Can Nintendo Rebuild?

(page 2 of 2)

Recently, Nintendo has been working with museums, malls, and fast-food chains to set up Wi-Fi hotspots and location-specific services for the DS. What else might Nintendo try? Analysts say that with sales in decline, Nintendo is likely already at work on new consoles. "Because of the Wii's rapid slowdown, we assume a new version of the console will be released in 2011," Citigroup Global Markets analyst Soichiro Fukuda wrote in an Oct. 29 report.

Before that, Nintendo could make modifications. It could, for instance, redesign the Wii to play high-definition videos on Blu-ray discs or beef up its online offering so Wii owners can download movies and TV shows from an online servicesuch as Netflix. Rumors abound that Nintendo is already negotiating tie-ups. The company might also equip the portable DS console with wireless technology that connects the gizmo to 3G mobile networks so users can download e-books or access social networking sites.

Free Online Games

Nintendo will have to do something soon. In a direct challenge to Wii's unique features, Microsoft and Sony are gearing up to sell motion-sensing handheld controllers for their consoles as early as next year. Nintendo has a formidable new rival as well: Apple. Apple's presence in portable gaming continues to grow, thanks to big-name game publishers and independent developers that have jumped at the chance to create games for an estimated 50 million iPhone and iPod Touch users. Apple's online App Store now boasts thousands of games—hundreds of which are free. Besides Apple's offerings, players can find numerous other free and low-cost online games for PCs.

In a recent study, market research firm NPD Group found that iPod and iPhone owners were buying just two out of every 10 games they were downloading. And few who tried games that could be upgraded for an extra charge did so. That has ramifications for the entire industry, says NPD analyst Anita Frazier. "I can't help but think that the explosion of free gaming options is exercising at least a slight downward pressure on pricing for gaming," she wrote on her company's blog.

In the Oct. 30 press conference, Iwata betrayed a touch of annoyance at questions suggesting that Sony or Microsoft would suddenly lure away Nintendo's audience or that Apple's low-cost gaming model would make people any less willing to pay, on average, $50 for a Nintendo game. "I don't understand how people can say that Nintendo will lose its advantage just because other companies are working on their own motion-sensing controllers," Iwata said. "If it's so simple, shouldn't there be a ton of games like Wii Sports available for the Wii? So why aren't there more?"

Hall is BusinessWeek's technology correspondent in Tokyo.

Business Exchange

Track and share business topics across the Web.