The Industry of Today: Part 3

As I've mentioned before, Nintendo is the only company in the industry today that makes nothing but video games. Heralded as the savior of video games, the Nintendo Entertainment System's (NES) release in 1985 revived the video game industry from the slump it was in due to the crash in 1983. Although historically, Nintendo has been one of the strongest game producing companies in the industry, and even with the success of the Wii, which launched in 2006, recently Nintendo has been suffering from the same sort of problem as Sony - losing money.

The factors in Nintendo's money loss are basically the same as Sony's, their hardware is costing them to sell, and sales aren't doing too great. The Nintendo 3DS, while outselling Sony's Vita, sold nowhere near as well as expected at launch, prompting Nintendo to drop its price soon after its initial launch. Fortunately for Nintendo's finances, as of July 25 of 2012, they stopped reporting losses on 3DS sales, meaning that the cost of production of the hardware has gone down enough to allow for the lowered price^[1], but that hasn't undone the losses they suffered from it.

To me, Nintendo's problems stem from their consoles having less than desirable launch games since the launch of the Wii, typically being carried by one high-name title, and supplemented (barely, might I add) by lesser titles and the promise of better titles in the future. If we look back to the release of the Wii, the big named launch title was The Legend of Zelda: Twilight Princess. At E3 2006 when Nintendo revealed the Wii, they also promised that it would have Super Smash Bros. Brawl as a launch title, which was then delayed to be a "soon after launch" title, and further delayed until it finally released in the United States in 2008. In my opinion, the promise of Brawl was something that Nintendo used to sell Wii consoles to their core audience, but the 3DS didn't have this kind of push behind it, and neither does the Wii U, which releases later this month.

The Wii U is in an especially odd position, since it is being carried more by third party games than Nintendo's own first party material. In the days of the Nintendo 64, which launched with a diverse selection of games from different publishers, this third party support was instrumental in the 64's success, but only because the consumers could not get those games on a rival console. When you look at titles like Batman: Arkham City or Assassin's Creed III on the Wii U, you realize that not only can you get these games on other consoles, but you could have purchased them months ago.

Of course, for owners of the consoles that already have these games, purchasing a Wii U based on these titles is pointless, so I'm predicting the Wii U's sales being lower than anticipated by Nintendo, to follow suit with the 3DS.

Next up, we'll look at Microsoft, whose stock chart seems to make them out to be the strongest in the market right now. Are the stocks really an indicator of this when the majority of Microsoft's income comes from their computer software?


References:

[1] Keza MacDonald, July 25, 2012: Nintendo Still Losing Money, But 3DS Sales Improving