This article comes fromWeChat official account: The Great Filter (ID: TheGreatFilter), author: Ang West Xiang, Producer: TGF team, drawing questions from the visual China


As the top developer of consumer electronics, Nintendo should probably imitate Apple the most.

But it is still far from being done. The most important difference between the two is:

Apple sells hundreds of millions of hardware every year, and its hundreds of billions of revenue, tens of billions of net profits, and stable expectations for future revenue have supported a market value of two trillion;

But what about Nintendo? The stock price trend in the past two decades is enough to prove that cyclicality is its biggest weakness.

In the picture above, GameCube, DS, Wii, 3DS, Wii U, and Switch are all outstanding works of Nintendo in various generations of consoles. But later facts proved that many of these efforts were futile.

Because of the stability of hardware sales and the sustainability of software revenue, Apple has embarked on a very certain path; but Nintendo is not like this. If a certain generation of consoles cannot satisfy consumers, its business onIt will stagnate in growth or even collapse.

Even if a new popular hardware (such as Switch) is released, it’s still difficult for shareholders to believe in its business given its history Continuity. This has caused Nintendo’s stock price to fluctuate year after year, and it is difficult to get out of the current valuation trap.

Based on this, this article will focus on two aspects:

First, use the history and success of Nintendo’s previous console hardware to infer its iteration logic and understand the periodicity of Nintendo’s business;

Secondly, summarize the current strengths and weaknesses of Nintendo, and explore possible paths that will help it escape the valuation trap.

I believe that if Nintendo insists on not changing its operating strategy (when the hardware cannot attract massive additions, it cannot effectively activate existing users), it Will never break through the invisible business ceiling.

The “randomness” of the success of Nintendo’s console

The secret to Nintendo’s success in the game console market may lie in quantity: in the past two decades, it has released much more models than its competitors.

Although continuous innovation has increased the probability of failure, it has also provided Nintendo with an opportunity to reverse the situation. According to statistics of game consoles with sales of more than one million in the past, it can be found that Atari, Microsoft, Nintendo, Sega, and Sony are all on the list.

Among these, Nintendo’s selected models accounted for 30%, far surpassing Sony( 15%).

(All game consoles listed in the figure are “game consoles with sales over one million”, but only part of the data)

This achievement is obviously due to Nintendo’s many experiments and innovations in the appearance and function of gaming hardware, which is crucial for its development to this day.

For many years, Nintendo’s enemies have been Sony and Microsoft. In the brutal competition in the game console market, Microsoft Xbox and Sony Playstation mostly compete in hardware, and the two have fought for nearly 20 years around dimensions such as operating speed, processing power, and memory.

In most cases, Nintendo’s console does not mention these. Following the GameCube(the last Nintendo console that directly competes with Microsoft and Sony on hardware conditions), Nintendo’s strategy has undergone considerable changes .

Of course, no matter from which point of view, GameCube is not a failure. Since its release in September 2001, this host has sold nearly 22 million units worldwide, and the response from users and the industry has been quite positive.

However, its sales lag behind Microsoft’s original Xbox, which sold 24 million units. Moreover, the combined sales of GameCube and the original Xbox cannot keep up with the best-selling game console PS2 of all time, because PS2 has set a sales miracle of 158 million units.

Fortunately, five years later, the release of the Nintendo Wii turned the situation around. Wii was launched in November 2006. According to statistics, its cumulative sales reached 102 million units. This result has stabilized the same generation of Microsoft’s Xbox 360 (8580 Ten thousand units) and Sony PS3(88 million units).

Later, everyone understands the success of Nintendo Wii, which is often attributed to its abandoning the strategy of imitating and chasing competitors to overemphasize hardware specifications, and instead play to its own advantages-that is, introducing novel gaming experiences and paying more attention Family game scene.

Wii canceled the typical two-handed control handle, and instead incorporated the motion sensing system as a core component into the host. As a result, users can swing the Wii handle like a sword when playing “The Legend of Zelda”, and they can also simulate bowling when playing Wii Sports.

This ingenious design made the Wii stand out at the time and was welcomed by users and critics. In 2006, Gamespot named the Wii “Best New Game Hardware.” Also in the same year, “PC World” ranked Wii as one of the 20 most innovative products of the year.

After the success of Wii, Xbox and PS also adopted the same strategy. Microsoft released the Xbox Kinect for Xbox 360 in 2010. Sony followed closely behind, releasing the PlayStation Move in 2012.

In addition to the innovative gaming experience, the success of the Nintendo Wii also benefits from its attention to different gaming groups. It has long shifted its focus to casual gamers and families.

President Satoshi Iwata(Satoru Iwata) said in 2006:

“We did not consider fighting against Sony, but considering how many people are willing to play games. What we really care about is not consoles, but newcomers who can have fun.”

The words are still in my ears, but Wii is destined to be a short-lived miracle. Because shortly thereafter, the Nintendo handheld 3DS did not achieve the success everyone expected.

It inherited the dual-screen appearance of DS Lite and DSi. Once it came out, it attracted everyone’s attention with its naked eye 3D technology. But when the player really got started, he discovered the tastelessness of this feature: in actual use, the user’s line of sight must be perpendicular to the screen, a slight deviation will cause serious ghosting in the picture, which is a great feeling of dizziness. New and old players were advised to retreat.

In addition, in the first year of 3DS, it was not only difficult for third-party manufacturers to follow up, but even Nintendo’s own first-party game manufacturers were also a headache. Because we want to achieve naked-eye 3D, in addition to hardware support, game software must also be optimized. Coupled with the poor performance of the 3DS host hardware, players who have great expectations for it are disappointed.

Because the above problems are difficult to solve in the short term, Nintendo finally cut off the 3D function, and this technology fell silent. At the same time, the poorly-selling 3DS also brought the originally booming Nintendo stock price into the quagmire (refer to the first picture of the article).

At this time, the pits that the Nintendo console has iterated through are not yet complete. Because within a few years, Wii U, the successor to Wii, which should have been expected to shoulder the public’s expectations, once again surprised users and shareholders.

The success of Wii may swell Nintendo slightly. For them, the success of Wii is based on its revolutionary motion sensing system. Swinging the handle is like swinging a tennis racket. This kind of happiness is something that many people have never imagined before. Therefore, people who were almost not interested in games in the past have also entered the pit.

But the next question Nintendo facesThe question is: What is the next step? It looks around and thinks about what revolutionary innovations can inspire people’s enthusiasm for gaming.

The answer that Nintendo gave at that stage was to equip a game console with a screen that was fun enough. So Wii U came into being.

According to Wii U’s vision, the controller is equipped with a screen, so players can play without the help of a TV. Of course, if it is a multiplayer game, everyone else can also share the screen through the TV.

This idea turned out to be quite stupid.

Wii U is still Wii in essence. Although its expandability and performance have been slightly enhanced, it is difficult to compare mobile games in terms of portability. Coupled with the fact that the interaction between friends is not good enough, the final outcome of Wii U is: trying to take into account the light players (Somatosensory touch users) When the core players (traditional host users) demanded, they lost them at the same time.

Fortunately, the failure of Wii U did not make Nintendo restless, and its legacy finally brought the birth of Switch.

In order to design the Wii U controller back then, Nintendo’s handheld team and the home phone development team conducted in-depth cooperation, combining the 3DS gyroscope, accelerometer, etc. with the main functions of the home phone. This is considered to be the key to the subsequent emergence of Switch.

If there is no Wii U’s mistakes, will the Switch exist in its current form? It seems unlikely-as mentioned above, Nintendo is willing to try things that no one else has done before. This is the important reason why it has repeatedly developed the most interesting hardware. Although it has repeatedly hit walls, it has also given it rise again. Possible.

After nearly ten years of success for Wii and five years of criticism for Wii U, Nintendo’s eighth-generation game console Switch was launched. It perfectly integrates traditional home consoles and handheld systems to provide players with a true one-to-one experience.

Can the Switch stand out in the same generation of consoles like the Wii? It is difficult to say at present. As of January 2020, PS4 sales have exceeded 100 million units. At the same time, Microsoft’s Xbox One’s sales are estimated to be 47 million units (in addition, Microsoft has announced that it will shift the focus to the number of active users of Xbox Live. As the “main indicator” of success).

By comparison, since its launch in 2017, Switch has sold 52 million units. Although it surpassed the Xbox One, it is still a long way from PS4. Fortunately, PS4 was launched in 2013, 4 years before the Switch, so the Switch still has enough time.

Nintendo’s armor and weakness

Nintendo’s console iteration history is very tortuous, but one of the most important points is that this company has a persistent enthusiasm for console innovation. This may cause it to encounter setbacks from time to time, but in the long run, it will help Nintendo maintain the number one game console track.

In order to better understand why Nintendo made such a choice and what areas need to be improved in the future, it is necessary for us to summarize the current strengths and weaknesses of this company.

Nintendo has both hardware design, manufacturing and software development capabilities, and this capability is at the same level as Apple in the mobile phone industry and Peloton in the fitness industry. Therefore, it can design its own hardware according to the game software it wants to develop and the game experience it wants to change. As long as this strategy is implemented in place, Nintendo will not be restricted by other players in the industry.

This kind of industry control is Nintendo’s first advantage.

Secondly, as mentioned earlier, because Nintendo focuses on hardware consoles and software games at the same time, when new console devices shine, they will effectively drive the sales of software running on them and bring more to games. Positive word of mouth, enterAnd promote more hardware sales. This is a virtuous circle that lasts for many years.

The hardware and software sales revenues of the following three hosts are the best examples:

(Because the Switch’s life cycle may be just over half, its hardware and software revenue is far from reaching its peak)

Therefore, good business synergy is Nintendo’s second advantage.

If you study Nintendo’s more than one hundred years of history in detail, you will find that the path it has traveled so far has never been paved by the outside world. Many of its projects rely on internal personnel from the establishment to the end. Nintendo has always focused on the most important thing-building the best game console equipment and game software, and never rely on external acquisitions to continue its innovation capabilities.

This kind of persistence and determination is Nintendo’s third advantage.

Looking at the game field, there is no second company that has created such a wealth of IP as Nintendo, and can consolidate its position for decades. In the list of the top ten most monetizable IP franchises (including Marvel, Star Wars and Call of Duty, etc.), Nintendo’s Pokémon and Mario ranked first and ninth respectively. This is a valuable and long-lasting brand asset.

The best IP, this is Nintendo’s fourth advantage.

As a listed company, Nintendo from a financial perspective is also very interesting: it likes hoarding cash, dislikes debt, and has always maintained a very good cash flow.

Take the 2020 financial report as an example. As of the end of March 2020, Nintendo’s cash reserves are 900 billion yen, which is approximately its market value at the time.(6.5 trillion) 14%. Whether it is the influence of Japanese business culture or Nintendo’s own choice, extremely abundant cash can help it out during extremely difficult times.

Financially sound enough to deal with various risks, this is Nintendo’s fifth advantage.

Finally, even if Nintendo still focuses on core hardware and software, its well-known IP and financial robustness allow it to try other businesses more actively. For example, opening an offline store (already doing it), and for example authorizing filming and opening theme parks(Already doing it).

There is the possibility of new business development. This is Nintendo’s sixth advantage.

But at the same time, Nintendo’s four disadvantages cannot be ignored.

First of all, every 4~7 years to redesign and persuade consumers to buy and sell a new set of hardware equipment, the risks behind this cycle are uncontrollable for Nintendo. Historically, not every attempt was satisfactory.

So, the periodicity of the hardware business is the first disadvantage.

Secondly, as mentioned earlier, Nintendo is betting on both hardware and software, which will bring both good synergy and possibly bad. When a hardware device fails to excite people, it will quickly fade away, leading to a rapid decline in sales and affecting software revenue based on it. This will further reduce people’s motivation to buy hardware and enter a negative cycle.

The last time this story happened on Wii U, no one can guarantee that there will be another time.

The counter-effect of business synergy is Nintendo’s second disadvantage.

Nintendo’s third disadvantage is the size of the potential audience.

New things are difficult to attract everyone’s attention when they are first born, but potential products will gradually gather more and more people, and this process may be accelerated.

But for Nintendo, in the past ten years, it has actually faced a somewhat tasteless market-not because it is not as popular as before, but because it has not grown.

Minecraft, which came out in 2011, is the best-selling game of all time, with sales of more than 150 million, followed by “Grand Theft Auto V” in 2013 with 125 million sales and revenue of more than 7 billion US dollars.

In contrast, Nintendo’s two popular games in the past five years: “The Legend of Zelda: Breath of the Wild” and “Super Mario Odyssey”, each sold only 17 million. Today, their monthly active users may be less than 1 million. And this is only 1% of 250-300 million console and PC players, and only 0.05% of 2 billion mobile game players.

The last disadvantage is the poor progress of Nintendo’s mobile games.

The rise of smart phones constitutes the biggest disadvantage to the host device market; at the same time, the rise of app stores has also greatly changed the monetization logic of games. Nintendo has a serious lack of successful experience in this field, and so far, it has still not found a repeatable and scalable effective strategy.

In general, Nintendo’s advantages and disadvantages are both outstanding, and to some extent they are accompanied by each other. Nintendo is walking on the path of its own choice, hoping to achieve its mission according to its own wishes, it will inevitably face the risks and challenges that it brings.

Nintendo’s possible solutions

Based on the above analysis, we can guess that Nintendo may have made breakthroughs in the following three areas:

Reduce periodicity

As mentioned at the beginning, periodicity is Nintendo’s biggest flaw. Looking at its stock price chart again over the past 20 years, the peaks and troughs are obvious:

How to break this vicious circle? Nintendo may need to learn from Apple and consider these two strategies:

First, extend the life cycle of equipment through small and more frequent iterations. Switch is currently doing this, first release the basic version, then the lower cost Lite version (can accelerate the expansion of the player population), and then release the Pro Version (in order to satisfy the wishes of the most loyal users).

After the whole process, the life cycle of Switch has been extended. For Nintendo, it can not only increase the profit of this series of products, but also quickly improve the next product iteration through feedback. At the same time, it also gives it more time to conceive and complete the next generation of works.

Second, try to obtain more predictable recurring income. Nintendo’s DLC strategy (add additional expansion content to the released game to obtain additional revenue) is much better than before, which will make players’ More participation and longer time spent. It should continue to learn from today’s Internet companies, improve Online services,Save your efforts.

Finding successful strategies for mobile games

In the past four years, Nintendo has earned more than $1 billion in revenue from six mobile games:

But this number is too small compared to the hundreds of billions of mobile games market. And the biggest problem is that the way Nintendo used to monetize console games in the past is in serious conflict with current mobile game advertising and in-app purchases.

This is what led to Nintendo’s many failures in the past. If it wants to make a breakthrough, it may need to find new strategies.

For example, it can choose to compromise and accept the gameplay of other successful mobile game companies;

Or, continue to try the paid model, but optimize in terms of price, content, etc.;

The worst, you can also become a partner of Apple Arcade, and no longer consider monetization strategies.

In any case, as long as Nintendo does not give up its mobile game attempts, there is hope. If it is content with the status quo, it would be a pity.

Build meaningful new business

Nintendo has been unable to accept things beyond its core competitiveness, and the management has almost no interest in products other than hardware devices and software games. This may never change, but at least there are signs of improvement now.

For example, we can see that Nintendo’s first physical store has made considerable progress, and the theme park in cooperation with Universal Pictures-Super Nintendo World will also open this year. In addition, as early as 2018, Nintendo stated that it would work with the American animation studio Illumination to produce the Super Mario animation film (which will be distributed by Universal Pictures, initially scheduled for In theaters in 2022).

The above actions reflect that Nintendo’s mentality is more open. Although they will not invest in such projects on a large scale in the short term, this is a good start after all. All these flexible ways of using IP provide people with more ways to interact with Nintendo’s brand (thus stimulating additional hardware/software sales).


Nowadays, new technologies are changing consumers’ gaming behaviors and entertainment methods, and even Nintendo can’t ignore this change. It has found its own coping strategies in the past few decades, but when new challenges come, the previous efforts are obviously not enough.

Fortunately, Nintendo still has a solid enough basic disk. Although it has almost completely failed in the field of mobile games in the past, it still has great potential and enough time for trial and error.

This article comes fromWeChat official account: The Great Filter (ID: TheGreatFilter), author: Ang West Xiang, Producer: TGF. Team