Nintendo needs to leverage hardware and tackle the mobile market

Nintendo continues to ignore the booming mobile gaming market even as its console and handheld businesses decline. The one-time king of gaming has seen three consecutive years of financial losses, the Wii U has been a miserable failure, and the popularity of Android and iOS games are clearly eating into sales of the 3DS. No wonder shares slid 18 percent last week before rebounding slightly in the last few days.

Earlier this week it looked like Nintendo may finally dip its toes into the mobile waters, when reports surfaced that the company would create “mini games” that essentially serve as smartphone demos of its console titles. The company quickly quashed those rumors, however.

A healthy fear of mobile gaming

There is no shortage of opinions regarding what Nintendo’s next move should be. Market research firm SuperData estimated this week that Nintendo could generate a cool $2.7 billion over the next several years simply by porting its titles to mobile. Wired’s Chris Kohler took a contrarian tack, urging the company to continue to avoid the mobile gaming market and instead open its eShop storefront to all third-party developers in an effort to grow a library of classic titles for Nintendo’s hardware platforms. The Financial Post’s Daniel Kaszor goes even further, suggesting Nintendo should build an entirely new console from off-the-shelf parts running Valve’s Steam OS and supporting third-part games as well as its own proprietary titles.

I understand Nintendo’s trepidation regarding mobile gaming. While the market is exploding in terms of overall revenue, it remains a hit-driven space where publishers continue to struggle to produce multiple successes across multiple franchises. The freemium model that has come to dominate the industry is a poor fit for the high-profile titles and sophisticated game-play Nintendo spends vast sums to develop and market. And while dedicated handheld gaming devices and consoles have the luxury of leveraging complicated controls with all kinds of buttons, smartphone and tablet games have been shackled by the simple touchscreen navigation of smartphones and tablets. Which is why titles from traditional game makers like EA often get lost in the translation to mobile.

Hardware is the key

A major problem for the DS3 is that few consumers are willing to carry a dedicated gaming device if they’re already toting a smartphone. Yes, the DS3 can offer a far more immersive experience, but that requires asking users to sacrifice some mobility.

Unlike most other established publishers, though, Nintendo could bring its vast manufacturing experience to the mobile gaming world. It has dominated the world of dedicated handheld gaming systems since the debut of the Game Boy in 1989, successfully fending off threats from Sony (the PSP) and Microsoft (the Xbox 360). Meanwhile, the number of children using phones and tablets – in other words, the sweet spot for the mobile gaming market – is far larger now than it was just a few years ago.

Apple has essentially paved the way for Nintendo by supporting third-party controllers with iOS 7, as my colleague Lauren Hockenson recently documented.  That gives Nintendo the opportunity develop mobile games and controllers in unison, which could result in some sophisticated, immersive games for the iPhone and iPad that could then be extended to Android gadgets. The company could offer mobile games without sacrificing its well-earned cachet as a developer of top-notch games and high-quality devices. And it could continue to pursue the console and dedicated handheld businesses. Which is far wiser than continuing to ignore the fastest-growing gaming segment in the world.