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Can Nintendo keep us coming back for more?

During the pandemic, the Nintendo Switch made the company a juggernaut in gaming. But can the 132-year-old company keep up with competitors on the cutting-edge?

This story was published on our The Company newsletter, A weekly deep dive on a company you need to know.
  • Scott Nover
By Scott Nover

Emerging tech reporter

Published

Hi Quartz members,

I’m convinced the Nintendo brand carries some sort of magic. Breath of the Wild, the latest incarnation of The Legend of Zelda series, sucked me back into the Nintendo universe. I was obsessed with the open world, a place where the protagonist Link could explore for hundreds of hours on end and never truly run out of vistas to see, secrets to unlock, or puzzles to solve.

The childlike wonder the game inspires isn’t a mistake, after all. Nintendo’s mass appeal comes largely from its ability to capture audiences of all ages. While Microsoft’s Xbox and Sony’s PlayStation consoles—as well as the entire PC gaming universe—have all seized upon first-person shooters and more adult-themed games, Nintendo has remained, well, tame—and accessible.

Nintendo’s reputation hinges on its ability to stay “family-friendly” and not “childish,” a characterization Nintendo executives have publicly pushed back on. The company’s recent successes are ambitious: It’s explored expansive open-world designs, robust online gameplay, and grittier hack-and-slash titles. But the company very much sticks to its guns, improving upon its established intellectual property rather than focusing on introducing new characters and series.

During the pandemic, the Nintendo Switch has once again made the company a juggernaut in gaming, though in its earnings announcement today Nintendo lowered its projections for Switch sales due to the global chip shortage. But for this 132-year-old company, which rarely moves fast or breaks things, Nintendo faces a simple question: Can it keep up with competitors on the cutting edge? Or can that careful mix of quality and nostalgia continue to keep Nintendo fans coming back for years to come?

BY THE DIGITS

5.1 billion: Nintendo video games sold globally

800 million: Nintendo hardware units sold globally

5,944: Nintendo global employees as of 2019

26 million: Switch Online subscribers

$51 billion: Nintendo’s current market capitalization

From humble beginnings

Nintendo was started by Fusajiro Yamauchi in Kyoto, Japan, in 1889 as a trading card company, selling intricate handmade cards called Hanafuda. The cards eventually became associated with gambling and the Yakuza crime syndicates, falling out of favor in Japan by the 1950s and ‘60s. The company struck a deal to produce cards for Disney in 1959, providing a link to the gaming and toy markets it would later occupy.

With the trading card business struggling, the company pivoted to electronics in the 1970s, under the leadership of Yamauchi’s grandson, just as Atari and Taito were releasing groundbreaking new games like Pong and Space Invaders. 1981’s Donkey Kong—made by legendary Nintendo designer Shigeru Miyamoto—was Nintendo’s breakthrough, where Jumpman (later Mario) avoided rolling barrels en route to saving the damsel in distress known only as Lady (and then Pauline) from the titular enemy. The game saved Nintendo, which was on the brink of bankruptcy after its first North American arcade game, Radar Scope, flopped. (It sold just 67,000 arcade cabinets in two years.)

By 1983, Nintendo had unveiled the Nintendo Entertainment System, a home gaming console. Over the next decade, the company released a suite of acclaimed titles like Duck Hunt (1984), Super Mario Bros. (1985), and The Legend of Zelda (1986). Not long after, the GameBoy revolutionized handheld gaming with titles like Kirby’s Dream Land (1992) and Pokemon Red and Blue (1996).

This period represents something akin to the Disney Renaissance of the 1990s, a time when the company could not really miss—and it showed in the eye-popping sales figures. “This is as big or bigger than anything the toy industry has ever seen,” one reporter told ABC’s 20/20 on a 1988 broadcast. “Barbie, which is an institution, does about a half a billion dollars a year. Nintendo does over three times as much.”

A BRIEF HISTORY OF CONSOLES

A timeline of Nintendo consoles released since launch
Image copyright: Jasmine Teng

The company today

The Nintendo of today has changed in form. The Nintendo Switch, which came out in 2017, combined Nintendo’s handheld and home consoles into one device that can switch between two modes—and was a commercial success during the Covid-19 pandemic. In the second quarter of 2020, Nintendo’s profit rose 428% year-over-year to $1.37 billion off of 5.68 million Switch sales and 10 million Animal Crossing: New Horizons sales in that quarter alone.

While the form has changed, Nintendo’s core magic—its characters—hasn’t. Today, Nintendo’s most successful titles predominantly feature characters and plot lines first introduced in the 1980s and ‘90s: Gamers follow Mario, Link, Samus Aran, Pikachu, and Kirby as they embark on new adventures—albeit more sophisticated ones often with cutting-edge graphics.

Nintendo has also stayed true to its old strategies: It only produces games for its own consoles, has barely dabbled in smartphone games, and holds its IP close to its chest. While the Switch has an online subscription service that allows players to connect virtually, one of the main draws of the package is the ability to play games issued for its own older consoles (though the recent Nintendo 64 package has been met with criticism for its poor emulation quality and awkward controls). Moreover, the company has been rather uncomfortable with modern trends in esports and fandom. The online magazine Input reported last year that the company has cracked down on virtual esports competitions, even during the pandemic when in-person gatherings are inadvisable, and aggressively targets fan art and DIY projects for copyright violations.

Nintendo may eventually need to embrace trends like mobile and online gaming to stay relevant, but its aspirations clearly involve sticking with its tried-and-true formula: building on established characters and narratives, focusing on quality, and keeping its intellectual property largely on its own hardware. “[Nintendo] doesn’t want to be Disney, or Tencent, or Activision Blizzard,” venture capitalist Matthew Ball wrote last year. “It wants to keep being Nintendo. And it’s important to recognize that some are driven by perfecting their specific process. Not scaling it.”

The future of gaming is likely more interactive and online than Nintendo has really experimented with—Animal Crossing comes closest. As gaming and the future of the internet converge, often around theories of the coming metaverse, a next-generation internet that Ball and others have written about, Nintendo should build the worlds its fans have grown to love. I, for one, would love to live in Hyrule. Make it happen, Nintendo.

KEEP LEARNING

Have a great end of your week,

—Scott Nover, emerging industries reporter (and future resident of The Legend of Zelda: Breath of the Wild metaverse)

ONE 😭 THING

I recently walked through the Henry Ford Museum of American Innovation and spotted a section on the 1990s. I was horrified to see the “atomic purple” GameBoy Color of my childhood in a glass case. Not only is this patently not an American innovation, it was also a rude awakening for this 26-year-old that his childhood toys are fodder for museums.

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