Recently Nintendo has been catching so much flack it might as well be in a World War 2 film. Low sales of the Wii U, taking YouTube revenue, and EA jumping ship would make you think that Nintendo is circling the drain. The reality of the situation is much worse. It's the console industry that is circling.
Wii U sales are dismal, PlayStation 3 and Vita sales are down, 360 sales are stagnant and sales of games have declined year over year. People need to realize that the current state of Nintendo is an indicator of where things are headed.
Many may site the fact that new systems being released later this year from Sony and Microsoft are the reason behind the slow sales of their systems, but that isn't the case. Game sales and revenue from said games are down.
There is a fantastic quote from Patrick Klepec at GiantBomb.com regarding this.
The financials are just crazy now. Like TakeTwo: revenue increase, but no profit despite Borderlands 2 selling 6 million copies and BioShock Infinite selling 3.7. Plenty of their other games sold really well, but Max Payne bombed.
So they make all those hits and one game sinks them. These are on machines with the user bases stretched as far as they're going to go. Now we are going to produce more expensive games and start the user bases over in a market where a lot of the money people spent on these consoles is now in other directions? If you are a AAA publisher or just making games in general, that sounds scary as fuck.
Activision themselves came out and said in their recent conference call that they were hedging their bets this fall saying people shouldn't be laughing so much at the Wii U. Yes, Nintendo made all sorts of unforced errors. They should have just called it the Wii 2, their marketing was confusing, but you shouldn't be laughing at a brand new console from a company like Nintendo that just tanks. Because it is not just an anomaly. There is less money going around. And to just point at Nintendo does not tell the whole story.
Klepec makes the great point about the economy as a whole. People are no longer willing to spend $60 on a brand new game, especially when the current state of game quality is shaky (Colonial Marines anyone?) Restrictive DRM has ruined some game experiences (SimCity, Diablo) and unfinished games have destroyed potential money makers (The Old Republic).
Game development is too expensive and too risky. The economy can't handle it anymore and I'm waiting to see what the general reaction will be when PS4s and the next Xbox don't fly off store shelves when they are released.
These consoles have to provide a service that their current iterations do not. A mere increase in graphical power will not be enough to convince the general public to drop $500 on it. The PS3 can play Blu-rays, Netflix, Hulu, music, surf the internet as well as play games. What will the PS4 provide that the PS3 doesn't? The ability to share a screenshot? How does that justify such a high price tag?
What you are going to see are cross-generational games. Games that come out on the PS3 as well as PS4 because they will lose money if they just go on the PS4. The install base for the PS3 is as big as it is going to get. If you can't make money on a game now, what makes you think you can with a small install base and higher production price tag? You won't.
So while the internet trolls have fun declaring the death of Nintendo, they just need to wait a few months and you'll see similar headlines talking about Microsoft and Sony's low sales and shrinking revenue.