E3 2014: Nintendo's Opportunity

By Steve Peterson   Google+

Posted May 27, 2014



The situation facing Nintendo for E3 2014 is a strange one. The company has been losing money for the past couple of years, and its flagship Wii U console has consistently undersold Nintendo's projections; even the 3DS has been slowing down. Sales of software have also been less than expected. On the other hand, Nintendo's in a good position to have a successful E3 show. Expectations are low, the company is saving money (and further reducing expectations) by not holding a press event. What can we expect to see from Nintendo at E3 2014?

First, let's look at the landscape for Nintendo. The Wii U's sales are on track to be Nintendo's worst-selling console ever, and the situation is unlikely to change soon. The company is hoping to boost sales with Mario Kart 8 and the new Super Smash Bros., but third-party support is vanishing. Companies like Electronic Arts have no plans to put out Wii U versions of hit titles, and even Ubisoft (which has done very well with Wii titles like Just Dance) won't be displaying any Wii U titles at E3. Salvation won't be coming from third-party publishers.

The 3DS, which has been performing well after a rocky start, is slowing down, and Nintendo predicts lower sales this year of the hardware despite the introduction of the $129 2DS last Christmas. Overall, then, Nintendo is looking at a difficult year for its hardware.

This leads us to E3 2014, where Nintendo has (like last year) elected not to have a major press event, or even a presentation inside their booth as they did last year. Instead, the company will stage a Super Smash Bros. tournament and provide a Nintendo Direct video to fans everywhere. Essentially, the video will be Nintendo's press event, only produced in a carefully controlled environment at a considerable cost savings. What can we expect to find out from this video and from Nintendo's booth?

No new consoles
Nintendo may have concluded that the Wii U in its current form is not going to be a hit, and that a new console is probably warranted. But creating new hardware takes time, and it takes even more time to create software for it. If Nintendo has learned anything about its latest hardware introductions, it should be that killer software needs to be introduced with the hardware. So we aren't going to see new consoles this year, unless perhaps it's a new color.

No price cuts
Don't expect Nintendo to cut prices on the Wii U or any of the 3DS line at E3. The company is already losing money on every Wii U sold, and cutting the price only means losing that much more. This might make sense if there was plenty of software to sell (generating profits to cover the hardware losses), but the Wii U doesn't have a vast library of software to sell. If Nintendo is really planning a new console, they might as well try to keep selling the current one as profitably as possible while the new hardware is under construction.

Expect new games and new features
Here's where Nintendo is likely to focus: New games, and adding features and services to existing products. We've already heard about Nintendo's plans to add near-field communication (NFC)-enabled toys to its line, and apparently some toys will work with Super Smash Bros. Maybe we'll hear about a new Zelda game, but there will certainly be other games announced. We may also hear about new services, changes to the eShop, and improvements to the Wii U software.

Increase value
Nintendo will be doing all they can to increase the perceived value of the Wii U, since they won't be reducing the cost. That means talking about upcoming games, of course, but it also may mean new features for console, new services, or bundling in software or other things to increase the value of the Wii U. Perhaps an NFC toy will be included with the Wii U, along with some demo software, to show exactly how much fun the NFC toys will be.

Marketing strategy
Either explicitly or implicitly, we'll find out more about how Nintendo intends to market its products for the rest of the year. We probably won't hear about expensive TV advertising spend, but there may be more efforts with hands-on experience in stores (like the Super Smash Bros. demos that will take place during E3 at Best Buy stores). Nintendo will continue to use video to get its messaging out directly to fans, since that's inexpensive and effective at reaching the fan base. One interesting thing to note will be the relative attention given to the 3DS line versus the Wii U line. Which product line will get more space in the booth, or more time in the video? That will tell you how Nintendo ranks the importance of each console, and Nintendo believes the greatest sales and profit opportunity lies. 

Summary
Nintendo's prepared the world not to expect all that much at this year's E3, and thus any cool new thing they show will be seen as a win. Everybody loves an underdog, and if Nintendo can show some exciting new software on the horizon the media will give it a good play. Nintendo's not going to be hinting at any future consoles in order to avoid killing sales of current devices. We'll see more reasons to buy the current offerings, and we'll get a sense of where Nintendo is going to focus its marketing spend in the year ahead.

Meanwhile, Nintendo is working on the new directions that its CEO Iwata spoke of (something to do with fun and health), but we won't know about that until some time in the future. New hardware will surely be on the way, but Nintendo would be wise to keep that under wraps until it's ready to sell with some great software along with it. For the time being, Nintendo will stay the course it's set, and try to make the best of what it has. We'll see if it's good enough to lift the company back into profitability, but we won't know that for quite a while.





 


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