic can anyone be for next year's Wii U rollout when Nintendo can't move its gadgetry even at fire-sale prices?
The funk is real, and it's not getting better.

Mario Brothers
Mario Brothers

Wii Will Rock You

We're now a week away from a Nintendo event in Tokyo, where the Japanese gaming giant is expected to showcase upcoming 3DS games and perhaps even new 3DS peripherals. Some bloggers have posited that a radical redesign is in the works, but that's largely wishful thinking. Besides, it's not as if Nintendo is a makeover away from revisiting its glory years.

Consumers have moved on, even if Nintendo has yet to realize why it wasn't given a forwarding address. Nintendo can be clueless.

In an interview with video game website Kotaku last year, Nintendo of America president Reggie Fils-Aime dismissed the threat of Apple's (AAPL) App Store and the iPad, iPod Touch and iPhone lines it feeds.

"If our games represent a range between snacks of entertainment and full meals depending on the type of game, [Apple's] aren't even a mouthful, in terms of the gaming experience you get," Fils-Aime said.

He also suggested that the platform isn't a viable profit platform for developers because there are so many free games available and the premium downloads are too cheap.

Well, there were fewer than 100 million devices running Apple's iOS platform at the time. There are more than 200 million iOS devices now. Google's (GOOG) Android is also taking off, at least on the smartphone front.

It doesn't matter if developers don't like swapping a handful of games being sold at $30 for a ton of them at $0.99. It's the consumers calling for free -- or nearly free -- casual games that can be played on Facebook or on a smartphone.
Nintendo just isn't where the gamers are.

Paying the Price for Aiming Young

Sony (SNE) and Microsoft (MSFT) have cornered the diehard gamer market, and that hasn't been exactly a picnic, either. However, Nintendo's emphasis on low-tech titles that appeal to younger gamers, retro purists, and multigenerational families playing together is at the very heart of the App and Android games that continue to flood the market.

Sponsored Links

If you don't think that gamers are warming up to Nintendo-less apps, check out GameStop (GME).

"Did you know that GameStop now buys your old iPod, iPhone and iPad devices," reads GameStop's website. "Trade them in at GameStop for in-store credit."

It's not just about buying back iOS gear, GameStop is likely to begin selling it, too. Apple-watcher 9to5Mac is reporting that GameStop recently told dealers at a trade show that it's about to begin offering iPads, iPods, and iPhones through its stores.

Nintendo is in a quandary. Will it simply settle for thinner and thinner slices of the gaming pie, or will it go the Sega route and begin licensing its proprietary games and characters on rival platforms? The former is a recipe for a slow-death casserole. The latter simply speeds up the process, but with a little more licensing revenue on the way out.

I would love to see Nintendo pull a Yoshi out of its hat next week, but it's just not going to happen. Nintendo's best days are a replay screen of the past.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Microsoft, Apple, GameStop, and Google. Motley Fool newsletter services have recommended buying shares of Apple, Google, Nintendo, and Microsoft.

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