NINTENDO

DISRUPTOR BEING DISRUPTED

Jaime Fuertes de Arredondo
LikeYu Consulting Group

Its not a matter of whether or not the tech

is cutting
edge, but whether or not people

think its fun.

- Satoru Iwata, president of Nintendo Co, Ltd

The Question
Nintendo is facing for the
first time in its 30-year
history the prediction of a
net loss of US$264 million.
Would Nintendo be able
to meet the changing
consumer needs?

The Answer
The market is changing. The introduction
of the new mobile systems that support
better graphs and playability has caused
the loss of interest in the former handheld
consoles as the Nintendo 3DS.
Most people are causal players, they
prefer to play in just one device and
forget about buying different ones,
avoiding the cost of a console. Mobiles
and tablets has become the main
instrument for casual players.
Those who really care about technology
look for a better console as Xbox 360 or
PS3.

So whether or
not a great
concept comes
upits all about
the ideas.
- Hiroshi
Yamauchi, former
president of Nintendo Co,
Ltd

Here there is the opportunity. Nintendo has

already very fun and enjoyable games.
Its great success is based on the ease to
play their games. Actually, the same that
is happening with mobile gaming.
Its games can easily be adapted to be
played in a tablet or mobile phone. But,
we do not want to lose the opportunity
of continue selling consoles and focus
only in games.
The creation of WiiPlay will revolutionize
the market. A new tablet made to play
all the incredible and always enjoyed
Nintendo games. Who does not want to
be able to play Mario Bros in a portable
device
that
also
offers
all
the
functionalities of a normal tablet?
Besides, the creation of the a wireless
controller and the Wii Market will change
the way we see video games. With
millions of possibilities and without the
need to go to a shop for buying a game.
You can even share the games you play
with your friends!
The future has come:
We Play: WiiPlay

LikeYu Consulting Group: Ideas for you

INTRODUCTION
Nintendo has always been a leader in the video game business. Though Nintendo has
had many up and downs, it has never had to face any annual earnings loss since it
released its first handheld game devices in 1980. However, the changing environment of
the video games industry with the development of new mobile operating systems has
led the last Nintendos device (Nintendo 3DS) to low sales figures. What is more, net
loss prediction for the year ending in March 2012 would be US$264 million.

ANALYSIS
1. MARKET
In 2010, the video game markets revenue was US$62.7 billion. This industry is
experimenting a continuous growth and is expecting to continue this path during the
coming years. Nevertheless, it is crucial to understand how the new technologies are
transforming the market and the way video games are played nowadays. We can
distinguish four sections:
-

Console gaming.
PC gaming.
Handheld gaming.
Mobile gaming.

We can check how the unit sales of consoles are decreasing in general [see Exhibit 1].
But most important, consoles are decreasing their market share every year [see Exhibit
2]. Conversely, mobile gaming, PC gaming, as well as advertise based games are
increasing their revenue at a very fast track.
Dedicated handheld game devices are becoming more unusual due to the development
of mobile technology that is offering a disruptive experience (not only phone calls and
SMS; but internet, apps and games) and makes casual players less interested in buying a
new device only oriented to game playing.
Besides, it is important to take into account the trends. Multiplayer games are turning
out to be more and more relevant since every time the networking technology is
improving the playability. Related with this are the social networks games, which are
attracting a huge amount of the female population [see Exhibit 3]. Free and freemium
games and the possibility of digital game purchase are becoming two frequent options
between consumers.
2. CUSTOMERS
Customers can also be divided in three categories:
-

Casual gamers
Hardcore gamers
Professional gamers.

LikeYu Consulting Group: Ideas for you

It is easy to realize that more of the 50 per cent of population are considered either
casual gamers or hardcore gamers [see Exhibit 4]. This analysis is very important when
deciding what kind of product we want to sell. In other words, no matter how good is
the product in terms of technology, graphics and so on, if then it is so complicated that,
for instance, casual gamers are not able to understand how to play.
In these terms, Nintendo has always had the ability to create easy and fun games that
can be played by everyone [see Exhibit 5].
3. COMPETITORS

Direct competitors: Sony and Microsoft.

They compete in the handheld (only Sony) and console gaming sector but with a
different strategy. They are focus on the extension of the product life cycle of
the game console. Their game studios develop exclusives games.

Indirect competitors: Apple and Google.

The increasing popularity of the apps (15 billion apps had been downloaded
from the App store and four of the top five paid apps were games) and their
target users not necessarily technology-savvy are supposing not a direct
competition but a change in the way video games are conceived by casual
gamers.

4. OPTIONS
a) Improve Wii and Nintendo 3DS.
This would suppose to develop Nintendo consoles so they can compete with
Microsoft and Sony. Implementing more powerful hardware and getting thirdparty game developers work with them. Better graphics, music and features.
This would lead to a raise in the sales between the hardcore gamers if the result
is optimum. However, it would suppose abandon the Nintendo style making it
equals to others. What is more, it would mean to compete in a consumer market
where they are not established and copying other strategies instead of being
copied as in previous years.
b) Freemium games and Apps market.
It would suppose to abandon the console development and to center in the new
emerging phone gaming market. It could suppose a very large profit in a very
short time since Nintendo is the owner and developer of very famous games
such as Mario Kart, Mario Bros, and Wii Sports [see Exhibit 5], which
undoubtedly would be immediately bought and downloaded.
a) Create WiiPlay, Wii Market and a new game system.
This would lead to take advantage of the market in Nintendos way. Use the
experience and knowledge about the video game market that Nintendo already
have and use to create a new device that fits in the new market. Not only a new

LikeYu Consulting Group: Ideas for you

device but redefine the video game market looking to the mobile gaming as an
opportunity instead of as a threat.

PROPOSAL
After considering the different options [see Exhibit 6], I arrive to the conclusion that
option c is the one that can lead Nintendo to the highest level, achieving again a high
sales number and without forgetting the most important part: being disruptive.
This option compared with option a and b could be more costly and more difficult
to implement; however it is the only one that will make Nintendo sustainable in the
future.
1. WHAT?

Design a new device (WiiPlay) with the next features:

-

Portable, light, easy to carry. This would allow consumers to carry the WiiPlay
with them wherever they go. It would be very similar to the current tablets
regarding the design.

Access to the Internet.

App Market (Wii Market) so consumers can easily have access to Nintendo
games and uncountable characteristics based on their preferences. The Wii
Market could be downloaded on the mobiles phones allowing the consumer to
manage all his games.

Design the corresponding wireless controller, which could be connected with

WiiPlay, allowing consumers a better experience while playing. This would
improve the game experience on the entire mobile and tablet based games.

Create a new game purchasing system.

-

Instead of buying a physical game, all games would be available on the Wii
Market. Once a consumer makes the payment for one game, he would
receive a unique code to install the game in his device. This has the great
advantage that Nintendo will continue having the property of all the games
in the sense that anyone who want to play, for instance, Mario Kart, would
have to do it in the WiiPlay. Conversely to option b, in which Nintendo
games would quickly spread out and there would be no special need to buy
WiiPlay instead of any other tablet available in the market.

Besides, all the games would allow the possibility of sharing them with
friends. If two people are connected to the same Wi-Fi network but only one
has bought the game, this person could choose the option share so both of
them can play one against other in the multiplayer mode. This can seem a
disadvantage at the beginning since it seems more logical to make the two
people pay for the game. However, if we think of the physical video games
we used to play five years ago, they could be shared without problem and
played in a friends console. The option share will, in reality, foster sales

since anyone who enjoys playing a game would like to be able to play
without needing his friend.

The Wii Market will include a user profile so consumers can be connected with
their friends. This profile will inform about who is playing what, apart from the
friends scores and could include some discounts or limited offers if you buy a game
recommended by a friend. This strategy will also foster sales considerably since a
lot of people would like to buy the games at a cheaper price and, what is better,
Nintendo could reduce the investment in marketing as consumers will contribute to
raise awareness about the new games.

Take advantage of the users Nintendo has already been targeting (not expert
gamers). Nintendo is not going to focus on the lonely person who plays alone in his
room and prefers better consoles as Xbox 360 or PS3. On the contrary, Nintendo is
going to use again the family strategy. WiiPlay is a console tablet made to be
played with friends, with family.
It is going to be so easy to use that everyone could play. There is no need to have
several WiiPlay. One can just meet with some friends and start to play. Since
WiiPlay can be used with wireless controller, we avoid the problem of too many
fingers in one screen. Besides, WiiPlay can be connected to the television in the
case that there were, for example, five people playing and the WiiPlay screen was
not too large enough.

2. HOW?
The implementation plan is going to take four years.
Nintendos development team will build the WiiPlay. The hardware is not so
difficult to fabricate taking into account that the WiiPlay is not trying to be
different based on the technology features. The most innovative things as the
possibility of connecting a wireless controller is something already developed.
We are going to be innovative letting the users use it in the WiiPlay and
changing the game experience in mobile and tablet (which are basically the
same) gaming.
The marketing team will create a big campaign the year before the launch. Most
of Nintendo games are easy to play and, certainty, addictive to play with friends
and spend an afternoon. Mario Karts is a good example in which you can
challenge three other friends to win you a race and before you realized, the
whole afternoon is gone. The same happens with Wii Sports. That is why the
message is going to be put in terms of friends.
We play: WiiPlay
This slogan emphasizes the community, the friends and the family.

LikeYu Consulting Group: Ideas for you

3. RISKS & MITIGATIONS

Though I consider this plan not very difficult to implement, some problems might arise.
Costs. It could happen that the implementation cost could be greater than
expected. However, there is no reason to think Nintendo Co could not afford this
due to the high level of cash reserve. Besides, as a well-established company in
the market it is very likely it could receive finance from third parties.
Low demand response. If the sales of the WiiPlay are not as enough, Nintendo
would move to option B. This option is easy to implement [see Exhibit 6] and
would Nintendo recover its losses.

CONCLUSIONS
Nintendo is facing the worst time since its entrance in the video game market but this
has not to mean the end for Nintendo. On the contrary, this is a big opportunity for
Nintendo to reinvent the market, to demonstrate the world that it continues being the
first one in the video gaming innovation.
Undoubtedly, WiiPlay is going to introduce a new concept in the way games are played.
With the possibility of an unlimited multiplayer options, the sense of community, the
revolutionary Wii Market and the ability to connect with their audience with fun and
entertaining products. It is not going to be a handheld gaming, it is not going to be a
mobile gaming, it is going to be WiiPlay.

EXHBIBIT 1: GLOBAL UNIT SALES OF CURRENT GENERATION VIDEO

GAME CONSOLES FROM 2008 TO 2013 (IN MILLION UNITS)

Source: Statista. The Statistics Portal, http://www.statista.com/statistics/276768/global-unitsales-of-video-game-consoles/

(Accessed 27 September 2014)

EXHIBIT 2: GLOBAL VIDEO GAMES SECTOR REVENUE ($B)

Source: Digital game sales growing 33%; Steve Peterson. Digi-Capital.
http://www.gamesindustry.biz/articles/2013-03-29-digital-game-sales-growing-33-percent
(Accessed 27 September 2014

EXHIBIT 3: GENERAL PROFILE OF MALE VS FEMALE GAME PLAYERS

Average age first started

to play video games
Hours per week spent
playing games on a
computer
Average $ spent on video
games and game-related
purchases per year
Type of video game player
classified
Gaming device preference
Preference for violent vs.
non-violent content
Game gender preference
Preference for physically
interactive vs. nonphysically interactive
games
Likelihood of playing
games at all times and for
long periods of time
Likelihood of playing
games when others are
playing
Likelihood of feeling guilty
when playing video games
Playing video games as the
main hobby
Prefer doing other
activities (e.g., watching
TV)
Hours per week watching
TV

Male Players

Female Players

6.60

9.30

17.46

6.51

333.92

87.9

Frequent/Expert

Occasional/Novice

Desktop/Laptop Computer

Console/Handheld/Mobile

Strongly Violent

Equal Preference

Strategy, Role Playing,

Action and Fighting

Social, Puzzle/Card,
Music/Dance, Educational and
Simulation

Non-Physically Interactive

Physically Interactive

More Likely

Less Likely

Less Likely

More Likely

Lees Likely

More Likely

Yes

No

No

Yes

Less than 5 hours

More than 5 hours

Source: Video games: Males Prefer Violence while Females Prefer Social; M.H. Phan, J.R.
Jardina, & W.S. Hoyle.
http://psychology.wichita.edu/surl/usabilitynews/141/videogames.asp
(Accessed 27 September 2014)

EXHIBIT 4: TYPE OF VIDEO GAMES PLAYERS BY GENDER

Source: Video games: Males Prefer Violence while Females Prefer Social; M.H. Phan, J.R.
Jardina, & W.S. Hoyle.
http://psychology.wichita.edu/surl/usabilitynews/141/videogames.asp
(Accessed 27 September 2014)

EXHIBIT 5: WORLWIDE CONSOLIDATED TOP SELLING TITLES WII

(MILLION UNITS SOLD)

Source: Nintendo Annual Report 2011.

http://www.nintendo.co.jp/ir/pdf/2011/annual1103e.pdf
(Accessed 27 September 2014)

EXHIBIT 6: OPTIONS ANALYSIS

EXHIBIT 7: REGIONAL VIDEO GAME INDUSTRY REVENUE

Source: Video Game Industry. Video Game Sales Wiki. Wikia.

http://vgsales.wikia.com/wiki/Video_game_industry
(Accessed 27 September 2014)

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