I don't expect that this sort of approach will appease investors or materially change their financial fortunes.
It seems to strain credulity to believe that Nintendo's business is fundamentally sound, they just don't do a good enough job making people aware that they're releasing games. That's what this strategy says. It says that the 3DS and the Wii U are both good products which will succeed, but no one watches our ads so we just need to put our ads on mobile phones. The "demo" approach also assumes that Nintendo's games and franchises are appealing enough to make people want to buy hardware, if only they get a taste of the games. I don't believe this is the case, and I think it's obvious how it's not. Right, like the hubbub of last week wasn't "wow, no one is buying Nintendo stuff because they forgot that it exists". You have to assume that the massive miss on both 3DS and Wii U expectations was the result of some root issue in terms of demand.
Nintendo did very well with the DS and the Wii because they identified that the barriers to gaming are too high, and so making easy-to-get into compelling experiences for everyone (expanding demographics) at a fair price was a good strategy for success. So, what are the pillars of that strategy? Attract people who don't game much or have never gamed before. Give them something that is interesting and accessible. Make it easy, get rid of barriers. If you close your eyes and try to picture which platforms enable those goals best today, the answer is not Nintendo platforms. To the extent that controls got in the way before and that's why the touch screen and motion controls were a success, now Nintendo's controls get in the way of a pure touch interface. To the extent that higher software prices got in the way of PS360 success, now Nintendo platforms are competing against lower priced software. To the extent that hardware prices got in the way of PS360 and PSP last generation, now with mobile subsidies Nintendo's hardware is as expensive or more.
Let's take the 3DS. Brain Age was an enormous hit in Japan and Worldwide for Nintendo. The franchise has 100% evaporated. It isn't because no one has heard of Brain Age anymore. It's because no one is interested in buying hardware in order to spend $30+ on a game they already got their fill of. That market has entirely left. And this expands to things like pet simulators, puzzle games, all sorts of pick up and play stuff. Nintendo does an incredibly good job making the kind of software you want to pick at for 5-10 minutes a day. That's a very lucrative market. But the market for that kind of software is gone and not coming back. Now that people are carrying smartphones, a dedicated device is overhead in both the personal and financial senses. On your phone you can boot up a game in seconds and switch to another. The 3DS by comparison is not very well geared towards multitasking. On your phone you can download something no matter where you are. The 3DS requires wifi. On your phone you can instantly purchase, download, update, delete your games. You can also purchase additional content or items. The spirit of Nintendo's idea of making games accessible to everyone is now most clearly articulated in mobile gaming. Now, you and I might omg hate that garbag casual gam, just make 9 new fire emblem!!!! so beast mode!!! but ultimately that was a large part of Nintendo's success. It made them a ton of their licensing fees as third parties pursued it, it moved hardware, and the software was cheap to develop and generated massive amounts of revenue. So anything that looks at that problem and says it's a perception problem, not a product problem, I think is misunderstanding why both development support and user demand has shrank.
And that's just gaming software. There's also the utility factor. People keep repeating the argument that no one buys a mobile phone for games. That's, in fact, the secret to the success of mobile phones as gaming platforms. If people aren't in the mood to buy hardware for games, and instead look at games as one of many things they can occupy their time with, then devices where there are many options to occupy your time with are a better buy.
I think that if Nintendo's response to a drastic earnings and projection miss is to announce that they're planning on doing exactly what they said they were always planning on doing -- learning to use smartphones to advertise their games to lure people back to their hardware -- investors are going to find that a very unsatisfactory solution to their woes. I don't think investors think that's the problem. I don't think investors think that will restore earnings to the place they should be. I don't think investors will rally behind the stock with that kind of announcement.
And I don't think customers will feel differently. Because I don't think the problem is advertising. So great, a kid plays the Mario app and gets to the end and it says "Want more Mario? Buy a 3DS". If you want more Angry Birds, just press a few buttons. Is Angry Birds as good as Mario? No, but quality was never the problem to begin with, so it's time to start being able to recognize with the problem is and work on that instead.
Trying to come up with a solution means figuring out what problem you're trying to solve. These solutions indicate that Nintendo thinks there isn't really a structural problem. It's just a temporary thing. Release some good games and target advertising better and they'll turn the corner. I just don't see it that way.
I hope that along with this announcement, Nintendo wisely announces a change in focus in terms of the type of software they announce and looking in to software value perception (instead of perversely saying "Next quarter we will release games to make customers realize value! Sorry that this quarter our games were not highly valued by customers!"). Making software more accessible, cheaper, easier to buy, and easier to play would be great. It would be a step. I'm not convinced it would solve the problems, but I think it would at least suggest that they recognize what the problem is.
