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Nintendo’s pressure to make iOS games

The story of Nintendo’s investors pressuring them to release iOS games instead of more hardware platforms got a lot of attention this week.

While I don’t think there’s much to it, in that I don’t think this particular event will generate meaningful change in the company’s direction, it raises an interesting question: why should (or shouldn’t) Nintendo stop making hardware and just make a bunch of money selling its popular game franchises on other popular platforms like iOS?

Their hardware profitability woes are relatively new: while the hardcore gamers made fun of the Wii’s awful graphics, shallow gameplay, clunky to nonexistent online abilities, and lack of media-center features, Nintendo was busy selling everyone low-end hardware for $250 that wasn’t particularly fun until you spent hundreds of dollars more on controllers and various game-specific plastic attachments. The Wii kicked ass in the marketplace and made Nintendo a ton of money, so it’s hard to argue that they need to change anything fundamental about their business.

But Nintendo’s greatest strengths — its stubbornness and extreme conservatism — have made it less prepared than anyone to deal with Apple’s nearly accidental takeover of the portable gaming market.

If I were a Nintendo investor… well, I think I’d seriously reconsider that position right now. I’d certainly want to see a big change on the horizon. But I don’t know what that could be.

Nintendo’s financial health depends on a world where they can keep selling many millions of people those plastic steering wheels for $15 and nunchucks for $20 and controllers for $40 and the same games over and over again for $50 on new $250 systems every five years.

I don’t know how much of that world is left, or for how long, but its best times are probably behind us. The game-console world in 2011, especially portables, is a bit like the PDA world in 2004: it’s being eaten by consolidation from more ubiquitous devices. Game consoles will always exist, but they will probably decline significantly in sales over the next decade and be relegated to smaller markets like “hardcore” gamers, much like high-end PC gaming.

Nintendo could certainly sell their same games over and over again for $7.99 in the App Store or try to cheat kids and grandparents out of money on Facebook, but that won’t come close to earning the amount of money they grew accustomed to printing with their hardware business before 2010.

I’m not even sure that their brand recognition is relevant enough in these markets to guarantee that their games would do particularly well there. How much of the iOS gaming market is too young to have much loyalty to Mario and Zelda? (And how much of the Facebook gaming market is too old?)

Nintendo should probably reconsider its direction, especially in portables, but I don’t think this is where it should go.

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