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Opinion: It's now make or break for Nintendo

Opinion: It's now make or break for Nintendo
It's looking like a make or break situation for Nintendo after yet more financial woe for the Japanese giant.

With your positive Mario cap on, its first half losses of 27.9 billion yen ($350 million) compared favourably to the miserable 70 billion yen ($870 million) loss posted in the same period last year.

And with the company finally able to sell the 3DS at a profit as of the most recent quarter (the format's seventh), surely it's only a matter of time before the company returns to the "Nintendo-like profits" we're used to.

Indeed, if you focus purely on the 3DS, the figures look relatively healthy. Despite the perception of a troubled launch, Nintendo's newest handheld has continued to outpace the original DS - despite being launched at a traditionally quieter time of year.

With the holiday season yet to come, Nintendo's next set of results could put an even bigger gloss on the comparison picture.

There may be trouble ahead...

Unfortunately, there are more than a few clouds on the horizon, and at the heart of the company's plight are 'weaker than expected' 3DS sales outside of Japan.

Expectation is the mother of disappointment, and as fair as it is to observe that 3DS sales have been a little lacklustre outside Japan, Nintendo never makes the point that sales in Japan have been consistently well above expectations.

On home soil, the 3DS isn't so much dominant as completely trouncing any other format to a degree that's bordering on extreme violence. Surely even the most one-eyed Nintendophile didn't see the 3DS accounting for 57 percent of all hardware sales?

In a worldwide context, such a scenario would be a complete anomaly, and even in the handheld-centric arena of Japan, it's an incredibly dominant position.

How the west was lost

But with the 3DS occupying 20 percent of hardware sales in Europe (Jan-Sept 2012), and just 18 percent in the US, the west plainly isn't as excited by the format as Nintendo would have liked - or, indeed, expected.

And yet with the Wii having disappeared into relative obsolescence, and the upcoming Wii U also set to be sold at a loss for some time, the now-profitable 3DS and the 3DS XL are the company's main bankable formats.

The net result of the soft demand, along with the Yen problem, and impact of the loss-leading Wii U will be a lower-than-expected full year profit of six billion Yen ($75 million). A return to the black, yes, but less than a third of the 20 billion Yen ($250 million) forecast earlier in the year.

However you spin it, these are challenging times for Nintendo. Indeed, during his results briefing president Satoru Iwata repeatedly goes on the defensive to urge the financial community that things aren't as bad as they seem.

Novelty value

That said, while it looks promising that the 3DS market share has had a boost in the wake of the 3DS XL launch, most of the formats it's being compared to have been on sale for six years or more. If it can't thrive in this market environment, what chance does it have when three new home consoles are competing in a worldwide recession?

Ah yes, the recession. Whenever Nintendo apologists try and wheel out a long list of excuses for the company's performance, the recession is generally brought up.

But while that is a fair argument for any decline in fortunes, it never seems to stop people spending vast sums of money on much more expensive smartphones and tablets in quantities that defy every piece of financial wisdom you could care to come up with.

What it boils down to is basic desirability. While many gamers might admit they would quite like a 3DS, there aren't enough compelling reasons to own one. Or, put another way, there are more compelling reasons to own rival products.

We are legion

And that's the real issue here - Nintendo has more competition than ever. It's not even as simple as worrying about the PS Vita, or the various Apple and Android devices and their legion of excellent game titles.

Now that we've got the likes of Microsoft's Surface tablets rubbing shoulders with Amazon's Kindle Fire HD, and other newcomers like the Nexus 7 (and the 10), the iPad mini, and the beefed-up iPod touch - the 3DS isn't so much facing competition as being bullied mercilessly in the playground.

There's only so long Nintendo can expect to stand up to the bullies. Eventually, it'll just end up at the foot of an unseemly bundle.

As ever, part of Nintendo's problems are rooted in its approach to digital distribution.

While every device you can think of (including, yes, the PS Vita) makes it a slick, seamless process to download games, Nintendo still clings on to the belief that it can stem the tide with its own eccentric, somewhat backwards approach.

Digital detail

Drilling down into Nintendo's fascinating financial report, one of the most revealing pieces of information was that download sales for its games also available at retail "varied between three and slightly over 10 percent of the total sales."

But given its total dominance in Japan, that's probably not something to boast about. Indeed, all Nintendo would say about its download performance in Europe was that "the ratios...were relatively small".

And it's hardly surprising. Take a look at Nintendo's disastrous eShop, and you'll be hard pressed to find interesting games that exist outside of the obvious Mario/Zelda/Pokemon mainstream. Even if you've enough patience to poke around its confusing innards, few games are available at anything approaching an impulse price.

On that note, Nintendo's head-in-the-sand approach to pricing is one of the most baffling things, especially in the light of the sharp decline of digital downloads on Nintendo's stores since 2010.

Self-sabotage

Having presumably noticed that its own digital sales were dropping off dramatically, Nintendo rarely runs price promotions. Today it announced a couple of quid off Art Of Balance: Touch, but it needs to go much further, and shout about it louder.

Generally speaking, everything remains at the same (high) price that it was when it first went on sale - and in a market where pricing strategy is everything, gamers won't come back to the eShop if a) full priced games cost more digitally than in boxed form, and B) if they think nothing ever gets reduced.

It's almost admirable that Nintendo clings on to the belief that its handheld games are worth so much more than the competition. In some cases, that's true - there's nothing that can hold a candle to Super Mario 3D Land, for example - but there are many more examples of 3DS titles that are no better than some of the fantastic games being sold for cents on the App Store.

The frustrating thing for anyone who admires Nintendo is that it doesn't have to be like this. It doesn't have to have a broken online shop. It doesn't have to be so inflexible with its pricing. It has some of the most bankable brands in the world. It has some of the most talented game developers. Its hardware is innovative and often a joy to use. It should be cleaning up and dominating everywhere.

Next up

So what happens next?

What happens if the Wii U also fails to meet sales expectations? Personally, from what I've seen of it so far, the Wii U deserves to do well. On the basis of games like Zombi U and Nintendoland alone, it ought to surprise people just how 'new' it really is, but the test will be communicating to the wider public that this isn't just another Wii.

So far, the response to the pre-launch marketing has been muted at best, and a lot of that apathy comes down to the fact that a lot of people were genuinely fed up with how little quality software the Wii actually had - and how much crap diluted the range.

But if Nintendo can get the device in people's hands, it stands a chance of getting people excited again, but there's a real sense that a weary gaming public has already made its mind up.

With not long to go before the launch of Wii U, the next few weeks will be crucial -not just to the immediate success of its next console, but the long-term health of the entire company.

There's no such thing as 'not enough time' in Kristan's world. Despite the former Eurogamer editor claiming the world record for the most number of game reviews written before going insane, he manages to continue to squeeze in parallel obsessions with obscure bands, Norwich City FC, and moody episodic TV shows. He might even read a book if threatened by his girlfriend.

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