Should Nintendo go third party?

One of the most heated debates we’ve had on the NXpress podcast, revolved around an article John Cal McCormick wrote for PopOptiq describing the many reasons why he’d fallen out of love with Nintendo in recent years. To be fair, John brought up some key points that even I agree with, such as the hope that Nintendo will go back to their roots and design a traditional gaming controller for their upcoming console, code-named NX. However, the biggest sticking point for all of us here at Goomba Stomp was his insistence that Nintendo give up on producing hardware, writing:

“I understand the reluctance to give up on the independence that comes from making their own hardware to play games on, but Nintendo must look at the cold hard facts. Each of their consoles except the Wii has sold worse than the one that came before it, and the attach rate for games on the Wii implies that it was a fad, an anomaly, rather than something they’ll be able to replicate with a new console. Getting out of the hardware war and concentrating on games alone effectively removes all of the barriers between gamers and Nintendo titles. Paying a few hundred dollars for a console to play a handful of games you really want is a big ask, but if they’re on a system you own, then $50 for a new Mario game is a no brainer.”

For consumers like John, who want to play Nintendo games but don’t want to shell out the money for an additional console, it makes sense that they would want to have all of their favourite video games available on one system. But from a business standpoint, it would make no sense for Nintendo to stop producing hardware. As I stated in episode 27 of the NXpress podcast, Nintendo would never give up the console war, and even with their least successful console, the Wii U, they still made a significant profit to justify staying in the console war. Well, it seems I’m not the only one who believes this to be true: the famous video game, digital media and electronics analyst Michael Pachter, recently stated why he also believes Nintendo will continue making hardware “until they fail completely.”

“I think it really depends on what people expect software sales to be on the NX. You’re asking me to compare NX to a third-party strategy. If the NX is as successful as the Wii U, it makes more sense for Nintendo to go third-party. If the NX is as successful as the Wii, then it doesn’t make sense.

Nintendo sold about half of all software ever put out there for the Wii. There were literally 100 million Wiis, probably a software catch rate around 8, so Nintendo literally sold something like 400 million pieces of software for the Wii. That’s a very profitable business. If they have that success with the NX, of course they should do that.

If they go third-party, you’re talking about an install base around 55 million consoles. I think ultimately you will get an install base of 200 million PlayStation 4 and Xbox One, Nintendo will need a 20 percent share on those platforms to replicate the success it had with Wii. That’s possible, but it’s not likely.

My bias is Nintendo is going to stay in the console business until they fail completely, and I don’t even think they consider the Wii U a failure. Failing completely means no one buys the console at all.”

So there you have it. What do you think? Should Nintendo give up the hardware game? Let us know in the comments below.