It seems as though Nintendo (NTDOY) can do no wrong right now. The company, which struggled for more than five years to get its ill-fated Wii U console in consumers’ hands before mercifully killing it in January 2017, is flying high on the sales of its Switch hybrid console and a slew of awards for its best-selling, first-party games.
It’s not just the Switch that has fans and the street excited about Nintendo, though. The company is also diving deeper into smartphone gaming with the announcement that it will bring its popular “Mario Kart” franchise to Google’s (GOOG, GOOGL) Android and Apple’s (AAPL) iOS handsets sometime within the next fiscal year.
If Nintendo can keep the hits coming, it may eclipse the stratospheric highs it reached following the release of the Wii back in 2005. But that will require a steady stream of high-profile games, proof that its mobile strategy is working and ensuring that it can pull in the kinds of big-name, volume-selling titles that power the modern games industry.
To call the Switch a much-needed smash hit for Nintendo is the understatement of the century. The Wii U, which was supposed to merge a traditional home console with the portability of a tablet, was a certified disaster. The console, which was already underpowered compared to contemporaries like Sony’s (SNE) Playstation 4 and Microsoft’s (MSFT) Xbox One, felt like an anachronism designed for a time before online multiplayer and near-photorealistic graphics were major selling points among gamers.
Over the course of the Wii U’s lifetime, Nintendo managed to sell just 13.6 million consoles. Sony, meanwhile, has sold 70.6 million Playstation 4 consoles since the system was released in late 2013, according to Polygon. That’s… not great.
The Switch, however, is a different story entirely. Consumers purchased a ridiculous 14.86 million Switches between its March 2017 launch and Dec. 2017. That’s especially impressive when you consider that the console was nearly impossible to get in the weeks following its debut.
“It is an incredible turnaround. No doubt about it,” said IDC video game analyst Lewis Ward. “It’s probably what Nintendo hoped the Wii U would have turned out to have been in retrospect, but clearly was not.”
See, while the Wii U had a rudimentary tablet with an unresponsive touch screen, the Switch is a fully mobile device you can bring anywhere you want. The system can also be connected to your big screen TV when you’re at home. Of course, a game console is only as good as the software it runs.
Nintendo’s development studios are responsible for some of most iconic characters, let alone games, in history. And the company has brought those creative forces to bear with the Switch. The console’s marquee launch title “The Legend of Zelda: Breath of the Wild,” is already considered one of the best games ever made, while “Super Mario: Odyssey,” which launched in Oct. 2017 ranks among the greatest “Mario” games to-date. Three of Nintendo’s first-party games, those it developed internally, have already surpassed the 6 million units sold mark.
The year ahead, though, will prove especially important for the company, as the goodwill surrounding the Switch’s launch wears off and consumers look toward its long-term potential. Nintendo historically has difficulties wooing the kind of third-party, console-moving games that have made Sony’s Playstation and Microsoft’s Xbox lines so successful.
The house that Mario made, however, is trying to put those issues in the rearview by offering titles like “Doom,” “Wolfenstein II: The New Colossus,” “The Elder Scrolls V: Skyrim,” “Dark Souls: Remastered” and other third-party titles for the Switch. It will be interesting to see if that helps ensure Nintendo’s continued upward trajectory.
Of course, Nintendo still needs to get its premium online service off the ground. Like Sony and Microsoft, Nintendo’s service will help gamers from around the world play with and against each other whenever they want. Nintendo has even said it will provide subscribers with copies of classic games for its NES and SNES consoles through the service.
Speaking of which, Nintendo also sold 4 million units of its SNES Classic console during its last quarter. That despite the fact that the retro gaming system felt like it was perpetually out of stock.
Goodbye handheld, hello mobile
When Nintendo’s stock price reached its height in 2007, the company was selling both the Wii and its DS handheld. And during the dark days of the Wii U, Nintendo counted on the DS and its follow-up, the 3DS to serve as a needed light spot in its portfolio. Unfortunately, Nintendo’s handheld consoles are losing steam.
“Historically, there are two halves of Nintendo’s business: home consoles and their mobile or handheld business. And that latter half is struggling,” Ward said.
With the announcement that the Pokemon Company will no longer make proper “Pokemon” games for the 3DS, and the ability to use the Switch as a handheld, the market for the 3DS appears to be shrinking. Sure, the console is still selling relatively well. But not nearly as much as in previous years.
“Basically the 3DS sustained them through the flop that was the WII U” Ward explained. Now that the 3DS is getting long in the tooth there, they at least have a very successful home console.”
The biggest challenge facing Nintendo’s handheld business, though, comes from smartphone games. For the casual gamer looking to kill time during their commute, a smartphone is far more accessible than a handheld console. So to combat this, Nintendo is finally taking smartphone gaming seriously by bringing its biggest characters to Android and iOS.
Among the company’s current offerings are “Super Mario Run,” “Fire Emblem Heroes” and “Animal Crossing: Pocket Camp.” According to Nintendo, “Super Mario Run” has been downloaded 200 million times, and has a consistent player base of 20 million monthly active users. “Animal Crossing: Pocket Camp” has also succeeded with adult women gamers.
Still, Ward cautions that it will take some time for Nintendo to become a top 10 revenue generating smartphone game developer. The company will certainly help its case in the coming year, though, with the release of a mobile version of its “Mario Kart” franchise.
That said, if Nintendo is going to offset losses in its handheld console division by increasing its portfolio of smartphone games, it’s going to need to pump out quite a number of titles. Either way, the very fact that Nintendo is putting its most famous characters on smartphones proves that it is open to taking risks to keep from repeating the mistakes of its past.
Mario on the big screen
Speaking of past mistakes, Nintendo also announced that it is bringing Mario to the big screen… again. Yes, after 1993’s offensively repugnant live-action “Super Mario Bros.” Nintendo is taking its portly plumber back to the big screen. This time, though, Nintendo is teaming up with the people behind the popular “Despicable Me” and “Minions” movies to make an animated Mario film.
If the Mario movie is a hit, it could serve as a launching point for Nintendo to bring even more of its characters to Hollywood. A “Zelda” or “Metroid” movie could do wonders in increasing Nintendo’s value. If they’re good, that is.
This could be a the beginning of a new golden age for Nintendo. But for now, the iconic brand should bask in the glow of its renewed success. And not hire Dennis Hopper.
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