There's been a lot of digital ink spilled in the past few years over Nintendo's failings, first with the 3DS, then with the Wii U, and most recently as a profitable business in general. This thread is the general discussion, explanation and, essentially, rebuttal, to the general concept that Nintendo is 'doomed'.
To kick it off, let's address that concept right off the bat. Nintendo has around £6billion in liquid assets saved away for a rainy day. That's not stock value (which can fluctuate up and down), that's actual real money they can spend, or, as it happens, use as a safety net following three successive years of making a net loss. Compare this with Sony, who are also posting more annual losses than annual profits - the worst being in 2012, when they reported a record breaking loss of £3.5billion - and was today downgraded in its credit rating to 'junk' status (warding off investors) and it's clear that while Sony has between two and three times as much as Nintendo in liquid assets, as a business, they're struggling far more than Nintendo is. (At the moment, the Playstation brand is literally the only thing turning a profit for Sony).
A common theme that comes up in these discussions is that Nintendo will "do a SEGA", that the Wii U will be Nintendo's 'Dreamcast', and that in a few years, Nintendo will have to give up on hardware and start publishing their IP on other systems. What conveniently gets ignored in this suggestion is the fact that the Dreamcast, and Sega themselves, failed after close to a decade of terrible global mismanagement that literally brought the entire company to the state of bankruptcy. There is absolutely no chance of that happening with Nintendo - even on their current trajectory of losses. That doesn't necessarily mean that Nintendo remaining in the hardware business is the best model for their continued success - but it does mean that they have the luxury of choice, and there's very little chance of anyone at Nintendo choosing to exit the hardware business any time soon.
So, if Nintendo aren't 'doomed', does that mean they aren't in trouble?
No. While they may not be 'fucked' to the point of damnation, they are still in serious difficulty so long as they don't turn in a profit. The primary reason for this is that Nintendo is a publicly traded company, which means that there are investors that expect to see return on their money (something that will only happen whilst they remain investors by Nintendo paying out dividends on their net profits). As an investment prospect, Nintendo are still one of the best out there - the value of the intellectual property they own is enough to guarantee an eventual return to profit and eventual return on investment - but there are plenty of shareholders who will seek to cut their losses and sell whilst Nintendo continue posting losses, and that devalues the stock value for everyone else. In short, there is a lot of direct pressure for Nintendo to begin posting profit again - but that is much easier said than done.
Something has to give at Nintendo for them to be able to return to profit. There are various theories as to what that might be: cutting their losses on the Wii U and releasing a new console that can compete with the Xbox One/PS4; dropping the console business altogether and focusing on the now successful 3DS; even dropping Iwata (though he has made a point of saying that he won't be resigning, at least until the problem is solved... or until the investors force him out).
There's also a current low hanging fruit that plenty of 'analysts' have clung onto of Nintendo publishing their games on iOS/Android instead, essentially a new variation on the old 'Nintendo doing a SEGA' theme and just as likely. However, Nintendo will be moving towards using the platforms as a marketing tool at least - which can be expected to be along the same lines as The Pokemon Company's recent iOS (and to a significantly lesser extent, Android) efforts rather than actually porting across Super Mario Bros.
Personally, my view is that Nintendo is suffering from a somewhat Japanese influenced reliance on "what worked once can work again, so let's keep doing that, then" attitudes. There is some merit to this - after all, it's a significant reason of why Pokemon is so successful (although it's also a significant part of the primary criticism to the series that it ironically never really evolves very much). However, it has also led to a somewhat arrogant position for the company that is somewhat best reflected in the Wii U itself. Reliance on an unusual control method to create a unique selling point for the console, utilising cheap, old, technology to deliver the bare minimum of specs and expecting the Wii name to mean a high level of adoption from the casual gamers that made the Wii a success has all led the console to the situation it's in now.
The casual gamers never came on board (those that managed to get past the confusion that the Wii U isn't just a new controller accessory for the Wii just didn't see the point in spending £250-£400 on something that didn't really do anything different to the Wii they bought under the hype of Wii Sports or Wii Fit and then left to collect dust), and probably never will - the vast majority now much more likely to fall under the Microsoft or Sony camps with a device that fulfils their other, more utilised, entertainment needs.
The specs have taken Nintendo by surprise - who, upon exiting their insular bubble from the Wii, have claimed to have underestimated the cost and difficulty of developing 'HD' games, despite the entire rest of the industry working that out over the past 8 years, leaving the Wii U library pretty barren of core Nintendo titles as of yet. Whilst also forcing third parties to have to severely redevelop multiplatform games to port them over on a weaker platform with an entirely different architecture, leaving most of them to consider it too much of a cost for a platform that's not only not selling, but would be hostile to third parties even if it were (the stark truth is that a lot of Nintendo console purchasers almost exclusively only buy Nintendo titles for them - a fact that dates back even to the earliest days of the NES, and has only gotten more pronounced since). All leading to a critical lack of software.
Meanwhile, the Gamepad itself is neither enough of a unique selling point to shift the console off the shelves, nor apparently a great source of inspiration for new types of gameplay, given that even Nintendo seem to have given up on the idea of actually doing anything more innovative with it in their games than the ability to play with the TV turned off. As a major contributor to the cost of the system, as well as a significant reason why Nintendo can only make a loss on each system sold following the price cuts they've had to undertake to shift the systems at all (something fairly unprecedented for Nintendo, who have usually always sold their systems at a tidy profit - though it's the second time in the past few years they've had to do it), it's harming the system far more than it's helping it. Especially since the barely utilised Pro controller is actually a really good controller.
Combined with the fact that Nintendo has failed to compete, at all, with Microsoft or Sony in the realms of general entertainment value on their consoles (we're lucky to have scraped together Netflix and Youtube access), online systems and digital retail, and it's a brilliant demonstration of just how behind Nintendo are from the now established front lines.
Nintendo really can be innovators, but what use is innovation if you're so far behind the times that it just doesn't serve any real value any more? It's like inventing a brand new way to light gas lamps in your home in 2014.
There needs to be less insistence on formality and tradition (and a lot less Nipponcentric thinking during product development) and a greater level of ambition than just making the next Mario game. Whether we can do that with Iwata in charge, I'm unsure - certainly, I think a greater western influence would do the company a world of good. Whether Nintendo can manage that with the Wii U still in play is even more in question. Key games like Smash Bros will sell systems, and in the end it may at least settle in at Gamecube levels of success if later years yield better software results. However, the hardware itself just can't compete - and doesn't really lend itself well to the idea of Nintendo being able to improve upon the key areas such as general entertainment, online multiplayer and digital retail.
Nintendo could withstand holding firm on the Wii U and letting it live out at least another 2-3 years with a few first party titles holding it together each year. They'd almost certainly continue to make losses, but they can take it financially. Whether they would be allowed to by investors if they continued to post annual losses throughout is another matter entirely, though. And that's the crux of Nintendo's problem.
Tl;Dr - Nintendo aren't doomed, but the Wii U can be little more than an albatross around their neck. They managed to turn the 3DS around during 2013, but the handheld and console spaces are so very different now that it's unlikely even a similarly strong year of software would turn the Wii U's fortunes around while Nintendo can't compete with the key features now expected of a box that connects to your TV. A radical change of pace is required one way or another - and if that isn't established by this time next year, I'd consider Satoru Iwata's time to be running out.
To kick it off, let's address that concept right off the bat. Nintendo has around £6billion in liquid assets saved away for a rainy day. That's not stock value (which can fluctuate up and down), that's actual real money they can spend, or, as it happens, use as a safety net following three successive years of making a net loss. Compare this with Sony, who are also posting more annual losses than annual profits - the worst being in 2012, when they reported a record breaking loss of £3.5billion - and was today downgraded in its credit rating to 'junk' status (warding off investors) and it's clear that while Sony has between two and three times as much as Nintendo in liquid assets, as a business, they're struggling far more than Nintendo is. (At the moment, the Playstation brand is literally the only thing turning a profit for Sony).
A common theme that comes up in these discussions is that Nintendo will "do a SEGA", that the Wii U will be Nintendo's 'Dreamcast', and that in a few years, Nintendo will have to give up on hardware and start publishing their IP on other systems. What conveniently gets ignored in this suggestion is the fact that the Dreamcast, and Sega themselves, failed after close to a decade of terrible global mismanagement that literally brought the entire company to the state of bankruptcy. There is absolutely no chance of that happening with Nintendo - even on their current trajectory of losses. That doesn't necessarily mean that Nintendo remaining in the hardware business is the best model for their continued success - but it does mean that they have the luxury of choice, and there's very little chance of anyone at Nintendo choosing to exit the hardware business any time soon.
So, if Nintendo aren't 'doomed', does that mean they aren't in trouble?
No. While they may not be 'fucked' to the point of damnation, they are still in serious difficulty so long as they don't turn in a profit. The primary reason for this is that Nintendo is a publicly traded company, which means that there are investors that expect to see return on their money (something that will only happen whilst they remain investors by Nintendo paying out dividends on their net profits). As an investment prospect, Nintendo are still one of the best out there - the value of the intellectual property they own is enough to guarantee an eventual return to profit and eventual return on investment - but there are plenty of shareholders who will seek to cut their losses and sell whilst Nintendo continue posting losses, and that devalues the stock value for everyone else. In short, there is a lot of direct pressure for Nintendo to begin posting profit again - but that is much easier said than done.
Something has to give at Nintendo for them to be able to return to profit. There are various theories as to what that might be: cutting their losses on the Wii U and releasing a new console that can compete with the Xbox One/PS4; dropping the console business altogether and focusing on the now successful 3DS; even dropping Iwata (though he has made a point of saying that he won't be resigning, at least until the problem is solved... or until the investors force him out).
There's also a current low hanging fruit that plenty of 'analysts' have clung onto of Nintendo publishing their games on iOS/Android instead, essentially a new variation on the old 'Nintendo doing a SEGA' theme and just as likely. However, Nintendo will be moving towards using the platforms as a marketing tool at least - which can be expected to be along the same lines as The Pokemon Company's recent iOS (and to a significantly lesser extent, Android) efforts rather than actually porting across Super Mario Bros.
Personally, my view is that Nintendo is suffering from a somewhat Japanese influenced reliance on "what worked once can work again, so let's keep doing that, then" attitudes. There is some merit to this - after all, it's a significant reason of why Pokemon is so successful (although it's also a significant part of the primary criticism to the series that it ironically never really evolves very much). However, it has also led to a somewhat arrogant position for the company that is somewhat best reflected in the Wii U itself. Reliance on an unusual control method to create a unique selling point for the console, utilising cheap, old, technology to deliver the bare minimum of specs and expecting the Wii name to mean a high level of adoption from the casual gamers that made the Wii a success has all led the console to the situation it's in now.
The casual gamers never came on board (those that managed to get past the confusion that the Wii U isn't just a new controller accessory for the Wii just didn't see the point in spending £250-£400 on something that didn't really do anything different to the Wii they bought under the hype of Wii Sports or Wii Fit and then left to collect dust), and probably never will - the vast majority now much more likely to fall under the Microsoft or Sony camps with a device that fulfils their other, more utilised, entertainment needs.
The specs have taken Nintendo by surprise - who, upon exiting their insular bubble from the Wii, have claimed to have underestimated the cost and difficulty of developing 'HD' games, despite the entire rest of the industry working that out over the past 8 years, leaving the Wii U library pretty barren of core Nintendo titles as of yet. Whilst also forcing third parties to have to severely redevelop multiplatform games to port them over on a weaker platform with an entirely different architecture, leaving most of them to consider it too much of a cost for a platform that's not only not selling, but would be hostile to third parties even if it were (the stark truth is that a lot of Nintendo console purchasers almost exclusively only buy Nintendo titles for them - a fact that dates back even to the earliest days of the NES, and has only gotten more pronounced since). All leading to a critical lack of software.
Meanwhile, the Gamepad itself is neither enough of a unique selling point to shift the console off the shelves, nor apparently a great source of inspiration for new types of gameplay, given that even Nintendo seem to have given up on the idea of actually doing anything more innovative with it in their games than the ability to play with the TV turned off. As a major contributor to the cost of the system, as well as a significant reason why Nintendo can only make a loss on each system sold following the price cuts they've had to undertake to shift the systems at all (something fairly unprecedented for Nintendo, who have usually always sold their systems at a tidy profit - though it's the second time in the past few years they've had to do it), it's harming the system far more than it's helping it. Especially since the barely utilised Pro controller is actually a really good controller.
Combined with the fact that Nintendo has failed to compete, at all, with Microsoft or Sony in the realms of general entertainment value on their consoles (we're lucky to have scraped together Netflix and Youtube access), online systems and digital retail, and it's a brilliant demonstration of just how behind Nintendo are from the now established front lines.
Nintendo really can be innovators, but what use is innovation if you're so far behind the times that it just doesn't serve any real value any more? It's like inventing a brand new way to light gas lamps in your home in 2014.
There needs to be less insistence on formality and tradition (and a lot less Nipponcentric thinking during product development) and a greater level of ambition than just making the next Mario game. Whether we can do that with Iwata in charge, I'm unsure - certainly, I think a greater western influence would do the company a world of good. Whether Nintendo can manage that with the Wii U still in play is even more in question. Key games like Smash Bros will sell systems, and in the end it may at least settle in at Gamecube levels of success if later years yield better software results. However, the hardware itself just can't compete - and doesn't really lend itself well to the idea of Nintendo being able to improve upon the key areas such as general entertainment, online multiplayer and digital retail.
Nintendo could withstand holding firm on the Wii U and letting it live out at least another 2-3 years with a few first party titles holding it together each year. They'd almost certainly continue to make losses, but they can take it financially. Whether they would be allowed to by investors if they continued to post annual losses throughout is another matter entirely, though. And that's the crux of Nintendo's problem.
Tl;Dr - Nintendo aren't doomed, but the Wii U can be little more than an albatross around their neck. They managed to turn the 3DS around during 2013, but the handheld and console spaces are so very different now that it's unlikely even a similarly strong year of software would turn the Wii U's fortunes around while Nintendo can't compete with the key features now expected of a box that connects to your TV. A radical change of pace is required one way or another - and if that isn't established by this time next year, I'd consider Satoru Iwata's time to be running out.
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