Back around 2003–2005, Nintendo had a three pillar strategy. The Nintendo GameCube, the console business, was the first pillar. The Game Boy Advance, the handheld business, was the second pillar. And the Nintendo DS, this weird gimmicky handheld thing with two screens, was the third pillar.
They called the Nintendo DS the third pillar because if it failed, the handheld business could still live on in the Game Boy line. The fate of the DS was very uncertain, after all, and when it launched, it had weird experimental games rather than the hardcore epics that defined the early-mid 2000s. Gamers were a select, nerdy group of people who were threatened by casuals coming in from the PlayStation 2's DVD player, and the likes of Jack Thompson and Hillary Clinton trying to ban videogames.
Eventually, Nintendo collapsed their second pillar, made the DS their handheld line, and transformed the GameCube into the Wii. Two pillars, and Nintendo was the one bringing the casuals in by redefining the image of the gamer.
That was a long time ago. It's 2019 now, and Nintendo's three pillars are now, according to Nintendo's recently-released management policy outline that came after their financial results for nine-months into the year ending March 2019...
- Dedicated video game business
- Mobile business
- IP Expansion business
Up to this point, you'll notice that Nintendo defined a pillar as an individual videogame console or a handheld, and for that brief period of time, a hardcore console, a hardcore handheld, or a gimmick handheld.
Now the entire “Nintendo makes hardware and then makes software to play on that hardware” is merely one pillar of three.
Just so we all understand what a “pillar” is supposed to mean, and perhaps I should've defined this earlier, but a “pillar” in business is an essential part of your company strategy that, if it collapses, you have a significant strategic deficit to deal with. A broken pillar is very noticeable. Each pillar doesn't have to be equally important, but a broken pillar is a cause for big warning signs. Nintendo calls them each “critical.”
Right now, their smart device sales and intellectual property related income in their latest financial statement (page 7), combined, is about 3.3% of their sales. It was 3.3% last year, too. They combine the two pillars in their financial statements because I guess they're individually that insignificant.
Nintendo believes that the base of people who'd buy consoles has peaked, and the only way to expand is alternate revenue streams by going after whales on smartphones and getting kids to theme parks and other licensing schemes. Simultaneously, they're going through the subscription route to get more money per console customer with schemes like the Nintendo Switch Online.
Nintendo has been mentioning the Nintendo Account for a long time now, but all we've really seen of that effort is My Nintendo, which everyone agrees as not worth anyone's time. The Nintendo Account is how Nintendo will “deepen [their] connection with consumers” as a “strong interaction”, while playing games is a “weak interaction” because brand loyalty comes from having a loyalty-based account system.
As far as I'm concerned, dealing with My Nintendo makes me less likely to want to keep playing Nintendo games. What a worthless thing.
There you go. Nintendo's actual business is just one pillar, and then their insignificant not-really-growing-or-showing-promise other revenue streams are two other pillars that are so important they're avoiding answering questions on them and they're reporting them combined. In the end, you should care because, if Nintendo is going to put their money where their mouth is, you should expect more investments in cooperating with mobile-development companies—total waste since the entertainment value of a mobile game is less than a console game, and more intellectual property license agreements, which can range from cool to extremely dangerous.
|The Legend of Zelda concerts? We like those.|
Illumination Entertainment movies? Kinda iffy.
Any proliferation of the Nintendo Labo? Horrible!
You may choose to then look at it as “more investments in this area I don't like means less investments in the core gaming business I do like!” Nintendo would say it's building the total pie and the amount of investments that can happen. I'll believe it when there's an actual return.
Ludwig invests in Nintendo stock, and he's been extremely disappointed in how it's been performing since he put money into it. Since KoopaTV is responsible for the Labo's failure, and since that could've been its own pillar, Ludwig should at some point stop writing articles contrary to his financial interests. In any case, go ahead and comment what you think of Nintendo's pillar strategy in the present or the past.