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This is why you should never count Nintendo out

Former Microsoft Xbox exec has a new book, Xbox Revisited.Former Microsoft Xbox exec has a new book, Xbox Revisited.
Former Microsoft Xbox exec has a new book, Xbox Revisited.Brown Books Publishing Company

Nintendo has hit a rough patch, of late. The Japanese game publisher has failed to replicate the overwhelming success it had with its Wii console with its follow-up, the Wii U. The company also lost its long-time leader, Satoru Iwata, in July. Though the company has now appointed a new president, Iwata had guided the company since 2002 and was much beloved. And while Nintendo (NTDOY) still owns the portable gaming hardware market, it’s seen the growth of tablets and smartphones eat into its business.

But Nintendo has faced adversity and won in the past. Just ask Robbie Bach, who spent 22 years at Microsoft (MSFT), including a decade leading the video game division as chief Xbox officer (and has also recently written a book about the strategy Microsoft employed to successfully enter the video game market dominated by Nintendo and Sony). Bach knows first-hand how formidable Nintendo can be in the video game industry, especially when the market is all but counting the Japanese game maker out for the count.

“I’m one of the people that won’t ever count Nintendo out,” Bach says. “During our development of Xbox 360 we focused pretty heavily on Sony and PlayStation 3 and the Wii was a complete surprise, so the first 18 months of our launch was a real challenge.”

Although the Wii lacked the high definition visuals of Xbox 360 and PlayStation 3, the console introduced motion sensor gaming that connected with a huge audience of casual and first-time gamers. This allowed Nintendo to ultimately sell over 101 million pieces of hardware, compared to the approximately 84 million PS3s and Xbox 360s that Sony and Microsoft sold lifetime.

One of the reasons Bach and his team at Microsoft weren’t focusing on Nintendo is because its previous console, the GameCube, was considered a flop. That console only sold about 21 million pieces of hardware lifetime, compared to 155 million PlayStation 2s and 24 million Xboxes (Microsoft’s very first entry into gaming). And many experts had predicted Nintendo would follow Sega out of the hardware business and transition into a software company. But that didn’t happen.

Nintendo has sold just over 10 million Wii U consoles since launching in 2012, compared to the over 22 million PlayStation 4s and approximately 13 million Xbox Ones Sony and Microsoft have sold since debuting in 2013.

MORE: Shigeru Miyamoto: Why the Wii U crashed and burned

Bach says the challenge Nintendo has today is that a significant amount of its business focuses on the handheld market. Nintendo has sold over 154 million Nintendo DS portable devices since 2004 and an additional 54 million Nintendo 3DS portables since 2011.

“That market has become a lot more challenging because of smartphones, and their Wii U console frankly hasn’t caught on as well as they would like,” Bach says. “So you have a fabulous and amazing creative company that had incredible franchises, but doesn’t have a strong platform right now to develop for. That’s a tricky thing for them to navigate. They’re going to have to figure out either how to expand the number of platforms that they develop for, which would be a major change and would be risky, or they have to get into a cycle where their own Nintendo platforms evolve in a way that enables their games to get better coverage.”

Bach says Nintendo has always been more of a game company than they’ve been a platform company, and so each platform has always followed its games.

Nintendo is making a change in the portable market with its strategic partnership with Japanese mobile game publisher DeNA, which will see original games designed for smartphones and tablets featuring Mario, Donkey Kong, Link, and other popular characters.

And Nintendo has seen a recent uptick in Wii U sales since the introduction of amiibo toys-to-life figures in November 2014. While Nintendo faces more competition in that market from Activision (Skylanders SuperChargers), Warner Bros. Interactive Entertainment (LEGO Dimensions), and Disney Interactive (Disney Infinity 3.0: Star Wars), neither Sony nor Microsoft are competing directly.

“This does speak to something about Nintendo that’s different than Sony or Microsoft,” Bach says. “Sony is a consumer electronics company and Microsoft is a digital PC electronics company. Nintendo—with great respect and pride—is a toy company, and always has been. That’s why their franchises on the game side are so powerful. There may be an opportunity there for them to invest in what is essentially a core attribute of what they do (toys), and it may create an opportunity for the company that’s unique and separates them from Microsoft and Sony.”

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