Nintendo

Analyst David Gibson Projects That Nintendo Won’t Quit Hardware

David Gibson, Senior Analyst and Regional Head of Software & Services at Macquarie Research Japan, has told CNBC that despite Nintendo’s current struggles he very much doubts that Nintendo will exit the hardware business. Instead Gibson thinks that Nintendo will focus on opening up its own platform for developers.

CNBC Host:
And remember, as Kari was highlighting to us, plenty of earnings on tap this week: Nintendo will reveal the magnitude of their troubles with their full year earnings due out Wednesday. At least, given the sizable setback that we see on the Nikkei, Nintendo quite fairly resilient we should say, down only just by a third of 1% (-0.29%). The company has warned it is headed for its third consecutive annual loss, weighed down by weak Wii U sales. Nintendo slashed its Wii U [yearly] sales forecast by almost 70% to 2.8 million units for the year [April 2013 – March 2014]. This is [after] rivals Sony and Microsoft racked up huge sales last year for the PlayStation 4 and Xbox One since their launches in November. Let’s get straight out to Tokyo, just next to Kari is David Gibson, senior analyst and regional head of Software & Services at Macquarie Research Japan, and remember our guest host for the hour Wong Sui Jau, General Manager of Fundsupermart.com. David, very nice to see you again. So, is this a case for Nintendo where it’s no longer really about the Dollar / Yen story, it’s just that they just don’t have the right strategies in place, and there’s not much that Super Mario can do?

David Gibson, Senior Analyst and Regional Head, Macquarie Research Japan:
That’s right. They’ve been getting beaten like Nokia has been by Apple, by Samsung, Google Play, and that’s a real challenge for them, for you and I as consumers. You know, we buy our smartphones and tablets and we have a whole plethora of options that are free to play, that sort of thing isn’t viable on the Nintendo platforms. So, obviously though, as she said, they have great brands, which they still need to try and monetize, but we do think there are some things they can do. But it’s not going to be the hope that some would that they’ll exit hardware. We think that remains off the agenda in this stage in this strategy session coming up this week.

CNBC Host:
Yeah is it just simply too late to get in on the whole mobile sphere, because that’s where everything is going whether you look at one company or another’s earnings, it’s all about how quickly and efficiently they have that strategy worked out.

David Gibson, Senior Analyst and Regional Head, Macquarie Research Japan:
Yeah, that’s right. Iwata-san the president has had a smartphone, had an iPhone for many years, and a Mac laptop when he presents—so he’s known about the threat. But really, I think he’s misunderstood the pricing difference that free-to-play really does dominate now globally for mobile games. His angle is “We provide quality and hence people pay upfront,” but look, you know, we’ve all got alternatives, we’ve got alternatives for our entertainment now, and they look much less competitive. So, what we think the option for him is a simple one…is that…he might try and copy the store rather than join them, he might actually do what they are doing and open up his own platform for developers. It’s very difficult now for anyone now to sign up for an individual developer like you can with Apple…you know, it’s very simple cost. We think Nintendo might actually open it up themselves, which means you’d be able to get Clash of Clans and Puzzles & Dragons on the Nintendo platform, but also get Mario as well. And that’s their potential strategy…we see it potentially announced on Thursday.

CNBC Host 2:
Hi David, sitting next to Chloe in Singapore. You know, I’m not a gaming expert, but just curious…you know, the market seems to be discriminating against Nintendo, and criticizing it for not moving “with the cheese,” so to speak…and making its games more readily available on these mobile devices…but what about all of the other competitors?

David Gibson, Senior Analyst and Regional Head, Macquarie Research Japan:
Do you mean from the Mario brands, I’m presuming that’s what you mean?

CNBC Host 2:
Yes, talking about the Sonys of this world, and also the Microsoft Xbox…are all their games available on these mobile devices?

David Gibson, Senior Analyst and Regional Head, Macquarie Research Japan:
Tend to be both have a strategy, yes. PlayStation and Xbox Glass, definitely they’re putting their titles on other platforms and making them…the main PS4 and the main Xbox One games made by each other are not on other platforms, but generally speaking yes they are doing mobile as well. But relying on the installbase of smartphones and tablets, that’s their leverage play, not as hardware manufacturers on portables, as Nintendo has intended to do.

CNBC Host 2:
Ah, okay. What is the best way forward for Nintendo? I mean, we’re talking about what happened to Sega of course in the old days and dumping their console device, is that the path that would be best for Nintendo in this console environment?

David Gibson, Senior Analyst and Regional Head, Macquarie Research Japan:
You know, long term it probably is, but I think we’re a year or two before that ever gets considered. In the meantime he’s going to try and fix what they have. The reality is, the 3DS—yes the Wii U has been a disaster—but the 3DS has not so far. Even though they cut their numbers, software sales in North America are up 45% year-on-year, hardware sales are up 15%, you know, he’s actually getting growth out of that for the moment. Not huge growth like we see on smartphones, that says to me, to him and the market that we gonna stick with our strategy and try and make ourselves more relevant to smartphones…and I think that’s going to be a challenge.

CNBC Host 2:
I wonder…in the old days, so to speak (I’m only talking about 5 years ago), people used to say “Well, to stay one head of the game, you’ve really got to come up with new games and new software to keep these gamers interested.” In terms of the competition, does Nintendo have that right? Is it at all about the types of games they’re coming out with to attract this certain audience?

David Gibson, Senior Analyst and Regional Head, Macquarie Research Japan:
It’s a good question. I think they’ve traditionally made a real mix of titles, and what I mean by that is the titles that are attractive to everybody, not only to the core gamer but also the more casual user, using the brands of Mario. I think the challenge then is that now, that as more casual users in particular—the Wii audience for example—we’ve all got smartphones and tablets now and we’re playing other games, and I think that’s their challenge. It’s just our time is going elsewhere. And so he’s got the good brands but not as relevant from a pricing point of view…but engagement and experience? Definitely. They’ve introduced lots of innovations to the games market over the last decade or two. So you’re right, they need to do some more innovation basically and they need to come out and surprise us basically on their games and also maybe even new hardware going forward.

CNBC Host:
Yeah, a lot of homework to do it seems like over there…certainly the element of surprise has been lacking on that front. Thank you so much for that. Always nice to hear your thoughts. David Gibson of Macquarie Research Japan.

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69 comments

      1. Graphics are important, and it’s foolish to pretend they’re not. Graphics have been a focus in gaming for a long time. I remember the hype about the Star Fox graphics. Nintendo does need to compete with the other consoles graphically, as well as with online networks. Ignoring these two items, as well as their history with 3rd party have left current consoles with a lack of current mainstream titles or inferior versions of the games. And with other consoles to choose from, people are going to go where the games are.

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      2. Have a whinge. That seems to be all the gaming community does. I don’t have a problem with the way graphics are now. I agree that Nintendo need to focus more with online. You have no idea what goes on behind closed doors between Nintendo and third parties so stop talking like you know it all.

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      3. Nintendo’s relationship with 3rd party developers is well documented and dates back to their NES days. They have a stigma to them, and have for over 20 years.

        I agree that good graphics don’t define a good game.

        But as a consumer, if you’re buying a Call of Duty/Madden/Bioshock, you want the best representation of that game. For at least 2 generations, Nintendo hasn’t been able to deliver that.

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      4. Third parties are irrelevant to me. More and more of them are going bankrupt. Square Enix and Capcom are next because of their retarded business decisions. With game budgets rising I am going to laugh when more companies go bankrupt. How is the power/spec war going for Sony? Last I heard they’re Junk status and yes I know they do more than gaming.

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      5. The titles may not interest you, but many consumers want titles like Madden/FIFA, Bioshock, Call of Duty, Battlefield, Grand Theft Auto. If you can’t get the best version of this game, or comparable versions of these games on your console, people are going to go else where, and that’s what they’ve been doing. You can’t ignore the sales numbers of EA Sports or CoD. They may not be your cup of tea, but they sell, people play them, and at best, Nintendo is left with inferior versions or ignored completely (GTA5). This drives people to other consoles.

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      6. I agree 100%. It’s not just underpowered consoles but the Wii should have included tradition controller like an upgraded GameCube wavebird in the box and the Wii U should include the same thing or the controller pro and Wiimote plus nunchuck with the Gamepad, so players and developers can play and make games how they want.

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      7. You’re a little bit stupid to think that visuals are important. They are no where near as important as the game play of a game.

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      8. Visuals and game play are not mutually inclusive or exclusive. Great visuals don’t define a great game, but people don’t want to play inferior versions of games either.

        High Definition doesn’t make a great movie either. But I buy Blu-ray instead of DVD because I want the best experience.

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      9. This is a fair answer, but I disagree with all your “gimmick” shit. Just because you don’t like how a game is played, or the controller built to play it with, does not make it a gimmick. It simply means you’d prefer to soley mash buttons and look at a TV. A lot of us get bored with the same old control scheme Gen after Gen.

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      10. Seriously is a 10 to 15 percent jump from last gen ti this gen that broad and is the gulf between wii u architecture and psbone4 that vast. Remember that in reality there are only 2 systems competing against each other. Nintendo and MicroSony. Sony and Microsoft are competing on who has better gimmicks. Nintendo is competing with games and are losing cause 3 rd party is being bought outright by MicroSony with cash in hand tactic s instead of cash on delivery of a quality product.

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      11. If graphics were so important, games like Just Dance and Angry Birds wouldn´t be as successfull. The focus on graphics and not on gameplay and design innovation is a paradigm that is killing the industry slowly.

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      12. They indeed got a good console, but the most kids only want graphics that’s almost real. X looks so beautyfull, if every game on the WiiU gonna have that kind of graphics in the feature, i am realy happy caus it looks realy good!

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    1. OF COURSE THEY WILLNOT QUIT! he should replace pathcer.

      anyways, the wii u is great . hopefully the next gen one will be have the nuintendo awesomeness but still be similar in hardware in terms of power and all that.

      they cant get rid of 2 screens on the handhelds though. its perfection. 3ds adavance maybe>? lol as long as it has 2 screens and something new then great./

      ads should continue to improve but they are still not aggressive enough.

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      1. There really isn’t tbh, like #nintendo5lyf and all, but Nintendo did mess up this time, especially with the name of the console…
        I have a Wii u and a PS4 and I prefer my Wii U, that isn’t to say that the Wii U, to most consumers, is terrible

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    2. They could do it even without another console, they just need to make some amazing fucking games. I’m pretty sure everyone can agree that graphics, while important, can be compromised to an extent if the game is great.

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      1. If you released an amazing game with Dolphin-level graphics, you’re looking at no one buying your game…. It’s to do with both an amazing game and a great console

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      2. It also depends on the quantity. No matter how good a game is, even if it’s the best game in the world, if it’s the only game worth buying on the console then no one will buy the console. If there’s like 100 amazing games, then people will be willing to buy the console. Even if the graphics were on par with the gamecube.

        I’ll use the 3DS as an example, it is graphically weaker than the vita, but it has more games that are worth buying on it and that people want, so it sells. The 3ds being graphically weaker and outselling the Vita are facts, neither of us can deny that. So, what can be said about this is that graphics can be comprimised (not completely, I might add), so long are there are enough games (that are amazing) that make the system worth buying.

        If Nintendo starts consistently making truly great games that are able to target different demographics, then even with the inferior system they have now, then they will sell.

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      1. That’s what they’ve been doing and it’s sinking their ship.
        Nintendo creates consoles without software and wonders while their pile of money is on fire.

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  1. Of course they won’t quit, they can survive a flop or two. They’ll probably learn from their mistakes and make the next console much better.
    But even if they did stop making hardware it’d only be consoles, their handhelds are so successful I don’t ever see them stopping.

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    1. They can survive way more than 1 or 2 failures.

      It took 5 hardware failures to force Sega out of the hardware business.

      Nintendo has way more money than Sega ever did and has a very successful handheld business than Sega never had.

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      1. The genesis was great but then they made all the terrible add-ons and the saturn, Although the dreamcast was a pretty great console at the time the PS2 just came and crushed it

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  2. Our empire will only fall when the Sun explodes…

    But maybe our superior overlords the aliens will take our empire with them and continue Nintendomination in outer space!

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    1. The greatest Empires fall from within.
      As Nintendo keeps fucking it’s fans, the empire is crumbling from the inside out.
      It’s not Mobile, or ipads, or Sony or Microsoft, it’s their shitty strategy, their delayed games, their broken promises, their censorship,… Nintendo will never die because of the competition. They simply don’t need to move as many consoles as Sony or MS. They will die because of hubris and losing touch with their core fan base.

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  3. Shows how little these talking heads know about gaming. Sony nor MS have their major franchises on mobile devices. Glass is just a way to interact with mobile devices. The core of the game is still played on the console.

    Dumbasses.

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  4. I hope to see Nintendo step away from gimmicks for their next system. Love the Wii U, love their games, but I can’t stand the gimmicks.

    For example, having to blow into a controller. Terrible addition to Mario 3d World.

    We get it, there’s a lot of different things you can do to control a game. That doesn’t mean you should.

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    1. Yeah but gimmicks have always been their thing! Each new thing they bring out is DIFFERENT, I reckon that’s why they brought out a less powerful, yet new console to the consumer’s eyes (the gamepad)

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  5. Note to David Gibson: smart glass is not the same thing as putting your games on mobile. So, no. Ps4 and xbox one games are not on mobile.

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    1. I don’t agree with that at all. There’s enough brand confusion as it is. Wii U is a terrible name and a missed opportunity. I don’t agree about the unbundling either. One of the issues that led to brand confusion with the Wii U is all the “add-ons” the Wii had. Balance boards, zappers, tennis racket heads, countless items that plugged into the Wii mote. Selling the console without it’s controller further drives that home. It creates the image of nickle and diming the consumer.

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      1. And Xbox One isn’t just as confusing as the first Xbox? Also sticking a number 4 on the end of PS to make it PS4. Yeah and you’re saying Wii U is stupid.

        I cannot see how people can get confused.

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      2. With PS, it’s an increase of a number. It’s logical. It’s easy for someone who doesn’t read the blogs and follow the news on gaming to say, “Oh, PS4, it’s a new console from the PS3.” Xbox 1 is equally stupid as Wii U, but they’ve been able to get mainstream run on it because of it’s features.

        The main problem with the Wii U is that it doesn’t define it as a new console because of how they handled the Wii. Wii-mote, Wii-zapper, Wii-everything in the world. Wii-U sounds like an add-on to the last console. Especially to people who don’t keep up with it.

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  6. Leaked info on what Retro is working on: 2 DLC expansion packs for DKCTF and Metroid in the works. Details is in the comment section in the last topic below

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  7. What exactly would that even solve? Nintendo make games for both home and handheld.

    Nintendo’s IPs belong on their hardware. They’ve no reason, especially since they’ve been creating hardware a lot longer than MS and Sony put together.

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  8. “I think the challenge then is that now, that as more casual users in particular—the Wii audience for example—we’ve all got smartphones and tablets now and we’re playing other games, and I think that’s their challenge.”

    Exactly. He gets it.

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    1. next gen they should aim to compete to have hardare side preety much the same as the rest but keep advertising. a small gimmick would also help. and of course, being the cheapest.

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      1. yeah having the most powerful hardware is definitely gonna help.. and having the highest price point on top of that… what a load of bull

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    2. well apparently gimmicks do work because most mobile games are nothing more than gimmicks.. exactly the type of game that is stealing away players from the consoles

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  9. he’s making some valid points about nintendo opening up their hardware

    it might just happen

    at least this is far more realistic than the “ditch the hardware” bullshit

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  10. Nintendo has two choices:
    ———-
    1. Wait for MK8 and Smash to get released and see how many WIiU units they can sell, and:
    a. If sales increase; keep at it, increase marketing campaign and take advantage of the momentum.
    b. If they don’t sell much, then a price drop is inevitable, and hope for the best.
    ———-
    2. Make another price drop before MK8, for $250 (Gamepad) and $200 (no Gamepad).
    a. if sales increase; keep at it, increase marketing campaign and take advantage of the momentum.
    b. if they don’t sell much, they’re fucked.
    ————————————–The END———————————————
    0—————–(The Eye of the Tiger plays in the background)————–0

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    1. you can’t sell a wii u without the gamepad.. that would be like selling a car without the dashboard

      needless to say that price drops alone don’t help either, europe is proof of that

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      1. disagree with you, Amazon UK or Argos recently drop the price to £180. 2 days after, the price went up to £220. Saying that I still have not hear any huge sales from Sony and Xbox. The fans brought their console and a lot of people still waiting who will offer the best experience. I do believe Nintendo need to get thet Nintendo Tvii, their website in check as well as get more software out and force third part to do the same. Needless to say they also need to get the bloody console on the window of the seller cause so far you bearly see them.

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  11. what I found interesting is when David says that the future of the game industry is tablet and smart phone and Nintendo will eventually give up the hardware and focus on software. David let’s me know when it will come cause I will start buying Wii/PS3/WiiU/PSP/PSV/PS4/DS lite/3DS games as well as second PSV/PS4/3DS console and stuck to it until I am dead. When I want to play a video game I like big size game on big f*** off TV. Please also note that I can play on a 4″ screen but I would far prefer to have it on a dedicated console game (hello 3DS). If I was Nintendo I will also look at PC game cause gamer like me will not play dumb s*t on a bloody tablet (which a wash down version of a laptop with the same price tag)

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  12. I’m extremely impressed with your writing talents as smartly as with the format on your blog. Is that this a paid subject or did you modify it yourself? Anyway keep up the nice quality writing, it is rare to peer a great blog like this one these days..

    Like

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