There has been a lot of discussion about Nintendo‘s next console launch, whether or not it will be successful, and what will happen if it’s not. This discussion is obviously brought about by the fact that their last console, the Wii U, was a tragic failure, and certainly affected Nintendo’s standing in the worldwide gaming market. This easily leads into imagining what that market would look like, should they just fold and resign from making consoles altogether.
I’ll start my theorizing by saying that the NX (as Nintendo’s new console is codenamed) probably won’t fail. It’s likely they’ve done their homework and learned from the Wii U’s failure, and figured out what they can do to avoid such a thing happening again. Nintendo is not a dumb company – this is what they’ve done for decades now, as arguably the most prominent video game company in the world. That, however, is why the hypothetical situation of a practically non-existent Nintendo is so fascinating: what if the giant did fall?
The Broken Trinity
The first place everyone’s mind probably goes to is the competition: how would the downfall of Nintendo affect their adversaries in the console market, Sony and Microsoft (this is, obviously, assuming that Microsoft retains their ownership of the X-Box, which is considered uncertain at this point)? The question is really more complex than it might seem at first glance. First, we must remember that Nintendo is in a very different place than the other two; arguably, they’re not competing in the same space as Sony and Microsoft are, as can be seen from their products, their release schedules, and their PR activity. To put it simply, Nintendo probably considers themselves to be in the business for toys and such, while Sony and Microsoft compete with computing and related entertainment.
What this means regarding the hypothetical disappearance of Nintendo is that Sony and Microsoft would not instantly gain a bigger piece of the pie. Instead, there would be a vacuum in the market – one that so far has only been occupied by Nintendo, as their products have primarily been targeted towards families, and long-time fans of the specific intellectual property they own. I don’t have actual stats on this, but I’m fairly certain that Nintendo supplies the vast majority of casual gamers, who would then be left with two companies mainly concentrating on a more seasoned audience. The focus of the market would (at least at first) shift toward core gamers, trivializing the consumer group consisting of casual gamers and families.
Sony and Microsoft are not stupid either, so they would see the potential in the now-vacant sector of the gaming market. Either of those companies – or both – could try to capitalize on the situation by expanding their operation. It’s also entirely possible, however, that a new party would emerge to provide the supply to satisfy the demand of entertainment Nintendo used to produce. And even if the casual gaming was capitalized on by either of the two existing companies, the emergence of a third company is still more than likely (more on this in one of my older posts). At this time, Valve or Amazon seem like the most likely ones, but it could be anyone – who knows, maybe Hasbro would expand into video games?
Where’s the IP?
While the console question itself is the first issue most think of, that’s probably not even the most relevant one in this scenario. As most who follow the games industry know, Nintendo is a prime example of how a console developer does not make its money on the console itself, but from the games that support it. Nintendo is incredibly well-off because it commands intellectual property unlike anyone else, and that makes all the difference.
The most unpredictable situation would be generated if Nintendo was in such a fiscal situation that they would be forced to sell their IP, like many companies have been before them. However, this is not likely to happen: first off, Nintendo is not going bankrupt, even if the NX does fail. Selling IP is the solution most companies utilize when they need the money to get out of a dire financial situation, but Nintendo will make more money by retaining that IP, even if they never launch another console.
If Nintendo’s consoles do disappear, however, that breeds another question: where does the IP go then? If Nintendo owns it and doesn’t make consoles, they won’t be making any more money unless they use that IP to create products. Therefore, they would likely go down the road already mapped by Sega and Atari: become a third-party developer and just make games. Many argue this would be the smartest course of action for Nintendo anyway; after all, their games make them so much more money than their consoles, if you relate that to the competition.
That might sound like a worrisome idea, especially because of the reference to Sega and Atari. Those companies are little more than dusty memories these days – especially Sega, since it’s a more recent thing. They seem like a cheap relic of the old days, when they used to be relevant in some way, but these days they’re just another average game developer.
The difference between Sega and Nintendo is this: Nintendo is doing fine. Sega was going bankrupt, so not only did they literally not have enough money to develop a new console, but they were forced to sell the IP they owned to stay afloat. What they were left with was a bunch of guys with computers and a somewhat recognizable logo, which – after the IP sale – meant very little.
Nintendo, on the other hand, is in a good place financially. They won’t need to sell their IP, or downsize, or do any of that. And besides, even if Sega didn’t sell their IP, Nintendo would still be leaps and bounds ahead if they entered a similar situation – as I stated earlier, Nintendo’s IP is unmatched. Therefore, even if they did meet their demise in the console competition, their legacy is exponentially bigger than Sega’s, meaning that they would remain significant outside the console business.
This again leads us into the next question: if Nintendo doesn’t sell the IP (as they wouldn’t), where does it go? I mentioned earlier that the IP, however valuable, is practically useless if it’s not utilized. Nintendo might make the most profit by being a third-party developer and make games for as many platforms as possible. But that’s not the most interesting scenario, now is it? What’s much more intriguing is the idea that they would enter an agreement with a single partner and practically “lease” their IP. This would be a tremendous shift in the balance of the industry; where Mario goes, millions will follow.
Sony and Microsoft would probably both be fanatical about trying to secure an exclusive deal with Nintendo – the added profit for landing Mario or The Legend of Zelda would be unprecedented. It’s possible – perhaps even likely – that Nintendo would only make an exclusive deal concerning a select few of their intellectual property, but there would definitely be noticeable changes in the competition either way. Especially in this case, one of the two would definitely expand into the sector Nintendo is currently the master of.
Considering the amount of Nintendo fans in the world, the disappearance of the third faction in the console competition would generate a boom of growth in the remaining two – especially the one who could secure the better deal with Nintendo. This could lead into unprecedented changes in the nature of the competition and the direction of the industry as a whole; right now, both Sony and Microsoft have their own thing and their own goals, but the opening of Nintendo’s segment of the market as well as the colossal income boost would both skew the direction as well as jog the speed of the evolution.
What Would Nintendo Do?
I’ll reel it back a little bit, to conclude with something a bit less high-flying. If the NX was a failure, there are a few things Nintendo can do: the first option was basically explored by me in detail just now, and that’s them going third party. That would be a smart call from them, considering that Nintendo makes fantastic games that make them a lot of money, and their consoles are usually not worth the trouble.
The second option is doing what they did with the Wii U, and the GameCube as well: just keep going. Granted, Nintendo has never faced two defeats in a row, and if the NX was a crushing failure the people in charge would likely make the smart call and not try it again. But there’s always the chance, and Nintendo does have the means – what they lose in consoles they will make back in game sales.
There is perhaps a third option for Nintendo: even if their home consoles don’t quite work out, they’ve (nearly) always had a good thing going with handheld consoles. Even though there are arguments against it, handheld gaming is still a thing, and no one does it better than Nintendo. Granted, they’ve made some odd mistakes with the 3DS, but all that has been glossed over by the blunders Sony has had with the Vita. So far, Nintendo is practically unchallenged in the handheld market, and should they invest all their resources in console development in that, they would take us to heights we wouldn’t believe; trust me on that.
Thank you for reading! Make sure to check next Sunday’s post, where I’ll be explaining my claim that Solid Snake is an irrelevant character within the Metal Gear series. Whaat!?