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When people think of video games, one of the first names they think of is Nintendo. The company has become synonymous with video games. Millions of people grew up with a Nintendo system in their homes. As popular as the brand is today though, the empire could have easily become a mere shadow of the past like Atari and Sega.
However, Nintendo is as popular and successful as it has ever been despite some close calls. The company has clawed its way back not once but twice from the brink of significant failure. Nintendo did this by learning from past mistakes, focusing on its strengths, and dialing into what makes it such a hit with fans: a sense of fun.
The history of Nintendo begins long before Super Mario and Donkey Kong were household names. In fact, the story starts in 1889, decades before video games, arcades, or computers.
So, if the company wasn’t making video games, what did Nintendo do in 1889? Nintendo started out as a playing card company founded by Fusajiro Yamauchi. The Yamauchi family would go on to be a driving force for change within the business throughout the 20th century, but from the start, one thing became clear—Nintendo was all about fun and games.
Under the name Nintendo Koppai, the company found success with its playing cards. This success happened even though gambling was illegal at the time. Nintendo skirted this regulation by not featuring any numerical symbols. The beautiful, handmade cards were a big hit in Japan and spurred further growth into the mid-1900s.
In 1950, Hiroshi Yamauchi became the third president of Nintendo. It was during his tenure that some of the biggest changes occurred within the company. Hiroshi wanted to expand past playing cards, though this happened to varying degrees of success. An attempt at instant rice turned into a debacle, while a chain of love hotels was similarly a failure.
By 1963, the company had decided to double down on the idea of games. This is where Nintendo experienced its greatest success.
Throughout the 60s and 70s, Nintendo developed electronic games, including arcade game machines and home video game systems. Most of these didn’t see much use outside of Japan until 1980 when Nintendo released the handheld Game & Watch units. This was followed up by the arcade game Donkey Kong, which would go on to be a huge hit worldwide. Shigeru Miyamoto was the creative mind behind Donkey Kong, and he would be an influential and innovative voice for the company for years to come.
Nintendo Hits a Home Run With Home Consoles
In 1984, Nintendo found its biggest success yet with the release of a home video game console called the Famicom in Japan. This system would later be released in the rest of the world under the name Nintendo Entertainment System (NES). The NES would become a worldwide phenomenon, eventually selling an incredible 61 million units. The system gave gamers the chance to play classic games such as Super Mario Bros. (the first Nintendo game available for the system) and The Legend of Zelda. It helped video game consoles become a permanent fixture in households, a trend that continues to this day.
More Nintendo consoles would burst onto the scene in the 1990s. The Super Nintendo Entertainment System (SNES) and Nintendo 64 were a hit with Nintendo fans. Handheld systems like the Game Boy and Game Boy Color would similarly prove revolutionary. Nintendo appeared to be undefeatable, but what once looked like a bright future turned murky and uncertain.
A New Wave of Competition
At the time the Nintendo Entertainment System was released, Nintendo had little in the way of competition. The huge success of the console meant that the landscape would change quickly. First, it was Sega that released the Sega Genesis—the first real competition for Nintendo in the home console market. While Nintendo would still sell 49 million SNES units, Sega’s new console meant the SNES would not do as well as its predecessor. The Genesis would go on to sell a respectable 29 million units.
More companies would seek to enter the market with consoles of their own. Nintendo was an industry titan, so every new entrant was gunning for them. Sega was only the beginning, and as more rivals emerged, Nintendo began to fall behind.
Competitors went after demographics largely ignored by Nintendo. While Nintendo had an image of being family-friendly, bright, and colorful, other companies targeted older consumers with more mature games. As consultant Ed Barton stated, “[Sega] made it relevant to an older demographic. That was the start of a process that PlayStation later took one stage further[.]”
Sony’s PlayStation console, released in 1995, would continue this strategy, offering impressive graphics in addition to games intended for older gamers. Combined with their use of CDs instead of video game cartridges—a move that made game development easier—Sony would sell more than 100 million PlayStation units.
The gaming industry was moving in a new direction. So, how did Nintendo respond? As video game designer Ian Bogost of The Atlantic wrote, “Nintendo weathered the changes in games largely by ignoring them.”
The company focused more on what had worked in the past, appearing behind the times and innovations of the gaming world. Nintendo would continue releasing consoles, but each new generation led to lower sales numbers, culminating in the Nintendo Gamecube selling only 21 million units. The company had fallen to last place among the major console manufacturers.
The Wii: Illusion of a Comeback
At a time when things looked bleak, Nintendo was in desperate need of a hit. They got one in the form of the Nintendo Wii, a console that would eventually sell 101 million units, the highest number of any Nintendo console up to that point. The Wii was so popular that consumers faced a massive shortage in the lead-up to Christmas in 2007. Based on the numbers alone, it looked like Nintendo had the comeback it wanted, even in the face of competition like Sony and Microsoft.
On the surface, the Wii seemed like it would continue the trend of diminishing returns. After all, compared to the cutting-edge graphics technology found in the latest versions of the PlayStation and Xbox, the Wii looked dated. However, the Wii succeeded due to several factors. The first was the revolutionary motion controls. Even though the controllers didn’t have many buttons, they were intuitive to use and opened up possibilities in gameplay that were unique and satisfying. Games like Wii Sports took full advantage of these controls and made for a fun atmosphere when played with friends.
The motion controls along with a lower price point compared to the competition also made the Wii accessible to more people. Not only could younger gamers get into the action quickly, but older people could get involved as well thanks to how easy the console was to use.
The success of the Wii led Nintendo’s rivals to try to copy them. The PlayStation Move and Xbox Kinect resulted in failed attempts. Nintendo had become king of the mountain once again, at least in terms of sales numbers.
But was it all an illusion?
While the Wii was incredibly successful, many of the issues from before remained. If anything, the Wii only represented a temporary success. Nintendo would soon find out that they had a lot of work to do.
The Disaster of the Wii U
If the Wii was one of Nintendo’s greatest successes, the Wii U was perhaps its greatest disaster. The console would only sell 13 million units during its lifespan. That was by far the least amount of any Nintendo home console. Looking back at the Wii U now, it’s easy to see that some of the ideas were good, but the execution was lacking. The Wii U featured a unique gamepad. It was supposed to revolutionize gameplay in the same way the Wii’s motion controls had. However, in practice, this central feature was clunky, bulky, and severely underpowered. Touted as a handheld option, its battery would quickly drain.
Compounding the Wii U’s weaknesses was the fact that the marketing campaign behind it failed to drum up much excitement. What made it all the worse was that Nintendo didn’t clearly explain exactly what the Wii U was. While it was a whole new console, the name and marketing caused some to think that it was only an accessory to the Wii. When people saw the high price tag for what they thought was merely an add-on, they didn’t jump at the chance to buy one.
The Wii U also paled in comparison to Nintendo’s competitors at the time. Besides the clear graphical disadvantage it had, it also offered no hard drive storage and was unable to play DVDs or BluRays. Put simply, the Wii U was a device well behind the times.
Other Weaknesses Catch Up to Nintendo
The Wii U’s failure wasn’t the end of Nintendo’s misery. Several other problems that the company had largely ignored over the years only grew over time. One of these issues was the lack of third-party support for their systems. For years, Nintendo had gotten by on the strength of the creative properties they owned—Mario, Zelda, Donkey Kong, Metroid, Pokemon, and more. While these games were popular with fans, they rarely reached beyond the core Nintendo fanbase. To extend that reach, they would need to use third-party developers and publishers. But those companies were reluctant to partner with Nintendo due to the technical limitations of their systems.
One notorious example of this was the relationship Nintendo had with Squaresoft, a game developer based in Japan. Squaresoft had released their games on Nintendo systems throughout the NES and SNES cycles. However, when creating their newest Final Fantasy game, Squaresoft chose the PlayStation over the Nintendo 64 since the N64 used cartridges. This limited the memory the developer would be able to use for their games.
Nintendo didn’t handle the decision well. Hiroshi Kawai, a character programmer for Squaresoft, recalled what Nintendo’s response was: “What I heard was Nintendo said, ‘If you’re leaving us, never come back.’”
The company also ignored the growing mobile gaming market, much to its detriment. Nintendo has usually had an attitude of keeping their properties on their own systems. Mobile never really entered the equation for them. However, the mobile gaming market exploded at a time when the company would have benefited. Considering it was worth upwards of $119 billion by 2021, failing to address the issue meant dismissing a profitable venture that may have boosted the company.
All of these missteps had cost the business dearly. By 2016 and 2017, Nintendo hit a low point at less than $4.5 billion in sales. The handheld devices they manufactured were the main things keeping them afloat. The Wii may have allowed the company to survive, but the future looked grim. There was even talk of Nintendo getting out of the console business entirely and licensing their properties to other game platforms. Nintendo would give it one more shot—a new console that needed to be a success.
A Switch in Nintendo’s Fortunes
In 2017, Nintendo released its latest console: the Nintendo Switch. It wasn’t long before the company knew they had a certifiable hit on their hands. Nintendo learned from the failures of the Wii U and delivered something consumers wanted. It was the hybrid home/handheld console the Wii U was supposed to be. Games like Super Mario Odyssey and The Legend of Zelda: Breath of the Wild led the charge and created customer demand. The technology was useful and intuitive, combining features from previous consoles. The motion controls from the Wii became the joystick controllers for the Switch. The large gamepad for the Wii U became a sleek, more portable screen for the Switch.
The new console sold phenomenally well and now stands as the best-selling home console Nintendo has ever produced at more than 111 million units sold. The Switch continues to sell well, and, perhaps more importantly for Nintendo, is able to compete with other consoles that have superior hardware capabilities.
Correcting Other Mistakes
Nintendo used this period in the company to address many of the issues it had ignored over the years. One of those was the lack of third-party support. The Nintendo Switch boasts numerous games developed by other companies, including independent developers. As just one example, Nintendo repaired the relationship with Squaresoft (now called Square Enix) and now features a wide variety of games that Square Enix publishes. Pursuing this strategy opens up the customer base for Nintendo and doesn’t relegate it to only the hardcore fans who were always going to buy the latest Mario or Zelda game.
Equally important were Nintendo’s strides into the mobile gaming marketing. The first and most successful game was Pokemon Go, an alternate reality game designed around collecting Pokemon. To call the game a wild success would be an understatement. Pokemon Go has been downloaded over a billion times since it was released in 2016. The game has also made more than $5 billion during that time. These numbers indicate that there was clear market demand for Nintendo products on mobile devices, which they eventually addressed.
Focusing on the Fun
From Nintendo’s first product to its latest console release, the company has tried to provide opportunities for customers to have fun. However, the times when Nintendo has struggled seem to be when its focus rested on other goals such as innovation for innovation’s sake or simply cutting corners to earn a quick buck. Only when Nintendo steers away from the distractions and focuses once again on fun do they seem to enjoy another period of success.
The company itself seems to recognize this, even building the idea into its identity. As stated on the Nintendo website, “Nintendo’s mission is to put smiles on the faces of everyone we touch.” When looking at the success of the Switch, Motley Fool contributor Dan Kline says the focus on fun for everyone is what made it a best-seller. “It is a game system that does not require a high level of learning,” Kline reported. “You can pick up most of the games and just play them and have them be fun. A lot of the games don’t give you a huge advantage for being younger and good at gaming.” As long as Nintendo understands this, they likely won’t have to worry about another downturn.
The Saga of Problems to Fix Isn’t Over Yet
That’s not to say that Nintendo has fully steered clear of issues and is now in a golden age. In recent years, the company has been accused of poor working conditions, with workers saying they’ve been underpaid and kept as part-time workers. QA worker Jelena Džamonja says, “The idea of being hired full-time is like a carrot on a stick to keep you dealing with the [mistreatment].” Nintendo has also faced allegations of union-busting and overall mistreatment of employees. While it’s true that Nintendo has saved itself from collapse, these signs point to further problems at the top. Leadership can dictate a company’s success, but if they fail to treat employees with respect and consideration, that likely indicates the company isn’t staying close to its core values.
There appears to be a pattern of this behavior, one that isn’t going away any time soon. If company leadership doesn’t address it, then changes in that leadership must happen. Nintendo has done a good job of turning the company around in one sense, but if they don’t want to face another catastrophe, they can’t let these problems fester. Only then will they be set up for sustained success well into the future.