Posted by: seanmalstrom | August 19, 2016

Email: July NPD – 3DS was the bestselling hardware

Hello, Master Malstrom!

First off, let me make it clear that the purpose of this e-mail is not to celebrate the 3DS as a great gaming device. This e-mail is about Nintendo’s larger strategy that involves using smartphone games to grow their core business (dedicated gaming hardware).

According to the leaks for July NPD (numbers provided on sites like NeoGAF and VGChartz, by people who have a track record of being credible), the 3DS was the bestselling hardware (exact numbers undisclosed, but a minimum of 176k units was confirmed), beating everything else. What makes this interesting is:

1. The 3DS slumps in the region of 80-120k units in non-holiday months on a regular basis, more often than not below 100k.
2. The PS4 and Xbox One pull off numbers in the range of 175-225k in comparable months.
3. The 3DS had no price cut on its hardware or its games in July.
4. The only notable new 3DS release was Monster Hunter Generations, an IP that doesn’t push any notable amount of hardware in the USA.

Essentially, the 3DS had to double its sales rate in order to have a shot at #1 for the month, and it did just that without any sort of the usual things that drive hardware sales. The cause of this sudden surge is easily found: It’s Pokémon Go. The smartphone game reinvigorated interest in the Pokémon IP, the titles that benefited the most from it were Pokémon Omega Ruby and Alpha Sapphire which re-entered the top 10 of the software charts with combined sales of ~160k units.

Conclusions that can be drawn from this:

1. Nintendo’s strategy to use smartphone games to grow their core business is going to work, provided NX offers compelling software. Pokémon is known to not deviate much from its established framework, so new mainline games (or remakes of them, as is the case with Omega Ruby and Alpha Sapphire) deliver what consumers expect from Pokémon. I do not expect NX to be a surefire success if Nintendo goes crazy with their IPs or the hardware itself and shows no interest to meet consumer expectations.

2. Smartphones aren’t direct competition for dedicated handhelds, rather the relationship between smartphones and handhelds is similar to PCs and consoles. I know you’ve said this before, but the video game industry likes to push the notion that the dedicated handheld is dead; consequently, Nintendo games on smartphones would be the final nail in the coffin for handhelds. But what the actual numbers show us is quite the opposite and it’s all the more delicious because a mediocre system like the 3DS beat the industry favorites PS4 and Xbox One.

That’s enough for this e-mail. Looking forward to your 2 cents on these NPD results, and more importantly, the implications for Nintendo’s future.

 

I’m impressed, but not surprised, that Minecraft Wii U version is like number 6 on the NPD. Monster Hunter is like #1.

What does it all mean?

It means no new games came out in the month of July. That is what it means.

But it also means Pokemon Go’s success is feeding people into the 3DS and Pokemon games.

In the 80s, there was Nintendo Power and TV cartoons like Captain N or The Super Mario Super Show. There has always been commercials. But now the TV is no longer relevant. The most important screen in a person’s life is their smartphone screen. People look at it everyday for texting and whatever else they do. Pokemon Go is keeping the IP alive in people’s minds which feeds them to the Pokemon product despite it being years old.

This is interactive marketing, and it is brilliant. Pokemon Go isn’t so much a game as it is Nintendo marketing.

It makes me wonder what this means. With the Internet, we saw marketers try to shift their advertising in such a way for that forum. We have seen ads inside games. But perhaps the best way to market a video game is through interactive gameplay of a sort.

I think Nintendo would make a Mario app game similar to ‘Flappy Bird’ which would funnel people to the Mario game on NX. A Zelda type app to do the same to the Zelda game.

I actually believe this was the purpose of the ‘Expansion products’ that Nintendo made. Nintendo wanted Wii Sports and Wii Fit to lead people to 3d Mario, Aonuma Zelda, Sakamoto Metroid, but instead those gamers went to the games Nintendo didn’t want to make such as 2d Mario or even Mario Kart. These ‘app games’ are just to drive the ‘players’ to the Nintendo product.

The problem with mobile games is that they are cheap or free and add value to the hardware, not to the game maker. Apple or the hardware maker is leveraging the mobile makers to sell their phone at a premium amount. What Nintendo is doing is inverting it. Nintendo is using Apple or other hardware phone makers as a platform to drive its users to Nintendo’s platform. The Nintendo IP serves as a bridge from one hardware (mobile phone) to another (Nintendo hardware).

Will analysts understand this? No. They will think the mobile games are products unto themselves. They may generate profit, and it is awesome that marketing itself can now become profitable, but the mobile game is not the end into itself. In the same way, the ‘weather channel’ or ‘everybody votes’ channels on the Wii were not an end to themselves. They were to create new pipelines of consumers into Nintendo’s gaming.

The mobile game will never replace the console game. Nintendo will use the phone’s hardware uniqueness to make that mobile game as Pokemon Go did (Pokemon Go could never be made on a home or handheld game console). Nintendo’s mobile games have the distinct advantage over other games because Nintendo is utilizing the hardware’s uniqueness, the other mobile games are wannabes and trying to create a console (handheld or home) experience on a phone.

This is also an interesting marketing technique to get old products selling again. The Pokemon fans already bought the Pokemon games. So who is buying Pokemon today? It  has to be the new fans. Nintendo may be using this type of marketing for games already out for a year or two.

It makes me think of the NES Mini. If someone buys it and is happy with it, that is money in Nintendo’s pocket. But most likely, a new love for video games will come out in that person’s heart. That person will want to buy the new Nintendo console to play new games. The NES Mini might be better interpreted as ‘interactive marketing’ though intended for a different audience (former Nintendo gamer).


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