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CaimDark avatar 2:00 PM on 11.18.2013  (server time)
The 3DS and Wii U Were Mistakes Nintendo Won't Make Again

If you've never seen me around, you're probably thinking "dude, are you high? The 3DS is the best-selling platform everywhere", and if you did see me around, then you might be wondering, besides what drug I'm on, "wait, aren't you a Nintendo fanboy and Wii U enthusiast"?

Ok, first of all, I'm not a fanboy and I'll thank you for not calling me that awful, awful insult. The word "boy" implies a child, and I'm not a child. I'm a very sophisticated adult, so I can't be a fanboy. I'm a "passionate Nintendo connoisseur". And I don't play videogames because they are toys and I'm too mature for that, I "experience interactive entertainment"!

Now that we got that out of the way, on to the topic at hand. What I mean by the title is that both the 3DS and Wii U are anomalies by Nintendo standards, spawned by the confidence gained from the unbelievable success of their predecessors, anomalies Nintendo won't repeat.

How are they "anomalies"? The 3DS is now very successful, and Nintendo consoles sold poorly in the past, but I'm not referring to units sold. To understand what's different about the 3DS and Wii U from what Nintendo has always done, a history lesson is in order.

If you look at pretty much every single Nintendo hardware ever release, there are two crucial similarities between all of them that have been staples of Nintendo's strategy since forever: one, maintaining a low(er) price point takes precedence over incorporating the latest and greatest technology or premium/multimedia features, at least next to the competition, and two, profitable hardware. Granted, adjusted for inflation, $199 in 1985 or 1990 equals LOL ARE YOU FUCKING KIDDING ME in 2013 dollars, but times were different. Technology was way more expensive back then and those were standard market prices at the time. For reference, the Atari 2600 launched in 1977 at $200.

When Nintendo finally had some really big competition, starting with the 32-bit era, they doubled down on keeping prices as low as possible. The Gamecube and N64 both launched at $199 next to their $299 competitors, and the Wii needs no explanation.

Nintendo's business was always solid: make money on hardware, make money on games, make money on royalties. Which is the same basic business strategy used everywhere since the dawn of time: sell shit for more than it costs to make.

But wait, didn't the Gamecube fail? And aren't consoles typically sold at a loss? Well, not quite. The Gamecube failed in the sense that it only sold 20 million units and obviously Nintendo wanted to sell way more, but it was always a successful business. Far more successful, in fact, than the Xbox business ever was. And consoles weren't always sold at a loss. Sony introduced the business model of subsidizing hardware (i.e selling at a loss) with the Playstation, and Microsoft copied it with the Xbox, but before that, consoles were sold for profit like everything else, and Nintendo wisely stuck to the old model.

However, the wild success of the DS and Wii gave Nintendo the confidence to abandon those two staples of its hardware business. Its difficult to remember now, but waaaay back when Nintendo introduced the DS, Iwata (or maybe Miyamoto), humbled by the Gamecube, said they'd be happy if they got 10% of gamers interested in it. When the Wii came, they were similarly cautious. 

The post-DS/Wii Nintendo apparently wasn't nearly as cautious, and when the successor to the DS came around, it cost nearly twice as much as the DS did at launch. Nintendo no doubt bet that the 3D and the DS brand would be enough to get customers to open their wallets.

Same with the Wii U. Thanks to the Gamepad, they priced it at $350, and for the first time ever, launched a console at a loss even at that steep price. Sure, they sold the 3DS at a loss for a time after the price cut, but that was in response to weak demand. The Wii U was, from the beginning, meant to be sold at a loss.

People often say that Nintendo doesn't care about third-parties or even doesn't want them, but that couldn't be farther from the truth. It is true that, unlike Sony and Microsoft's consoles, Nintendo doesn't NEED third-parties to survive, but that doesn't mean they aren't important to Nintendo's business.

One of the most baffling videogame myths, one that endures even among hardcore Destructoid readers, is that nobody bought any Wii games. In fact, the Wii has an attach rate of over 8 games per system, a very good number, many of those games sold by third parties. But, but, but, the Wii had no Assassin's Creed, no Bioshock, and surely nobody bought Call of Duty on it? 

The thing is, even before smartphones, games were already bigger than just those hardcore games. Remember EA? The one that doesn't release any games for the Wii U, and Chris Carter somehow assumes that not selling games you don't have is proof you shouldn't have those games in the first place? Well, back in the Wii/DS heyday, they were selling nearly $1 billion a year on Nintendo platforms. Ubisoft's Just Dance? Over 10 million sales. Those crappy minigame collections we don't even remember the name from the likes of Take-Two and Majesco? Also million sellers. And we're not even considering DS games. Which meant fat royalty checks to Nintendo.

So, back to the Wii U, Nintendo's first ever crack at subsidizing hardware out of the gate. Say Nintendo doesn't care about third-parties and expects to get by just with their own games on their own systems. Does it make any sense to sell hardware at a loss if you're not counting on royalties to make up for it? Does it make any sense to sell hardware at a loss if you're only going to sell your own games on that hardware?

It absolutely does not make sense, which tells us Nintendo fully expected the Wii U to be as successful as the Wii was, meaning they expected lots of third-party games and and lots of royalty revenue, much like they had with the DS and Wii.

As we've seen, it didn't quite work. The 3DS needed a price cut that cost them hundreds of millions of dollars, and even after they stopped losing money, their margins on the 3DS hardware were severely compromised, while the Wii U continues to drag down profits. I do think it will follow a pattern similar to the PS3 and that its best years are still ahead of it, but even if the Wii U does succeed as a consumer product, it's likely it will never be good business, not unlike, again, the aforementioned PS3.

I recall Iwata once said they almost scrapped the Gamepad idea because at first it wasn't economically feasible. Clearly he eventually decided they could make it work, a decision I'm pretty sure he regrets. The Gamepad alone is estimated to add over $80 to the cost of the console. When we consider the technology inside the Wii U that goes along for things like 100% lag-free streaming (as lag-free as a TV, anyways), I wouldn't be surprised if that number closed in on $100. Like they did with 3D, Nintendo bet that the Gamepad features and the Wii brand would be attractive enough to consumers despite the price, and so confident they were in its success that they risked selling it at a loss. The cautious Nintendo of yesteryear would never take such a risk, and whatever happens next, I'd bet the farm that the Nintendo that will emerge from these difficult years will never do so again. And by "never" I mean "until there's a change in management and enough years have passed for them to forget all about it".

Edit: to be absolutely clear, I'm well aware that the problems with the Wii U go way beyond price (as did those facing the 3DS), and yes I know things could have been different if we'd had, say, Mario Kart at launch and Smash Bros in April 2013, or "if teh Wiiu had any gamez" in Internet language, but the point of this blog isn't so much about the performance of a single product as it is the larger Nintendo culture and corporate strategy.

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