Nintendo Co., Ltd (ADR) (NTDOY) Faces Trouble Ahead

Speaking of Apple Inc. (NASDAQ:AAPL), the company has shown that it is increasingly interested in and capable of dominating the gaming market. Apple Inc. (NASDAQ:AAPL)’s iDevices have proven to be a Trojan horse for getting gaming enabled devices to a huge, mass-market audience. While the games on its Apps store typically retail well below a standard Nintendo handheld title, they are capable of reaching a much wider consumer base. What’s more, many of these titles are built around a micro-transactional model that draw a massive and steady stream of revenue. Casual gamers are increasingly gravitating towards mobile offerings and are seeing less reason to purchase a dedicated device.

Of all the hardware manufacturers, this represents the greatest threat to Nintendo. With the release of the DS and the Wii, Nintendo successfully courted and introduced a new wave of consumers to gaming. Sales trends make it quite clear that many of these new gamers are not sticking with Nintendo.

There’s no denying that the traditional market for videogames is contracting. In its place, we are seeing explosive growth in web, mobile, and independently developed games. It is my belief that much of this contraction will come at Nintendo’s expense. While the 3DS will likely enjoy moderate success for the rest of its lifecycle, it will come nowhere close to the sales of its predecessor. To make the same statement regarding the Wii U in relation to the Wii would be a massive understatement. The system’s yearly sales are going to wind up nowhere near Nintendo’s projections. Now consider that the Wii U is presently sold at a loss due to the screen and streaming technology in its controller and question whether Nintendo is an a position cut MSRP for a product no one seems to want.

So, the company is left dominating the quickly shrinking dedicated handheld market, irrelevant in the home console space, and too stubborn and inefficient to properly take advantage of the mobile market. I have doubts as to whether selling its games on iOS or Android devices would even be that lucrative for Nintendo, but at some point the company may not enjoy the luxury of choice.

Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Keith is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Nintendo Faces Trouble Ahead originally appeared on Fool.com is written by Keith Noonan.

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