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Monday, February 11, 2019

The New 2019 Three-Pillar Nintendo Management Policy

By LUDWIG VON KOOPA - Resource allocation. And hopes and dreams.

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...
  1. Dedicated video game business
  2. Mobile business
  3. 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.

Nintendo intellectual property licensing expansion 2019 examples
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.

14 comments :

  1. Well I like the Sanrio x Splatoon partnership because they finally made Off the Hook plushies unlike San-ei/Little Buddy. A little too late because we only have a few Splatfests left for plushie pictures. Their Marina plush is inaccurate though.

    ReplyDelete
    Replies
    1. Wot's inaccurate about it?

      Does IP expansion work when the result isn't on brand guidelines?

      Delete
    2. The fabric used for Marina's skin color is pretty light. I like having plushies as accurate as possible. I remembered when Snowanna from Wreck-it Ralph has a plush they made her purple skinned while the rest of the Sugar Rush kids were accurate. Then Disney Store pulled her off the store and about a month later they made her accurate as well and then I bought her.

      Delete
    3. ...Is it light enough that she's being white-washed?!

      Delete
    4. Some pictures show that there is a clear difference from the Pearl plush but still looks lighter than the amiibo. I guess I will see for myself when I get the plushies delivered to me and do an actual comparison. As someone who does make plushies and has to order online, it is always a risk when I order fabrics and have to rely on the sample pics for how they will look in real life. I could get a tiny sample of the fabric but I still have to pay for shipping so I usually just risk buying a regular amount of the fabric so I don't waste money for full price shipping on such a tiny swatch.

      Delete
    5. "Wait and see" I guess.

      (Feel free to write a guest post.)

      Delete
  2. Could it be some kind of misdirection? It kind of seems like a decision of the caliber of stupidity that is inimical to a corporation's continued existence, and not many of those make such decisions these days afaik. That is, IF it's on the level.

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    Replies
    1. I'll put you down as "I don't think Nintendo's future is on smartphones and theme parks they don't operate so they can't comment on them."

      Delete
    2. I take slight umbrage at that last part being put in my mouth. Anyone can comment on anything, that's what the internet IS. Commenting INTELLIGENTLY on something, on the other hand, is much more difficult internet or no.

      Delete
    3. Oh, no, that's regarding Nintendo not being able to comment on the status of their theme park when asked by an investor, because it's Universal's theme park so it's a secret.

      Delete
    4. Huh, that must have gone over my head somehow. There might have been a way to make it more grammatically clear? But I'm not sure how exactly.

      Delete
    5. Perhaps I could've spammed hyphens.

      I sorta assumed you read Nintendo's Q&A. :x
      Dangerous assumption on my part since I didn't even hyperlink to it in the article.

      Here it is; referencing question 6.

      Delete
  3. Switch/3DS/Wii U existed as the new three pillars for about five minutes.

    I don't think the IP expansion is necessarily a bad idea... Mobile games... eh... Mobile games don't have to be bad, but the free-to-play with microtransactions model seems to have taken over the mobile market completely.

    ReplyDelete
    Replies
    1. The Wii U had a niche when the Switch came out in that you could Miiverse stuff for The Legend of Zelda: Breath of the Wild on the Wii U but not the Switch. That's something.

      If IP expansion just results in stuff for New York, Tokyo, and Los Angeles to enjoy, then screw that. But that's what's been going on up 'til now.
      Nintendo notes the mobile market is maturing, and when you look at which of their mobile games is attracting the most success, they'll look at the gacha Fire Emblem Heroes and likely conclude that's the way to go.

      Delete

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