Summary
Nintendo is far from losing "some of its luster". Those that have underestimated Nintendo have been sadly mistaken. Nintendo is a 120-year old company that has focused almost exclusively on games and gameplay. Several larger companies have made the mistake of underestimating Nintendo and then paying the price for it, in terms of market share and overstocked inventory.
Analysis
Mark Twain replied after hearing his obituary had been published in the New York Journal, "The reports of my death have been greatly exaggerated."
Those that would count Nintendo out or as having lost this round of the console wars are sadly mistaken. Microsoft expected the Wii to beat the PS3, but they had no idea it would also give them a good run for their money. The Wii has not only outsold other platforms, but has brought new players to game consoles. The DS has been one of the most successful console introductions of all time. After over 100 Million units Nintendo just released their new DSi along with a new DSiWare game download service.
Perhaps the slow down in sales in Japan while rapidly escalating in the Americas can be chalked up to the tendency in Asian cultures to save and resist purchasing on credit. Asian consumers realize the economy is not that great right now, and may not be that inclined to run out an buy a new game system. Americans continue to buy SUV's despite recent $4/gallon gas prices. There is a historical precedent -- during the depression Hollywood continued to crank out lots of new movies. Buying a game system and some new games may be our way to escape the bleak economic outlook.
The iPhone has also been successful but in a slightly different market. The DSi is a $169 device. The iPhone costs $199 with a two year contract from AT&T with an additional $80/month for a minimum voice and data package.
One gets you a game system with high quality games that were subject to Nintendo's rigorous approval process. The other has 25,000 apps you can download. They both really appeal to two different markets or perhaps to the same consumer in different contexts.
To assume the DSi and the iPhone are mutually exclusive would be a big mistake, but then it would not be the first time the Wall Street Journal underestimated the game industry. Back in December 1982 after Atari brought down Warner Communications stock one third of its value in one day, the Wall Street Journal declared the game industry dead. Then in 1988 when doing a story on Nintendo the new reporter realized the Journal's previous mistake, "Despite earlier reports in this newspaper the game industry seems to be very much alive". By then Nintendo had 90% of the market share.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
