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Nintendo Records First-Ever Full Year Loss in 2011

This just goes to show you that you can only get away with basing your business decisions on undeserved arrogance for a decade or two.

Honestly? I was drinking the Kool-Aid until the Wii U was unveiled, and nearly simultaneously the 3DS was getting lukewarm sales and reviews, and Nintendo of America refused to import several Japanese games even though they had already been translated into English by Nintendo of Europe. It’s really bizarre how my opinion of Nintendo as a company did a completely 180 in that span of a few weeks. It’s like everything from GameCube to Wii to the future just suddenly caught up with me all at once.

When you’re going to base your entire business philosophy on insisting that your gaming experience is intrinsically “better” for intangible reasons, the fact that you have inferior hardware and archaic attitudes about gaming (“No one wants to play games on their phones,” “The internet is a fad”), it has to catch up with you eventually, right?

A few months ago, I was willing to go as far as to say that Nintendo might go completely bankrupt. Sony was circling like a hungry shark at E3, and all but publicly declared that they were going to knock Nintendo out of the market.

Then they shot themselves in the foot.

Announcing the Vita with an expensive, required proprietary memory card was a giant middle finger to gamers everywhere, every bit as shortsighted and arrogant as Nintendo has been lately. And far from knocking the 3DS out of the market, the Vita is setting records for low sales.

Sony and Microsoft’s advantages are fairly obvious if you just read their names. They have the backing of large corporations that do a lot more than gaming, and can afford to absorb a loss every now and then. Now, don’t get me wrong… I really wish the dogfight were still between Sega and Nintendo. I remember when gaming was something more than which first-person shooter or role playing game had the most attractive shades of grey and brown. But Sega getting knocked out of the console market was the worst thing that ever happened to gaming, and I don’t think Nintendo can be what it needs to be without a traditional competitor like that to keep them honest.

I think Nintendo weathers this for now, because of all the same factors we used to fall back on when examining the situation. Nintendo owns the handheld market (something I thought the Vita was going to seriously challenge, but now clearly isn’t), and their first-party titles have remained excellent regardless of everything else they’ve botched. We always used to say those two factors would keep them in business no matter what, and it looks like we’re going to get to test that theory unless the Wii U is much, much better and more marketable than it looks right now.

The thing is, there’s another specter on the horizon: the handheld gaming market might become obsolete. As smartphones become more and more commonplace, people won’t have as much of a reason to have a dedicated handheld gaming platform. Which means Nintendo would then become entirely reliant on their consoles, a prospect that I doubt is very comforting to Nintendo or its fans.

Longterm, Nintendo is going to have to start making some serious changes to remain relevant. And no, I don’t mean suddenly doing a 180 and getting in the business of making Call of Duty Knockoff 9: Featuring Additional Shades of Grey and Brown and More Realistic Muzzle Flashes. I mean making the kind of games that they’ve always made, but making smarter business and (especially, especially, especially) hardware decisions.