Could Iwata’s days be numbered?

The evidence is fairly obvious- Nintendo’s change in business strategy under the leadership of CEO and President, Satoru Iwata, brought the company back from the depths. Back in the GameCube days of the early 2000’s, many had ultimately consigned Nintendo to the same fate as Sega. And, let’s face it, some of us didn’t know what the hell to think after seeing the initial DS prototype or hearing Reggie utter the name “Wii” for the first time.

But, since his inauguration in 2002, the 51 year-old former HAL Laboratories president and programmer has consistently piloted Nintendo through its most innovative and financially successful period, overseeing the release of the two best-selling platforms in the company’s history. The Nintendo DS has sold almost 150 million units and stands ready to eclipse the Playstation 2 as the highest selling video game console of all time. Hell, there are more Nintendo DS’es out there than there are iPhones (true story). And the breakaway success of the Wii and motion-based gaming proved a truly disruptive and emergent force which expanded the video game market in ways that even Sony and Microsoft couldn’t ignore for too long.

Since Iwata got his hands on the steering wheel, Nintendo has seen record profits, unanticipatedly high sales, and a soaring stock that increased seven times in just four short years. At times, the Wii and DS platforms have boasted double the total market share of their competitors combined, and have hosted some of the best-selling video games in the history of gaming.

But the Nintendo of today is not the Nintendo of several years ago.

The company’s stock has fallen almost 60 points since its all time high in late 2007 and is now worth only slightly more than double what it was when Iwata first took the helm. For the past two years, sales and profits have plummeted as well, culminating with the Big N reporting it’s first ever quarterly operating loss and a 66% decrease in profits in the last fiscal year alone- the lowest performance Ninty has seen since before it released the original NES. Couple that with the stunted and unimpressive launch of the 3DS, a several month-long game drought across all of its consoles, and a decline in investor confidence so serious that stock actually dropped when Nintendo unveiled the much anticipated Wii U at this year’s E3.

To make things worse, Nintendo’s recent 3DS price slash has resulted in the first ever instance of the Kyoto-based gaming titan selling a product at a loss. And the recent announcement of a confusing and bulky circle-pad add-on peripheral makes it seem that even Nintendo itself has lost faith in its own products. A quick check of any video game message boards across the web reveals a good deal of fan sentiment echoing this growing uncertainty. Many Nintendo fans have been voicing their skepticism and outright displeasure with the current state of the company. Fan-spearheaded campaigns to localize coveted foreign games seem to have fallen on deaf ears. And the industry at large has accused Nintendo and even Iwata himself of being out of touch with respect to the burgeoning mobile and indie scenes. Iwata’s keynote address at this year’s Game Developers Conference, despite it’s relevance, betrayed Nintendo’s fear of the iPhone and Android platforms. And let’s not even get started on Nintendo’s woefully inadequate implementation of online services and digital distribution.

The general impression (be it true or not) is that Nintendo has seemingly gone from a brazen Fox McCloud, expertly blasting and barrel-rolling his way through an overwhelming onslaught of enemy ships, to an incompetent and obsolete Slippy Toad, unable to shake even the simplest of threats off of his six.

Could Iwata, who has recently taken a 50% pay cut and issued a very embarrassing apology to his company’s most loyal fans, become a corporate scapegoat? Could Nintendo’s struggles reach a point where his resignation or termination would be viewed as a necessary move to reinvigorate investor faith and reboot the company’s current image?

As gamers we know that hitting the reset button doesn’t always work. Sometimes you need to blow into the cartridge to get things running the way you want. I doubt something as simple as a change in leadership would make as big of a difference as many would like it to. Frankly, I think Iwata has done exponentially more good than bad for Nintendo and I’d like to see him stay- but convincing investors of that may not be so easy. As fans we may have to wait a bit longer for that game we want, while raising our collective eyebrows at the eShop and grumbling under our breaths about how much we paid for a console which we could have waited several months to buy at a discount. But to someone who has thousands or millions of dollars at stake in the company, chances are that they’re not primarily motivated by how much fun they are being provided with at the moment or in the future. In the short term, some of Nintendo’s board members could conclude that creating the illusion of a big change may prove more valuable than the actual implementation of the real thing, at least as far as wrangling disenfranchised investors is concerned.

But despite recent performance and increasing outside criticism, Nintendo still holds its own in the industry. It still dominates with respect to hardware market share in both the home console and handheld markets. In fact, if you include handheld sales, Nintendo has consistently sold more consoles worldwide than any of its competitors year after year since the release of the Famicom, with the only exception of the year 2000. And, of course, the games speak for themselves- they always have and will most likely continue to do so. A quick look at the list of the top 50 best selling video games of all time reveals that the top 17 games are ALL Nintendo games. In fact, of the 50 games on that list, a whopping 34 are Nintendo first and second party titles. The second place company on that list is Sony Computer Entertainment… with five games… the highest ranking one at slot #25.  The difference is practically tangible.

But sometimes in business it doesn’t matter how much success you’ve achieved, especially if the last thing your employer remembers you for is failure. Remember Gunpei Yokoi.

What say you, readers? Is the Era of Iwata nearing its end or is it just beginning?

23 Responses to Could Iwata’s days be numbered?

  1. Job says:

    Great article. I think Iwata should be fine because of the success of the Wii and DS. They are not doing so bad right now, they are starting to pick up sales. Things should get better from here on because of software releases, starting with STARFOX tomorrow

  2. Nexel says:

    Iwata has done so much for Nintendo, I really don’t see him going anywhere unless something else goes really haywire with the company…

  3. Brett says:

    @Job

    Yeah the stock is up since the price cut too. Almost 4 points, which is alot considering what Ninty is currently trading at. Curiously enough their stock price hit it’s lowest low in years the day before the 3DS price cut.

  4. Artefacto says:

    The disrupter was disrupted by 99c games, and a new generation of kids that would rather play on facebook and their cell phones than buy a game console. Iwata won’t change directions, and it might lead the company into a big plunge down the road. However, gaming is now bigger than it ever was, so Nintendo won’t break apart either. It just seems that it could become unsustainable with the old business model of expensive cartridges and devices that look like 90’s toys instead of futuristic gadgets.

  5. Richard says:

    Excellent article! I certainly hope Nintendo keeps Iwata around. Stock holders are short-sighted, and Nintendo won’t regain its position by chasing other company’s examples. They succeed through innovation. A hard look at their software pricing wouldn’t hurt, though.

    They’re in a game drought right now, so of course things look grim; without games, they’re unarmed. Hopefully the press conference next week will bring some good news. The bottom line for me: I love his “Iwata Asks” roundtables so much, I can almost forget the dry heaves I got from seeing the circle-pad add-on.

  6. Brett says:

    @Richard

    Ha yeah, “Iwata Asks” is such awesome content. I’ve got my fingers crossed for an Iwata Asks documentary movie- From Hanafuda To Hiroshi: The Story Of Nintendo.

    Just wait, in approximately 2 years we will start seeing “Tretton Inquires” or something.

  7. Warren says:

    …Nintendo doesn’t change presidents easy or often. I think he’ll be around for awhile because of that fact alone. Also Nintendo has faced down years under the last President, yet he stayed on.

  8. I like Iwata, but I’m not entirely happy with the direction he’s taken the company in. From a business perspective he’s had an astonishing track record, at least up until recently. As a gamer, I felt The Nintendo DS was a great innovation, but with the Wii, he did basically sold us the Gamecube for a second time. The design of the console and motion controls were great, but I hated the name, the casual approach, and I would have liked to see Nintendo continue competing on the hardware performance level as PS3 and Xbox 360. Even the Wii U (still hate the name lol) looks like it’s just a seventh generation console with a touch screen controller.

    My fondest memories of Nintendo were back when Yamauchi was President and Rare LTD was still around (sold when Iwata took office). I still think they make great games though and do plenty to please me as a fan. I’d just like them to really impress us with performance power again.

  9. Hitokiti_Ace says:

    Awesome article! I don’t really think anyone is to blame directly for this 3ds fiasco, if you will. I believe it to be a culmination of a few things:

    -3d stereoscopic displays being so new (you can get away with charging more for new, vastly underused tech)

    -Lately Ninty’s done no wrong, the Wii and DS both sold like hotcakes, why doubt yourself?

    -The fact that at E3 and the demo’s everybody adored the 3ds (aside a few discomforts among rare people) Remember when Iwata mentioned the price point was also sortof based on peoples reactions to it? Ya..

    I’d like Iwata to stay around, so long as Shiggy (Miyamoto) wants him to. As far as I can tell, as well as sales data shows, overall Iwata has been a great asset to Nintendo. Certainly not just another ignorant manager/figure head, but as a man who understands the underlying issues with sales/programming/development. He may be responsible for some mistakes, but he’s done well.

    As long as the innovation keeps flowing, so will my love of all things Nintendo. I will keep on voting with my wallet, Ninty, just give us some great things to vote for!

    -Fanman’s reincarnation signing off

  10. Yossarian says:

    Yes, it seems to be (and has for years) that nintendo and change are not synonymous with one another. Nintendo is an innovator with large, grand dreams. It is that portion of the company that we all love; it harkens us back to our childhoods and brings out the dork in us all. The part that irritates us is Nintendo’s continued inability to see beyond their idyllic vision and include today’s technology (and in many times basic technology) to expand playability and attract everyone. Continued bare-bones online content, subpar graphics (enjoying beefed up pixels does not make me shallow, thank you), and little irritating things (like the inability to save more than three wireless connection point data!!!) drive away some of Nintendo’s largest supporters. I think there is a part of all of those who grew up with an NES that wants to see Nintendo succeed and stand toe to toe with the other giants (Sony and Microsoft), but reports like a snap on control stick is just the kind of example that sickens and drives away would be customers. I was going to purchase a red 3ds today. Instead, I will wait until Tuesday’s Nintendo showing at the Tokyo game show for further instructions from General Iawata.

  11. garyaga says:

    If the Wii U fails then he should be worried.

  12. Verius says:

    I think Iwata should still be here for quite a bit longer as will Nintendo too. What kinda worries me is not that Nintendo doesn’t try to innovate in new ways to play but in the hardware they use. I don’t mind if the hardware is slightly older but I’d rather pay a bit more and wait to get a better, more well polished and well thought out product. The 3DS is a great device, but for the $250 launch price that I got it for, it felt rushed out the door to satisfy the fanbase and shareholders and had a not so good lineup of software at launch. I’d rather let them have some extra time to fine tune their consoles and build up a good lineup of launch software for their next round of hardware releases.

  13. baelnic says:

    He will get to the WiiU launch but if it fails that will be it. First quarterly loss ever. That can’t be mentioned enough and if I were Iwata I’d have a lot of very smart people trying to figure out what when wrong (because they obviously don’t understand what is broadsiding them).

    Add in that traditional Video Game sales are shrinking YOY (as tracked by NPD) and I assure you that the bean counters at Nintendo are freaking out. The NPD numbers are especially interesting because they’ve only recently started tracking online sales. Shrinking traditional market even when you add in online sales and Nintendo doesn’t sell their cash cows as downloadable games. Was that the sound of Nintendo’s accounting department screaming out in unison?

    What frightens me about Nintendo is that they make incremental changes in their strategy. NES > SNES, N64 > GameCube. Most people say that the Wii was a revolution in consoles but it was merely and incremental upgrade in their casual DS strategy ported to consoles. They sold a bajillion BrainAge, Nintendogs and games of the like and realized that their traditional console strategy wasn’t working anymore. They see that the stylus on the DS allows people to interact differently with games and thus the Wii is born with a pointer and a different way to interact with games. Revolutionary for consoles? Yes. Revolutionary for Nintendo? Nah. (P.S. Not very different from how Apple likes to innovate and is an amazing thing for a company to have).

    What they didn’t see (nor could they) was that everyone was about to own a touchscreen portable device in one pocket and be able to play tons of casual friendly games with their friends via social networking (some of which can be played on that same portable touchscreen device). In a few short years they were bombarded by iOS, Android, Facebook, and “hardcore” console makers that took their previous market. Enemies are at the gate.

    There isn’t a lot of time here to get things right either. Investors are more volatile than they have been since the early eighties (and more realistically since the Depression). I honestly don’t think Nintendo’s board can be as patient as they have in the past because swings of 20% in stock price send pretty strong messages. Panic is going to be the theme going forward for Nintendo (assuming they don’t hit a homerun with the WiiU). I really hope they get it right and don’t make bad choices out of fear. Time will tell.

  14. baelnic says:

    One thing to emphasize. They bet big on the casual market for the DS and the Wii. Who knew that casual games would be free on Facebook and $0.99 (or free with ads) on handhelds? How can you expect to compete selling $30 carts or $50 discs in that world? Quality alone won’t cut it for that market. It’s hard to blame Iwata for that but then again someone has to take the blame.

  15. EdEN says:

    Just have him approve a US release of Xenoblade, Last Story and Pandora’s Tower in CE for $49.99 with an artbook, soundtrack and metallic box (Metrod Prime Trilogy would agree), keep us happy for one last holiday-first semester period and pump us up for the Wii U. Price the Wii U at $299.99 and take a $60 hit per unit to aggressively get into as many homes as possible and see how MS and Sony skip 2012 and most of 2013 to lower their losses on new hardware since there’s no chance in hell the PS4 or the 720 could release at such a low price without them bleeding crimson red. ALLOW us to buy another new controller even if it costs $89.99-99.99 since there’s LOTS of uses for it (splitscreen co-op with more screen available to each player as the UI and extra data would be on the New Controller, Two player VC and Wii Uware games that can be played on the New Controller when the TV is off, using the extra New Controller as another Netflix screen, etc.). Increase the number of 3DS games you’re working on and bring back Advance Wars, Fire Emblem AND Startropics with new 3DS entries AND release the older Famicom ones IN ENGLISH at an import price (extra $2 each) and the two NES Startropic games for the 3DS VC… ok, that should be enough for the next 10 months.

  16. EdEN says:

    Ah forgot about: Disaster Day of Crisis at $30 and Fatal Frame with a similar CE and $49.99 price. They’re already in english (since they released in Europe) so it’s a small investment and several happy consumers. You could also market them with “Wii U exclusive content went played on Nintendo’s new console” and add in a level or two worth of cut content or maybe make the games a dual layer release with higher resolution textures and better framerate on Wii U as well as 720p´+.

  17. Nfanboy says:

    I think Iwata should ne sacked !!!

    I know he was the reason why the DS and the Wii were so succesful.

    But,

    The 3DS launch fiasco and the Wii U reveal are unacceptable.

    Many CEOs were fired for less…

    He should go !!!

  18. RisnDevil says:

    Actually, here is what I think will happen, and then what should happen after that:

    The 3DS gains momentum. It won’t quite reach stride and start reaching DS level success for another 12-15 but WILL be successful in the interim (just not as successful as Nintendo and its fans have gotten used to).

    The Wii U is going to launch to critical success. For the next nine (or so) months everyone from industry professionals to fan-sites will continue to report in and bash on the unreleased (and generally non-experienced) Wii U. But then, when the system launches, all the problems will have been washed away in a near perfect launch: may not have lines waiting outside the store, but nor will there be console shortages. Again, much success will ensue (about Christmas 2012) but not as much as with the Wii (more doomsaying/naysaying ensues).

    All of this WILL happen, just see.

    Now, what I want to see:

    Nintendo will use the new success (combined with the overwhelming success of last generation) to GO PRIVATE. Yes, they should buy up all public stock and go private. Why? Because the investors/board have caused many of the current problems. How? THEY are trying to rush products out the door (3DS). THEY are trying to push Nintendo into places that Nintendo just doesn’t feel right going (portable market/other platforms). THEY are the ones that are rushing to change and accomodate god and everyone. THEY are the ones that are making OUR BELOVED Nintendo not present the calm, confident, collected company we know and love. Get rid of them and you get rid of the problems, but keep Iwata.

  19. Brett says:

    @RisnDevil

    Great comment. You make a great point that unreleased hardware gets crapped on until it actually makes it’s debut. Especially Nintendo stuff. Nintendo certainly has a greater capability when it comes to surprise redemption mainly because a lot of us grew up playing their games and so we truly want to see the succeed more so than other gaming companies.

    Going private has it’s drawbacks as it limits the amount of investors you can legally have, but is an interesting suggestion. Whereas a company like Apple probably has investors who are Apple customers and fans as well, Nintendo’s main audience is probably not old enough to have acquired the wealth necessary to be a major shareholder with some pull. Even their last president, yamauchi, never played video games. And we all remember that investor who tried to tell Iwata that video games were a waste of time.

    You’re right though. There is a huge difference between us fans and some investor who is just in it to make money. Unfortunately in business, even with a company like Nintendo, there is a bottom line and the investors come first- public or private.

  20. monkat says:

    I actually like Iwata. I like that he’s an executive that is willing to apologize for the botch of a launch, both to stockholders, himself, and the consumers. He’s willing to admit that he made a mistake.

    Business 101 will tell you to never do that–it makes you look bad, it makes you look weak and that your company makes mistakes. Well, when Iwata did it, I never felt like more success was going to come from Nintendo than ever before.

    We’re human. We make mistakes. Mistakes have consequences. For every success, we fail twice or more. That’s how we keep moving forward, by surviving mistakes and trying again.

  21. gojiguy says:

    My only worry is that someone at the company is a dinosaur. a scared dinosaur. Afraid of true online interaction, multimedia components, digital distribution, etc. They want to make their own way of doing things by their rules- not by the demands of consumers.

  22. Nfanboy says:

    They need to bring someone with freash ideas.

    Nintendo needs fresh franchises and a new direction.

  23. Mohan says:

    Iwata had done so much for Nintendo, I don’t think his days are numbered.

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