Author(s): Peter Bryer
For more than five years, CCS Insight stressed the need for Nintendo to recognise the impending disruption from the smartphone market. As basic handsets evolved into pocketable computers with dedicated graphics processing units, powerful software development kits and well-supported marketplaces, the potential effect on the market for portable consoles and games was apparent. For Nintendo fans, the strategy of stubborn isolation was frustrating.
But change is coming. Last month, Nintendo announced a partnership with Japanese mobile game developer DeNA to address the drawn-out gap. The companies aim to develop a gaming service that can be accessed by smartphones, tablets and computers, as well as by Nintendo's dedicated hardware.
The partnership is a reaction to a changing market, but Nintendo is expanding its potential audience by hundreds of millions as more children and young adults use mobile devices and connected computers. It's fair to point out the company's tardiness in acknowledging platform dynamics, but Nintendo's family of characters including the likes of Pokémon and Super Mario Bros continues to be among the most valuable entertainment franchises, and in some ways rivals Disney for children's attention.
CCS Insight commented as recently as January that minimal software and hardware adjustments from Nintendo weren't the way forward to maximise the company's valuable intellectual property (see Daily Insight: More Marginal Moves from Nintendo). Recognising disruption is difficult for most companies and especially painful for those enjoying a leadership position. Nintendo was admired for its innovative DS and Wii devices, but competitors Microsoft and Sony responded with equally sensor-filled hardware.
The partnership with DeNA appears to indicate such a quick pace of change that Nintendo couldn't scramble together an in-house division. However, CCS Insight believes that the company has been evaluating partnerships with mobile software and hardware firms for more than a decade. We expect to see its games available in app marketplaces and via online services.
Nintendo certainly isn't admitting defeat. These new moves mean its market opportunities are actually expanding as more than one billion smartphones are now sold each year, many into countries that Nintendo's devices would never have reached in scale. With opportunities on mobile platforms, in community gaming and eventually virtual reality, the company should regain any lost mindshare if it plays its cards right.