Nintendo’s free game
In a move on June 21 to increase users, Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) announced it is attempting to develop its first free-to-play game. That shows the company is willing to change its traditional business practices to help spur the appeal of its Wii gaming console, and that’s a good sign for investors.
The game is slated to be released in March and would be a free version of Steel Diver, a submarine strategy game; it will be available on Wii U and Nintendo 3DS.
The move to offer a free game is a positive sign for the outlook of this firm, because it shows Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) is moving away from a strict business model, which has stayed far away from new technology such as smartphones. Even a slight change in tactics could indicate Nintendo is ready to work on gaming apps, which could substantially boost profits. Even just the free game offer will get the attention of new users.
The company looks like it needs to make a major change to strike a chord with gamers. Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) has had a lack of major game releases, and reviews of Wii U are mediocre, unlike the rave reviews it received for its 2006 launch of Wii. Probably the biggest challenge Nintendo faces is competition from two companies that have received praise for their consoles: Microsoft Corporation (NASDAQ:MSFT) and Sony Corporation (ADR) (NYSE:SNE). Each company is scheduled to release a new console this fall.
Microsoft listened to gamers
In a previous post, I criticized Microsoft Corporation (NASDAQ:MSFT) for the company’s announcement in June about the upcoming Xbox One. The firm originally was not allowing gamers to give away a game more than once, and it had to be to a friend for at least 30 days. Furthermore, the company initially required users to check in at least once a day online for the system to function. Many others felt the same way I did, and Microsoft Corporation (NASDAQ:MSFT) listened. This is a very positive sign for shareholders and those wanting to buy the stock, because it shows the company is at least trying to be user-friendly. If the Xbox One manages to beat the Sony PlayStation 4 in sales, the company will be in for a share price surge.
Microsoft Corporation (NASDAQ:MSFT)’s business holds a lot of stake in Xbox sales. According company figures, full year Xbox 360 sales ending in June were $10.2 billion. Overall revenues at the company for the same period was $77.8 billion. That represents 13% of revenue, playing a major role in share price.
Sony faces tougher competition
Nintendo’s plan to increase efforts to attract gamers to its console should be somewhat discomforting for both Sony Corporation (ADR) (NYSE:SNE) and Microsoft Corporation (NASDAQ:MSFT). Sony Corporation (ADR) (NYSE:SNE) is further challenged by Microsoft’s new-found commitment to accommodate users by giving them more freedom. However, Sony is used to the competition, as sales of the Sony PlayStation 3 are almost identical to sales of the Microsoft Xbox 360. Sony Corporation (ADR) (NYSE:SNE) will need every inch it can get in order to come out on top. Sony Corporation (ADR) (NYSE:SNE) looks to be fairly valued right now, with a price-to-book ratio of 0.9, but expect a price hike once the holiday sales numbers of the PS4 roll in.
Listening to consumers will help
In the end, it is the ease of using each console and the freedom each manufacturer gives to the gamers that will decide which company comes out on top. It will also boil down to the quality of each console and the superiority of each game offered on the devices. Both Nintendo and Microsoft Corporation (NASDAQ:MSFT) improved their outlooks by working with the users, and we will see who comes out on top as the sales start rolling in.
The article Video Game Firms Becoming User-Friendly originally appeared on Fool.com and is written by Phillip Woolgar.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Nintendo. The Motley Fool owns shares of Microsoft. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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