Nintendo's Hollywood Reboot

2012-39 BIZ Nintendo Illustration H IPAD
Illustration: Al Murphy

No longer just relying on hard-core gamers, an ailing Super Mario & Co. aim to take over television with TVii and an aggressive social strategy.

There was a time when Nintendo's Super Mario Bros. reigned supreme over video games. In the 8-bit era of the 1980s and '90s, adolescents learned a sense of discovery from the Legend of Zelda series, tasted pride by beating Mega Man and debated who was better in Jordan vs. Bird: One on One.

Then Nintendo lost its cool, turning off fans with such titles as Mario's Early Years: Preschool Fun. Sony's PlayStation stole its graphical thunder, and Microsoft's Xbox Live taught hard-core gamers the joys of gunning down friends through such online multiplayer shooters as Halo 2. These days, downloadable smartphone games like Angry Birds and social apps such as Farmville dominate the attention of casual gamers.

But is Nintendo poised for a Hollywood comeback? As the Kyoto, Japan-based company prepares for the Nov. 18 launch of its Wii U -- a flashier, more powerful and social-oriented update of its Wii system that debuted in 2006 -- its executives are taking a page from showbiz and positioning the console as a broad entertainment-delivery platform. Think television, web and video game enabler rather than just a home for Mario, Donkey Kong and Pokemon.

To that end, the Wii U features a handheld controller and comes equipped with the Trojan-horse app TVii, which allows users to record shows, see what other family members and friends are watching, communicate socially online via Facebook and Twitter and discover programming without the ugly grid viewers are used to seeing with their set-top boxes. If TV is going to become more about engagement and the "second screen" experience, then Nintendo hopes its controller serves as the platform of choice.

"It's the games that will drive the system into the household," says Nintendo of America president Reggie Fils-Aime. "But what consumers also will find is that they are getting a robust social space … then find out they have a super remote and an aggregator."

It might seem hard to believe that the Wii U can replace the remote control and cable box and challenge the iPad's dominance as the device to hold in the living room. After all, Xbox has for years broadened its offerings to include movies and TV. Earlier this year, U.S. subscribers of the Xbox Live online service for the first time spent more hours consuming video and music than multiplayer games. But now Fils-Aime aims to out-Xbox Xbox, touting deals with cable companies and satellite distributors, as well as streaming services such as Netflix and Amazon, that will allow the Wii U to launch with a robust content offering.

A lot is riding on the success of the Wii U. Nintendo likely will never again enjoy the 80 percent share of the gaming hardware market it boasted two decades ago. But its current 25 percent share must improve if the company wants to reverse recent financial trends. In April, Nintendo posted its first-ever annual loss of $535 million. And while the release of the company's first new console in six years likely will juice sales in the short term, other consoles are attempting similar transformations and some analysts are betting Nintendo's reinvention comes as too little, too late. "I don't think all the nursing homes and educational outlets who purchased the Wii are going to provide a similar uplift for the Wii U," says MKM Partners analyst Eric Handler. Adds Wedbush Securities' Michael Pachter, "Nintendo has lost a big hunk of its market and will continue to lose it, and they can't do anything about it."

Fils-Aime, who as a senior executive at VH1 a decade ago helped the cable network reach a younger demographic, disagrees. Asked to describe today's Nintendo consumer, he says, "Five to 95, male, female." In other words, everyone. Expanding its consumer base was the company's strategy in 2006, when it launched the original Wii. At the time, Nintendo was coming off the failure of its GameCube, which sold fewer than 22 million units compared with the 154 million units moved by Sony's PlayStation 2. The Wii's motion-sensor technology allowed gamers to wave their controllers as if actually bowling, boxing or performing other physical activities. Nintendo gave casual gamers something they could do socially with friends and family. As a result, Wii sold about 5 million units during its first year and spent a few years beating Xbox 360 and PS3 before the competition caught up.

But the motion-sensor novelty soon ebbed. Casual gamers moved on to low-cost diversions downloadable through more open platforms like Apple's iOS and the Android universe or social platforms like Facebook. Games on smartphones also have gobbled up Nintendo's share of the portable gaming market.

But if Fils-Aime has his way, the Wii U could be the device families fight over during primetime and beyond: "The collection of benefits will have everyone in the household touching the game-pad controller every day."