Monday, November 2, 2009

Nintendo's Sky Is Not Falling

By now you've no doubt heard that Nintendo's last quarterly fiscal report was not as awesome as we have come to expect from Nintendo. Depending on where you get your financial news, you may be half convinced that the lower Wii numbers are a sign of doom for the company and an indicator of a tragic collapse in the gaming industry. In reality, it is no big deal. In fact, it might actually be good for gamers.

Yes, the PS3 has passed the Wii in monthly sales. There is an excellent reason for that. Two of them. Sony finally brought the PS3 price down to reality and the Wii, it seems, has just about saturated the market. With no equivalent of the Red Ring of Death to encourage repeat customers and help pad sales, once the Wii market is saturated the sales numbers will drop. That doesn't mean the death of the Wii. It simply means Nintendo's game has changed.

Now, more than at any other time since the release of the Wii, Nintendo will rely on software to drive revenue. If they want to continue to rake in a cool billion a quarter, they will have to sell games to all those millions of people who bought a Wii. That means Nintendo will have to find some good games for the Wii. And that could be a challenge, and that is why this is good for us.

For a very long time, the Wii has been flooded with crapware and cheap, ugly ports. Crapware and cheap, ugly ports do not make for happy accountants. We will only get burned by shoddy Wii titles so many times before we as gamers start to write off the Wii... and the Wii has been largely written off as a serious gaming platform. Nintendo's own franchise titles (New Super Mario Bros. Wii, for example) will continue to fly off the shelves in swarms... but Nintendo will have to do better. The occasional awesome Mario or Zelda title will not be enough to refill the corporate cash pipeline. Nintendo will have to come up with high quality, third party titles somewhere.

The result of rapidly declining Nintendo revenues, then, should be an increase in the number of high quality titles for us millions to play on our Wiis. Now that Nintendo will have to rely on software sales and has admitted they have dropped the ball in release good quality games, I think the company will focus more on what is published for the Wii. Better Wii games will mean more money for Nintendo.

More importantly, it will mean happy Wii gamers.

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