Game Marketing Tips, Analysis, and News

Tuesday, July 26, 2016

How Nintendo NX Will Fail... or Could Succeed

An NX mockup
Let's take a closer look at Nintendo's NX at what its strategy may look like. Does this new console have any chance for success? Many industry insiders have been saying for years that the console is dying – that is, before the PlayStation 4 and Xbox One came out and blew away console sales figures, both outselling the previous generation in the same time period from launch. Then insiders starting saying "Well, this is probably the last generation of consoles..." and now we've got the Xbox One S coming out (the first console redesign where it's not just smaller and cheaper, but actually better in several ways), and soon the PlayStation 'Neo' and next year the Xbox One Scorpio. Now, those new consoles may or may not set sales records, but at least we're seeing more new consoles with at least a fair chance of good sales.

Now we come to Nintendo. After the 100 million unit sales of the Wii, some at Nintendo felt they could repeat that with the Wii U. Instead, the Wii U is ending its lifespan this year with perhaps 13 million units sold, earning it the Worst Selling Nintendo Console of All Time award (not counting the Virtual Boy, which was strangled in its crib). Now, slated for March 2017, Nintendo has announced the Nintendo NX, about which we officially know – nothing. Well, aside from the fact that Legend of Zelda: Breath of the Wind will be coming out for it (perhaps at launch, you'd think, but Nintendo hasn't even confirmed that). As for the Nintendo NX features and price, Nintendo remains quiet. We'll probably get the reveal in the next couple of months, since the supposed launch date is fast approaching.

Instead of official news, we have a rumor (confirmed by multiple sources, according to Eurogamer) that the NX will be a portable device that you can plug into your TV, with a pair of detachable shoulder controls, powered by an Nvidia Tegra chip of some sort (K1? X1? Or a custom version? No one is sure). Games would come on cartridges (!), though you could also download them. The NX would not be Android based, but instead run a custom OS designed by Nintendo. No backwards compatibility with previous Nintendo devices, we assume. No word on NX price, of course, or the actual graphics power – though based on what we have seen of Tegra chips, the NX should be around Xbox 360/PS3 level, with perhaps higher resolution output and some better 3D shading.

Let's assume for the moment that the NX does indeed look a lot like this device. What are its chances in the marketplace? The answer really comes down to the software situation. The launch title should be Zelda, of course, though if they don't release it for months after the hardware launches, that may be enough to kill the device. Look, regardless of the NX price, whether it's $299 or $499, there will be at least a million people who would buy one so they could get a new Zelda title. Really, continuing sales of the NX will depend to a large extent on how many quality titles Nintendo can publish for it, and how quickly they come out. If we have to wait six months for a good Mario title, and then another six months for a new Smash Bros., then six more months for Mario Kart... the NX is dead. Even hit software only every three months would be pushing it – if Nintendo really wants the NX to sell, their top brands should be coming out for the NX every two months or faster.

Third-party software support would be very helpful indeed, but it seems doubtful that Nintendo would get much support from the likes of EA or Activision. They've got much more certain places to invest their development money, at least until Nintendo shows some significant market numbers.

One thing about the NX seems likely – battery life will be a problem. You may only get two or three hours before you need to find an outlet. Will this affect sales and usage? Perhaps, but if the software is there people will just be external battery packs and move on.

There are a few things we can deduce from this (rumored) NX configuration. One is that Nintendo is opting out of the horsepower race with Sony and Microsoft, remaining well behind the capability of the competing consoles. That has an immediate consequence – almost none of the AAA titles from major publishers would be available for the NX, due to the sheer difficulty of porting (not to mention whether or not the publishers would even want to). So, the NX software would be limited to what Nintendo could produce, along with perhaps a handful of Japanese publishers and some daring indies (if Nintendo even decides to allow indies to publish on the NX). The NX, therefore, is likely to suffer from a severe lack of games compared to every other platform. If Nintendo can't produce key titles quickly enough (as has been the case with the Wii U), the NX will fail.

The other thing that's obvious is that even if the NX is a hit, selling tens of millions of units in its first year, that will be perhaps two orders of magnitude less than the number of smartphones and tablets out there (now around 2 billion). So the 75 million downloads Pokemon Go has already seen, with a likely $1 billion or more in annual revenue (of which more than half will be profit), is not even remotely possible for the NX. Nintendo has said it now sees 2 million units of software sales as a hit. Compared to what mobile software can do, that's pathetic.

Look, Pokemon Go all by itself could generate more profit (for Niantic, not Nintendo – Nintendo only owns 32% of The Pokemon Co., which gets a royalty from Niantic – though both TPC and Nintendo have investments in Niantic) in one year than Nintendo has generated in the last three years. Think of the profits Nintendo could generate if it invested in high-margin mobile game development instead of low-margin hardware development.

Sure, Nintendo has mobile games coming from its partnership with DeNA – but if Miitomo is any example, these mobile games will sink like rocks. If Nintendo was smart, it would ditch the NX, buy the rest of DeNA, The Pokemon Company, and maybe a couple of other mobile studios, and plunge headlong into mobile games with its library of iconic brands.

I'm pretty sure they won't, though. They will launch the NX, and there will be plenty of talk about it, and the software will be late in arriving and new titles won't come out all that often... and the NX will perhaps sell 20 or 30 million units in its lifetime. That's what seems most likely given Nintendo's track record.

Sure, it's possible the NX could be a success. How? Make sure the price is low to start with, like $199. Use Android as its base so you can get an enormous number of developers on board. Add GPS and a version of Pokemon Go that's better than the one on smartphones, because then every Pokemon Go player will want an NX. Give it a good name that doesn't have "Wii" in it anywhere. Spend a couple of hundred million dollars on savvy marketing, and pay a few hundred million to get several top game studios working on hot titles for the NX. How much of that will Nintendo actually do? Probably none of it, as they amble along hoping to eke out a couple of hundred million in annual profits, maybe sweetened by an occasional payout from The Pokemon Company or from licensing Nintendo characters to theme parks or beach towel makers.

Anyone care to argue that the NX will be a huge hit? Let's hear some good reasons.

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