Nintendo is at a crossroads. The Japanese video game giant's latest console, the Wii U, isn't selling to expectations --the company has moved 9.7 million units since it was released in November 2012, putting it well behind Sony's PlayStation 4 (22.7 million units) and Microsoft's Xbox One (12.6 million), even though both of those products came out a year later. And two weeks ago, when Nintendo debuted new games via a "digital event" released during the annual E3 video game convention in Los Angeles, many fans were left feeling underwhelmed.
But at the same time, some areas of Nintendo' business are booming. Sales of its 3DS handhelds are north of 52.9 million units globally; the latest model, the "New Nintendo 3DS XL," helped give US sales a 50% year-over-year sales bump in the first half of 2015. A new line of interactive toys called Amiibo, the company's first foray into the booming “toys-to-life” market created by Activision Blizzard's Skylanders, are a smash hit with gamers and collectors. And last week Nintendo revealed that its new multiplayer online shooter game, Splatoon, sold more than 1 million copies in its first 30 days in stores.
More big things are coming. Earlier this year, Nintendo announced it was teaming up with developer DeNA to make games for mobile devices; Nintendo CEO Satoru Iwata also revealed that the Wii U's successor, a console codenamed NX, would be revealed in 2016.
So where does Nintendo go from here? I interviewed Reggie Fils-Aime, president and chief operating officer of Nintendo of America, earlier this month at the E3 convention. The following excerpts from that conversation are edited for length and clarity.
David Ewalt: How do you feel about Nintendo's E3 announcements? Are you happy with what you were able to show?
Reggie Fils-Aime: Yeah, I am. The way we look at these events is it builds, all right? It's not what happens day one or day two. It's by the end of the week, have we moved the perception forward on our games, our position in the industry, the innovation that we're bringing? And I feel very good right now.
The way we look at this show, is what do we want to focus on over the next six to nine months. There are some games that we announce while we are here, but more often, we're showing complete builds. We're showing exactly what our vision is, with the goal of really helping people understand why they're going to have so much fun.
Arguably, Star Fox is brand new, hadn't been seen before. But we had hinted at it last year. Super Mario Maker, we had shown a little bit last year, but the game that we have here is much more robust. So it's just a different approach. And some of our fans get it. Others would always love to see more. And we hear that, and then we move on.
I was a little surprised that the announcements were all games, and there wasn't any mention of hardware. Was there a strategic decision to focus on software?
Our focus is over the current six- to nine-months. In our handheld space, we've just launched the new Nintendo 3DS XL. So from that standpoint, there is no new hardware coming over the next six- to nine-month period. There might be some new variants. The thing about the handheld space, consumers love new designs, new colors. And we'll continue to offer those types of experiences. But there's not going to be a fundamentally new piece of handheld tech coming out.
In the home console space, we're focused on Wii U. NX is in the future. That's something that we'll talk about at the appropriate time. But right now, it's all about driving our Wii U business.
But doesn't the fact that the NX has been revealed, that people know it's coming at some point in the future, make it difficult for you to get the message out there about the current platform?
Honestly, no. Consumers know that effectively, as we complete one piece of hardware, we always start thinking about the next. So we're constantly challenging ourselves. What's new? What's different? What's coming down the pipe?
The way we approach it is when there's a game or an approach that we can't do on the current system, that's when we begin in earnest to focus on the next system. So what that means is that our developers, a number of them must have certain ideas that will be enabled by the NX. We're going to have to develop those ideas and get that software ready. And that's going to drive the timing for when we provide more details on NX.
How do you feel about Wii U hardware sales? Are you where you want to be?
So as we stand here on, a global basis, I think the install base is over nine million units. That's what was announced as of the end of March. Nintendo of America territories represent about half of that volume. So from a Nintendo of America standpoint, we are focused on continuing to drive that install base. And we believe with Mario Maker, with Star Fox, with Yoshi's Woolly World, those three games in particular, we think we're going to have a strong year and drive the install base.
Star Fox and Yoshi may be fan favorites, but can those franchises convince more casual players to buy a Wii U?
I would argue that on the list [of upcoming games], there are four hardware drivers. Super Mario Maker clearly is going to drive hardware. There are consumers who have always wanted to make their levels of Mario games. So that game will really speak to those consumers.
Yoshi's Woolly World for young families and new entrants into the overall video gaming space, I think, is going to be a hardware driver. You know, as you look around the E3 show floor, there's not a lot of content out there for families. And so for a family with seven, eight, or nine-year-old looking to get into video gaming, I would argue the combination of Yoshi's Woolly World plus the collaboration we have on Skylanders... I think it's going to be a hardware driver for young families.
Star Fox is a fan favorite. And I do think that that game has the ability to drive hardware for us. And then the other one I would point to is Xenoblade Chronicles X. Especially for an older consumer, and potentially a consumer that owns a competitive console, this game with its massive open world, beautifully rendered, I think it's going to be something that's going to excite that fan and drive them into the business.
You announced that partnership with Activision to get some Nintendo characters into the Skylander franchise. What is that going to do for you?
When Activision was first exploring and developing the Skylander concept, they came to Nintendo. And they came to us because of our strength with families and our understanding of building strong IP. So arguably, this is a collaboration that's four plus years in the making.
It was E3 last year, as we unveiled Amiibo that we started having deep conversations about what an IP collaboration might look like. And I say that because if you look at the Skylander executions leading up to this year and introduction of vehicles, you had Swap Force where you would swap out different parts. That doesn't fit established characters like Donkey Kong and Bowser. You had Trap Team where it was trapping the opposing force, that didn't fit in as directly. Vehicles, like the ability to conceptualize vehicles that would go along with Donkey Kong and with Bowser, that fit. So that was really the kick off of the idea. And it truly was a collaboration. The Vicarious Visions team would visit Kyoto. Our developers would visit Vicarious Visions outside of Albany. There was a lot of communication, and the end result is just fabulous.
Do you think there'll be more Nintendo characters appearing in future Skylanders themes?
We are all excited to see how this integration works. And both companies love to chase success. So let's see. I think the collaboration has been very strong, and personally, I'm very excited about the execution.
Tell me about the Amiibo business. How big has it gotten? Are sales what you expected?
The toys-to-life business is well developed here in the Americas, more developed than Europe, and significantly more developed than Japan. So as we had discussions about the Amiibo business, we always believed it could be big. And we pushed the global organization on the production side. We pushed it in terms of the thought process and how to merchandise these figures. So we've always believed that this would be a big business.
Through the end of March, we've announced that Nintendo globally sold about 10.5 million Amiibo. Fully two thirds of that are coming out of the Americas, so we are the lion share of that business. And we're going to continue to drive it. I can share with you that when we just launched this most recent wave, over roughly a 30-day timeframe, just in the United States, we sold a million Amiibo. And so the momentum we have with our Amiibo business is very strong.
Is that ahead of projections?
I'm not going to share with you our projections. But what I will tell you is that we are pushing and challenging to continue growing our supply chain because we see continued opportunity. We see a tremendous amount of opportunity.
Do you have a sense of who's buying them? I wonder how many people are buying the Amiibo simply as collector's items, versus actually using them in games.
We're seeing both. There are collectors and completionists out there. And those are probably the consumers being the most vocal about not being able to get a particular figure. But we've done research. And I'm not going to show the numbers. But the number of Amiibo figures that people are playing with was astounding to us. It was bigger than we had anticipated. So from that standpoint, the collector aspect, the play aspect is really a strong driver of this business. We knew it would be. But certainly, 10.5 million units globally effectively over the course of about five months, is a very strong business.
One of the big themes of this year's E3 is virtual reality. There's VR stuff everywhere, except for the Nintendo booth... which is interesting because Nintendo was a pioneer in VR. So why isn't there a Nintendo VR player right now?
You're absolutely right. We were early in VR, and we were early in AR, right? The 3DS has AR capability. So we're very knowledgeable with the tech.
For us, beyond the tech, we believe that there needs to be two other key aspects. First, we've got to make it fun. There needs to be executions that make it fun, that really make it an entertaining experience. And then the second piece is that it needs to be social. It needs to be something that multiple people in the same room can enjoy. And it needs to be something that you're going to talk about and get others excited. And I have to say, as we sit here today, I'm not convinced that the current efforts are really pushing forward in those two areas. I haven't seen a "wow" experience yet. And I haven't seen something that really is going to be inherently social.
What can you tell me about Nintendo's new mobile strategy?
We're not talking in detail about mobile here at this conference. The only things I can tell you, first, we have a robust partnership with DeNA. They bring a lot of knowledge and a lot of infrastructure into our efforts. We obviously have the IP. And we believe we've got game creators that can do wonderful things on any platform.
We've also said that we're going to be doing a limited number of games and applications in this space. And we say that because as you look across the landscape, most of the players in this space have won it. So it's not like the video game business where there's going to be a lot of development across a lot of different franchises. It's going to be a very focused develop. And we've said that the first application will come out this calendar year.
So that's all I can tell you. But certainly, it is something that we're committed to. And our goal is to be Nintendo in this space, which is all about being innovative and being fun.
