Your salvation is in another castle: Nintendo's decline spells doom for casual game companies
Nintendo's reign is coming to an end. The company used to make cherished consoles and beloved games -- now its consoles are struggling to compete with other devices while its games face increasing competition from mobile offerings that make Mario seem like a useless plumber. Those two factors contributed to the company's third consecutive annual loss, and despite its promise to return to profitability later this year, it seems like Nintendo has been stomped.
That should serve as a warning to any gaming company hoping to build a lasting business on the back of a few popular games. Nintendo was the undisputed king of beloved series -- it created Mario, Zelda, and Pokémon, after all -- and even it can't leap from this grave by releasing another sequel to those popular titles.
Nintendo's woes show how fickle gamers can be. There isn't a gamer alive who hasn't played a Nintendo game at some point in their life, yet the company is unable to sell as many consoles as Sony, which released its newest console a year after Nintendo but has still outsold it. More people have downloaded "Flappy Bird" rip-offs than have purchased the new Nintendo console. Nostalgia will only get a company so far, and it seems that Nintendo has finally found its limit.
So if a company with decades of affection in its favor can't survive on star power alone, how is a company like Rovio supposed to thrive with Angry Birds? How is King going to keep ruling after Candy Crush has been spit out? How is any company going to survive as long as Nintendo has with games that are popular for a few months and are then quickly forgotten? (Remember when people couldn't shut up about Dots? Do you even remember the last time you played it?)
Rovio reported a 50 percent decline in profits earlier this year, and even though it blames the shift on hiring related to its feature-length movie, it might also be caused by waning interest in Angry Birds. As I wrote when the report was published:
To recap: Rovio is making less money from all of the candies, toys, and other products it built around a video game series that presumably boasts fewer players than it did just a year ago. The company is said to be experimenting with new business models and games — including one made specifically for young girls — to recoup those losses, but so far its success is limited.
Rovio has said that the halved profits are the result of investments in its animation division, which is said to be hard at work for a feature film set to debut in 2016. But that expenditure combined with the company’s inability to keep consumers interested in its newer games, the decline in revenues from its tie-in business, and its hesitance to disclose player counts makes it hard to blame the news of its falling profits on increased spending alone. Investors were also wary of King's initial public offering. Despite the popularity of its Candy Crush games, the company's IPO opened below its asking price. It has since reported record revenues -- a stark contrast to Nintendo's latest report -- but that might not be enough to convince investors that companies can build real businesses on top of popular game series.
Now it seems that even the godfather of casual games can't continue to thrive on those items alone. Mario has been stomped. Zelda remains with her kidnapper. Pokémon trainers have yet to catch them all. Nintendo is going down, and it's taking the last semblance of credibility to the "companies can be built on top of popular games" argument with it as it goes.