Nintendo’s Drive To Innovate Allows It To Chart Its Own Path

Gaming

Nintendo’s Drive To Innovate Allows It To Chart Its Own Path

While Sony and Microsoft are both ushering in next-generation iterations of their flagship consoles, Nintendo finds itself in a unique position. Since the Wii era, the company has effectively operated on its own generational schedule, sidestepping the technological arms race its rival console makers are engaged in to pursue different hardware strategies and audiences.

This tact has helped Nintendo and its systems stand out in the face of increasingly stiff competition, but it has not always worked in the company’s favor. The early, uncontested success of the Wii and its novel motion controller eventually petered out as the generation wore on and the system’s technological deficiencies became more apparent, and its successor, the Wii U, stumbled out of the gate and never found its footing, moving less than 14 million units over its truncated lifetime.

What’s more, Nintendo has traditionally had to juggle two different hardware lines: a home console and a handheld one. As a result, the company has had to divide its resources to support two separate platforms simultaneously, but this dual strategy has also been Nintendo’s saving grace; the publisher has historically dominated the handheld space, and this success has helped prop it up even when its home consoles have struggled to gain traction.

Which brings us to its latest system, the Switch–a handheld/home console hybrid that merges Nintendo’s two disparate hardware lines together into one platform. Although the system has only been on the market for a few years, it has already been a runaway hit for the company, enjoying Wii-like levels of success thus far–but Nintendo certainly had to learn a few hard lessons along the way to get there.

Rocky Launch And Course Correction

The road to the Switch begins with the 3DS, the company’s successor to the hugely successful DS line. The dual-screen handheld hit the market in early 2011, and much like the Wii and DS before it, its biggest selling point was a novel hardware feature: in this case, glasses-free stereoscopic 3D.

This feature would be the focal point of Nintendo’s initial marketing strategy for the 3DS, even serving as the basis for the system’s name. As genuinely impressive as the stereoscopic 3D effect was, however, it was not the irresistible draw that the company had perhaps anticipated. Thanks to the handheld’s meager launch lineup and steep price tag (it launched at $250 USD), 3DS sales were initially sluggish, and they would remain so for the first few months of its life until Nintendo made a drastic move: It slashed the handheld’s price.

In July 2011, less than six months after the system first launched, Nintendo dropped the 3DS’s price to $170 USD–nearly $100 less than what it was initially asking. As a make-good to those who purchased the handheld at its original cost, Nintendo gave away a smattering of free NES and Game Boy Advance games, as well as digital certificates designating early adopters as “3DS Ambassadors.” These NES games would eventually be sold through the handheld’s digital storefront, the eShop, along with other retro titles, but the Game Boy Advance games remained an exclusive perk for Ambassadors.

Enacting such a significant price cut so early into the 3DS’s life was an unprecedented gambit for Nintendo, but it had the desired effect: sales increased after the reduction. The price cut also arrived just as the system’s first marquee games began trickling in, further boosting sales. The stream of blockbusters kicked off that summer with remakes of two beloved N64 classics, The Legend of Zelda: Ocarina of Time and Star Fox 64, and it continued into the holiday season with the arrival of Super Mario 3D Land and Mario Kart 7, both of which would move well over 10 million copies over the system’s lifetime.

Hit After Hit

While Nintendo’s steep price cut was responsible for giving the 3DS a much-needed sales jolt, it was the company’s consistently stellar first-party output that sustained that momentum through the rest of the system’s life. Super Mario 3D Land and Mario Kart 7 were both pivotal in establishing the handheld, and over the next few years, Nintendo followed them with a steady string of additional hits, including Kid Icarus: Uprising, New Super Mario Bros. 2, Fire Emblem: Awakening, Luigi’s Mansion: Dark Moon, Animal Crossing: New Leaf, The Legend of Zelda: A Link Between Worlds, Super Smash Bros. 4, and Fire Emblem Fates, among many others.

But perhaps the biggest contributor to the 3DS’s success was Pokemon. Nintendo’s monster-catching franchise has remained a perennial multi-million seller since it exploded onto the scene back in the ’90s, and its 3DS installments would go on to become some of the company’s fastest-selling games. The series made its 3DS debut in 2013 with Pokemon X and Y, the first mainline Pokemon titles to feature full 3D visuals. The pair would be another smash, collectively selling more than 16 million copies–making them the fourth-best-selling generation in series’ history to that point. The handheld would receive a few more mainline Pokemon games as the generation wore on, including remakes of Pokemon Ruby and Sapphire, as well as a pair of seventh-generation titles, Pokemon Sun and Moon (which were eventually followed by expanded “Ultra” versions in 2017).

Not only did each of these first-party games garner positive reviews, they were all commercial successes, with most moving multiple millions of copies. This steady cadence of quality exclusives made the 3DS a vibrant platform, ensuring that there was always a new marquee game to look forward to. Moreover, these first-party hits were complemented by a solid array of third-party titles. Japanese publishers in particular released some great games for the handheld over its lifetime. Capcom launched Resident Evil Revelations and three mainline Monster Hunter games; Square Enix put out an original Kingdom Hearts game, a brand-new RPG in Bravely Default, and a well-received remake of Dragon Quest VII, among other gems; and Level-5 struck gold with the Yo-kai Watch series, which turned out to be a particularly big success in Japan.

Hardware Revisions Galore

Nintendo, perhaps even more so than its rival console makers, has a reputation for revising its hardware frequently, and that certainly held true over the 3DS’s lifetime. The company refreshed the dual-screen system more times than any of its previous handheld or home consoles. A year after the 3DS launched, Nintendo introduced the 3DS XL, a larger model that boasted bigger screens and improved battery life. That was followed in 2013 by the budget-conscious 2DS. This iteration eschewed the clamshell casing of previous models for a distinctly toast-shaped design. Even more notably, it lacked the handheld’s most distinctive feature, its stereoscopic 3D display, shifting focus away from the system’s original selling point.

The 3DS line received a more significant refresh in 2015 in the form of the New Nintendo 3DS and the larger New Nintendo 3DS XL. These retained the general look of the standard 3DS while introducing some notable improvements. For one, they boasted more powerful innards, giving developers an extra bit of horsepower to use. Only a small handful of games ultimately took advantage of this improved hardware, but it nonetheless made the New 3DS a genuine upgrade over the original system rather than a cosmetic refresh. The New 3DS also featured a significantly improved stereoscopic display, as well as a secondary analog “nub” on the right-hand side of the system, finally giving players a dual-analog control method without the need for a cumbersome attachment.

The New 3DS was followed in 2017 by the New 2DS XL, the platform’s final revision. Like the standard 2DS, this model lacked a stereoscopic 3D screen, but it retained the New 3DS’s clamshell design and improved internals, making it the culmination of the 3DS’s many redesigns. The New 2DS XL would go on to become the new standard model for the remainder of the platform’s life until production was officially discontinued earlier this year.

Financial Losses And Struggles

Nintendo was ultimately able to reverse the 3DS’s early misfortunes and turn the handheld into a respectable success, selling more than 75 million units over its lifetime, but it wasn’t a painless fix. Following the handheld’s early slow sales and drastic price cut, Nintendo posted an annual loss in 2012, the first-ever loss in the company’s history. In an act of contrition, then-president Satoru Iwata and other executives cut their own salaries.

While 3DS sales eventually recovered from this initial slump, the same could not be said of the Wii U. The home console launched in Fall 2012, and despite being a follow-up to the hugely successful Wii–Nintendo’s best-selling home console to date–it would flounder from the outset and never find its footing. Many factors ultimately contributed to the system’s failure. For one, its name and unconventional tablet-like controller caused much confusion among consumers, who weren’t sure whether it was a new system or a peripheral for the Wii. Nintendo itself attributed the Wii U’s failure to its high price point and the proliferation of tablets at the time, which diluted the GamePad’s novelty.

Compounding these issues was the system’s sparse library. Whereas the 3DS was supported by a steady stream of first-party games, the Wii U was frequently plagued by software droughts; the system would go months between a major release, which made it difficult for Nintendo to sustain any sales momentum. Despite its sporadic release cadence, however, Nintendo’s own output remained consistently excellent. The company buoyed the system along with some truly wonderful releases over its lifetime, many of which would move millions of copies despite the console’s small install base. Mario Kart 8 in particular was a remarkable hit. The game arrived in 2014 and would go on to become the Wii U’s top seller, shifting more than 8 million copies–a gargantuan amount considering the Wii U itself sold just over 13 million units.

It was hardly Wii U’s only software success. Super Mario 3D World and launch title New Super Mario Bros. U each sold nearly 6 million copies; Super Smash Bros. 4 moved over 5 million; and Splatoon–a brand-new IP for the company–sold more than 4 million copies. These hits were complemented by an array of other notable gems, including Pikmin 3, Donkey Kong Country: Tropical Freeze, Xenoblade Chronicles X, and remasters of The Legend of Zelda: The Wind Waker and The Legend of Zelda: Twilight Princess. None of these would be enough to reverse the ailing console’s fortunes, but they were all well-received in their own right.

Further exacerbating Wii U’s software problem was its scant third-party support. Outside of a handful of ports and some exclusives, the system received very few third-party titles over its lifetime, which meant players had little to play as they waited for Nintendo’s own offerings. This problem manifested right from the start. Although the system launched with a respectable number of games, many of these were ports of titles that had already been available on PS3 and Xbox 360 for some time, and their poor sales made other third-parties hesitant to bring their titles to the console.

The Wii U’s poor performance led Nintendo to post another operating loss in 2013. Iwata and other executives once again cut their own salaries for several months to apologize for the financial struggles. The company would ultimately weather these rocky years and return to profitability in 2014, but the Wii U would never turn the corner the way the 3DS did, and Nintendo pulled the plug on it after only four years on the market.

Tentative Steps Into Mobile Gaming

After years of resisting investor pressure to develop smartphone games, Nintendo finally relented in 2016 and announced it would be entering the mobile gaming market. The company’s first effort, however, was not quite what anyone had expected; rather than developing a mobile game based on Mario or another one of its marquee properties, Nintendo made its mobile debut with Miitomo, a social application of sorts in which players could create a Mii avatar and answer questions about themselves, then share those answers with friends through conversations with their own Miis.

Miitomo would become emblematic of Nintendo’s mobile venture overall. Although the app was an early hit, garnering more than 10 million downloads within its first month, it did not make much money, and it was ultimately discontinued a little over two years after it launched. Since then, the company has put out a handful of other mobile games to varying degrees of success. Super Mario Run followed in late 2016 (March 2017 for Android devices), but it likewise was not the blockbuster hit investors expected. This could be chalked up to the game’s steep price tag. Super Mario Run had an upfront cost of $10 USD, which seemed like an exorbitant amount considering that most mobile users are accustomed to downloading games for free. As a result, it would go on to be Nintendo’s second-poorest performing game in terms of revenue.

After Mario Run failed to make much traction, each of the company’s successive mobile games–Fire Emblem Heroes, Animal Crossing: Pocket Camp, Mario Kart Tour, Dragalia Lost, and Dr. Mario World–would embrace the free-to-play model. Fire Emblem Heroes in particular would become a respectable success for Nintendo; since its launch in 2017, the game has raked in more than $600 million, making it far and away Nintendo’s highest-grossing mobile game to date. The company would also continue experimenting with different monetization methods for its mobile games, introducing paid subscriptions to both Mario Kart Tour and Animal Crossing: Pocket Camp in 2019–to the consternation of many fans.

Although Nintendo’s mobile games have not been big money makers in their own right, the company says they serve an important role in its business: They help expand the reach of its IPs and direct players to its more traditional game offerings. Nintendo cites Pocket Camp in particular as introducing many female and US players to the Animal Crossing series, while Pokemon Go–although not developed or published by Nintendo itself–has helped spur sales of mainline Pokemon games. While Nintendo is reportedly considering winding down mobile development, for the time being, the company says it still considers it an important pillar in its strategy.

Flipping The Switch

Although the Wii U would end up becoming Nintendo’s poorest-performing home console to date, it was nonetheless an important step for the company, as it helped pave the way for its next system: the Switch. One of the Wii U’s most noteworthy features–being able to play console games either on the television or on the system’s dedicated screen–would become the focal point for its successor. Unlike the Wii U GamePad, however, which only worked within a few feet of the Wii U itself, the Switch offered true portability; the system could either be docked for television play or taken on the go, blurring the line between a handheld and home console.

The Switch officially launched in March 2017, and from the outset, it proved to be a remarkable rebound from the Wii U. Despite releasing outside of the holiday season, the system saw Wii-like levels of success, and for much of that year, demand outstripped availability; the console would sell out at retailers across the US and other parts of the world as soon as it hit shelves, making it highly coveted. (It’s a situation we saw repeat once again in 2020 amid the COVID-19 pandemic.) This record-breaking pace continued throughout the year, and the system ended up overtaking Wii U’s lifetime sales in only 10 months.

While the novelty of the Switch itself proved to be a big selling point, its library established it as a desirable platform. As it did with the 3DS, Nintendo meted out a consistent stream of first-party titles for the system in the months following its release, which helped sustain its momentum and avoid the extended software droughts that plagued the Wii U. The console launched alongside The Legend of Zelda: Breath of the Wild, one of the highest-rated games of the past decade, and in the months that followed, it would receive an expanded port of Mario Kart 8, a sequel to Splatoon, and a brand-new 3D Mario adventure. Nintendo has maintained this measured release cadence for much of the system’s life thus far, adding a number of other hits to the console’s library since then, including Super Smash Bros. Ultimate, Luigi’s Mansion 3, Pokemon Sword and Shield, and Animal Crossing: New Horizons–all of which would become multi-million sellers.

Although the Switch is still early in its life cycle, it too has seen a couple of hardware refreshes. In 2019, Nintendo introduced the Switch Lite, a cheaper, handheld-only iteration of the console that lacks the ability to connect to a television. Meanwhile, the standard Switch model was modestly updated that same year with better battery life. There may be more revisions on the way as well. While Nintendo has not formally announced any such plans yet, reports continue to circulate that the company will release an “enhanced” Switch model in 2021. Whether or not those rumors bear out remains to be seen, but given the company’s history, it seems likely that the Switch will receive a few more hardware revisions before its inevitable successor arrives.

Third-Party Strides

While the Switch has been an impressive sales success for Nintendo, perhaps its most remarkable feat has been mending the company’s relationship with third parties. Outside of its handheld systems, Nintendo has traditionally struggled to attract much third-party support for its consoles since the days of the Nintendo 64, but the Switch has built up an impressive array of third-party offerings thus far, with more studios throwing their support behind the console as it continues to sell at a record pace.

Even some developers that haven’t published a game on a Nintendo system in decades have brought titles over to the Switch. Blizzard released Diablo III and Overwatch on the system in 2018 and 2019, respectively, and it’s already confirmed that Overwatch 2 will be on the console as well when it launches; NetherRealm worked with Shiver Entertainment to develop a Switch version of Mortal Kombat 11, making it the first Mortal Kombat game to hit a Nintendo system since 2007; and Bethesda has released numerous games on the hybrid console, including Wolfenstein II: The New Colossus and Doom, with Doom Eternal still on the way.

Moreover, many third-party games have found remarkable success on the Switch. Celeste sold more on Switch than any other platform. SteamWorld Dig 2 sold 10 times better on Switch than on Steam. The Switch version of Wonder Boy: The Dragon’s Trap sold more than the PS4, Xbox One, and PC versions combined. Even older titles have experienced astonishing sales on the system. A quarter of Shovel Knight: Treasure Trove’s total sales came from Switch, while Super Meat Boy’s first-day Switch sales nearly equaled its Xbox 360 debut. And although the Switch lacks the horsepower of the PS4 and Xbox One, it looks like it could receive more games from those systems in the future thanks to cloud streaming. Last month, Remedy released a surprisingly solid cloud version of Control on Switch, while cloud versions of Resident Evil VII and Assassin’s Creed Odyssey were tested in Japan. IO Interactive has also announced that a cloud version of Hitman 3 is coming to Switch, signaling that cloud-streaming games could become a regular fixture of the system’s library going forward.

Other Matters, In Brief

    Iwata Passes Away: Satoru Iwata, Nintendo’s president since 2002, passed away in 2015. Following his passing, former Nintendo of America president Tatsumi Kimishima took the company’s reins until 2018, when he was succeeded by current president Shuntaro Furukawa.Reggie Retires: Longtime Nintendo of America president Reggie Fils-Aime retired from the company in 2019. He was succeeded by the fittingly named Doug Bowser, who previously served as NOA’s vice president of sales and marketing.Amiibo: Nintendo introduced a line of toys-to-life figures called Amiibo in 2014. These figures feature an embedded NFC chip that allows them to interact with compatible games, and they prompted a craze of their own; for months after their launch, Amiibo were practically impossible to find, selling out at stores almost immediately. While the company seems to have wound the line down in recent years, Nintendo continues to release Amiibo figures alongside some of its biggest titles.Embracing DLC: Nintendo released its first-ever paid DLC in 2012. Since then, DLC has become a fixture of the company’s business strategy, and many of its biggest titles have received some sort of expansion or add-on after their release; Pokemon Sword and Shield, for example, eschewed a traditional third version in favor of two DLC expansions, The Isle of Armor and The Crown Tundra.Post-launch Support: Nintendo has also embraced the practice of releasing free post-launch updates. The company regularly introduces new features and contents to many of its games at no additional charge after their release. Animal Crossing: New Leaf remains a prime example; the game was updated with new villagers, Amiibo support, and other features in 2016, three years after it first launched.Mini Consoles, Big Money: Nintendo released a miniature plug-and-play version of the NES, dubbed the NES Classic, in 2016. The system came preloaded with 30 of the platform’s most notable games. Nintendo followed that with an SNES Classic mini console in 2017. Cumulatively, the plug-and-play systems have sold more than 10 million units and, thanks to their success, have inspired a wave of classic miniaturized consoles from Sony, Sega, and more.Switch Online: Nintendo launched its Nintendo Switch Online subscription service in 2018. Like rival services, it gives subscribers the ability to play games online along with a few other perks, most notably cloud save backups and access to a library of classic NES and SNES games. As of September 2020, the service has more than 26 million subscribers.New Ventures: As part of its initiative to expand the reach of its IP, Nintendo has begun branching out into other markets. The company is partnering with Minions studio Illumination to produce an animated Super Mario movie that’s slated to hit theaters in 2022. Construction on a Super Nintendo World theme park is also underway. The park is scheduled to open first in Japan in 2021.Lost Classics: Nintendo has officially released a handful of classic games that had previously gone unlocalized. In 2015, the company brought the very first Mother game to Wii U as EarthBound Beginnings. In 2017, SNES’s canceled Star Fox sequel, Star Fox 2, was included in the SNES Classic mini console before later being added to the Switch Online service. Finally, Nintendo is officially localizing the very first Fire Emblem game for Switch in honor of the series’ 30th anniversary this December.

The Verdict (So Far)

Although it remains to be seen what the future holds for the Switch, the hybrid console has already been a significant success for Nintendo. After suffering numerous setbacks during the Wii U era, the House of Mario was able to rebound adeptly, releasing an innovative console that has built up a robust library of first- and third-party games. With the recent release of the PS5 and Xbox Series X and Series S, the console space will inevitably become much more competitive, but the Switch’s unique hardware features–particularly its portability–and its strong momentum place Nintendo in a good position.