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As Activision’s Bobby Kotick is finding out, the games industry loves to pick on the big guy. For most of this decade the punching bags were EA and Sony, both of whom are now enjoying a surge in gamer goodwill due to their recent (and mostly self-inflicted) troubles. Into their places have stepped Activision and Nintendo, charged with the high crime of making money, despite – or more likely, because of – the fact that their respective Guitar Hero and Wii Sports/Fit lines have done more to bring new people into gaming than any other in the last decade.

No wonder then that the first bad news to hit Nintendo in the past five years was greeted with a certain smugness by the gaming elite. Triggered by a dramatic slowing of Wii sales, Nintendo reported a 52 percent drop in operating profits for the July – September period, and now expects to make a mere $4 billion for this fiscal year.

While the jitteriness of the market is to be expected, when viewed rationally, it’s somewhat remarkable that the company is turning a profit at all. In this economy, practically every other Japanese giant is leaking red ink on the back of an unfavorably strong yen. In March, Toyota recorded their first loss since 1950, at a tidy $4.4 billion dollars; Sony, who are finally seeing an upswing in PlayStation 3 sales, last week reported a net loss of $292 million for the second quarter.

Nonetheless, such was the explosive rate at which it sold, the reality may well be that the Wii is starting to reach the upper limit for sales. The PlayStation 2 sold many more units, but that was on the back of a ridiculously broad catalog of third-party games, as well as its reputation as a cheap DVD player.

While in a dream world it would be nice to see Nintendo sit back and exploit this market with a succession of money-making titles that would keep profits ticking over at an unspectacular pace, the reality is that Nintendo is a hardware maker, and one that makes quite a substantial amount of money from their hardware sales. That means Nintendo must already be looking to the next big thing to bring in the customers.

And while many out there in the dark reaches of the interwebs reacted to last week’s news by pleading for Nintendo to return to making games for the hardcore, a return to the godforsaken Gamecube days of yore is, thankfully, impossible. But what should Iwata and company be doing to steer the good ship Nintendo back on course?

Aggressively Target Third Parties

After a very shaky start, third parties have largely come around to the potential of the DS, but opposition to the Wii is ingrained into the minds of many publishers and developers, and getting them on side with the Wii is going to require something special.

For reasons best known to themselves, Nintendo has traditionally been reluctant to break out the moneyhats in the same manner that Microsoft, and to a lesser extent, Sony recently have. But with Rare’s brilliance lost since long before they were sold to MS, and only sporadic moments of greatness from their other first- and second-party studios like Retro, Nintendo should consider swallow their pride and open their checkbook – particularly to studios in the West. Every Nintendo console from the N64 on has endured a mid-generation software drought, and it’s time Nintendo realized they need to rely on others to soften the blow.

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Don’t Fear the Sequels

Nintendo has a schizophrenic attitude when it comes to sequels. Nobody here wants to see another Mario Party game, and indeed the plumber could use a rest away from non-platforming duties. After a debut that is still hailed as one of the best games of the decade, the Metroid Prime series has fallen into something approaching irrelevance through a slew of slightly-less-than-brilliant sequels and spin-offs. Remember the days when Metroid Prime and Halo were spoken of as rivals? Those days have passed.

At the same time, Nintendo has an intriguing habit of neglecting to release sequels to blockbuster franchises that cry out for further development – imagine how much better their bottom line would look next quarter if they had had, say, a Wii version of Nintendogs on shop shelves for Christmas, or a DS version of Super Smash Bros?

The oft-touted suggestions that Nintendo has not developed new IP is a fallacy – Wii Sports and Wii Fit are the most successful new IP of the decade, just not the ones the people who make these silly arguments are looking for. Wii Sports Resort and Wii Fit Plus show that Nintendo is becoming better at utilizing their franchises. A little more would go a long way towards plugging the gaps.

Reinvent the Next-Gen Transition

While it’s still a little too early to be talking of a successor to the Wii, the DS is soon heading into its sixth year and a successor must be under consideration. Their now-yearly DS updates have so far proved very canny, much to the chagrin of those that don’t understand that Nintendo is not forcing them to buy a new console every year, no more than Apple are forcing you to scrap your iPod every time they update their line. Can this same strategy be applied to an entirely new product? Or, down the line, to a home console? Nintendo have aped Apple’s business model for handhelds – what if they did the same for the living room and followed Apple’s Macbook/iMac upgrade model?

As always, at this time of the generation, rumors are circulating of a Wii 2 that will have Blu-Ray, power steering and the ability to destroy rival consoles within a 2km radius, but Nintendo are not going to be the ones to push the technological envelope – they’ve never been good at it and it’s never been good for them. But for both the DS and the eventual upgrade to the Wii, if Nintendo is going to bring their new customers with them on the ride, they need to take the same course they have taken with the Wii and the DS and destroy another old business model. That means abandoning the ludicrous destroy-and-rebuild of the consumer base that the games industry is accustomed to. That might prove to be their biggest challenge yet – but if they can do it right, they could remain on top for a long, long time.

Don’t Listen to Internet Wisdom

And yes, that includes this article. The accepted wisdom has been wrong on everything Nintendo has done for the past five years – releasing an underpowered handheld with unproven touch-screen technology against the technological beast of the PSP; making a pet simulator years after the fad had passed; giving their new console motion control and an initially ridiculous name; turning a set of bathroom scales into a game. Nintendo have gotten to the top precisely because they stopped listening to what their supposed fans say they want. If you feel like they don’t love you anymore – don’t worry, they never did, and neither does anybody else. And sometimes it’s refreshing to have somebody like Nintendo not even pretend to.

Christian Ward works for a major publisher, and wants his Nintencats.

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