Releasing sequels isn't enough for Nintendo

The New York Times recently featured a compelling piece on its pages that delved deep into the world of Nintendo. The piece focused on the Wii's customers and outlined the fact that people simply aren't buying enough games. And while seemingly everyone knows about this issue and that it could spell trouble for Nintendo, the company seems like it doesn't care.

But if it doesn't come to its senses and realize that video game sales will propel the hardware forward as console sales start to dwindle, what will be left of Nintendo's venerable console?

Some believe that Nintendo will dominate this generation no matter what, but I'm not so sure that's true. Is the company controlling the market right now? Sure. And with its installed base of over 20 million, there's little chance Sony or Microsoft will overtake it anytime soon. But as we tread deeper into this generation, Nintendo may not be able to rest on its laurels forever in the hope that its hardware will continue to sell the way it does.

In other words, Nintendo's tried and true tactic of selling compelling hardware and its many popular franchises may work for some time, but I don't think we can expect it to last forever.

As The New York Times points out, the state of the Wii game business is not nearly as rosy as Nintendo wants us to think.

According to the publication, Super Smash Bros Brawl sales dropped a whopping 90 percent after selling 1.4 million copies in the first week.

To make matters worse, other Wii sales are performing relatively poorly when compared to the titles that were made available on other platforms.

"Over the first three months of the year, only three other Wii titles broke the list of top 10 best-selling games compiled by the NPD Group, a market research firm: Super Mario Galaxy, Guitar Hero III and Wii Play, a sports game that comes with the purchase of a much-needed additional game controller," the New York Times is reporting. "The Wii may not be behind the success of all those titles, though; Guitar Hero, for example, sold 2.2 million copies for the Wii, but 2.8 million copies for the Xbox 360 and almost 5 million for two versions of the PlayStation."

Some have said that marketing is the major issue holding Nintendo back. And while the company does need to do something about its poor marketing techniques, the issues are much more troublesome than that.

If nothing else, Nintendo has always believed that the way it does business is the best way for all parties involved. Is it right? Certainly in the mobile gaming space and so far, it has proven that it can be right with hardware. But why can't it be right with everything, namely, console games?

According to an analyst from Wedbush Morgan, the average Nintendo Wii owner purchases 3.7 games a year, compared to 4.7 games for Xbox 360 owners and 4.6 titles for PlayStation 3 owners. That difference may not seem major when taken at face value, but considering the fact that there are approximately 20 million Wiis currently in homes today, that's not the best news for developers who must decide between offering titles on a Wii or an Xbox 360.

So far, the developers can get away with it because there are so many more Wii units than others, but what will happen as Wii sales decline and other hardware becomes more popular?

According to NPD's most recent figures, Sony witnessed a 98 percent growth in hardware sales year-over-year selling 257,120 units and enjoyed a year-over-year growth of 139.2 percent on software sales that amounted to over 1.9 million units. Assuming that kind of growth continues going forward, where does that leave Nintendo? And to make matters worse for the company, Grand Theft Auto IV and Metal Gear Solid 4 should make things even more difficult for Nintendo.

But the main problem for Nintendo isn't that its success can't last forever (it probably can), but rather that its success has heretofore been relying upon its compelling hardware and sequels of its most popular franchises. But once that well dries up, Nintendo has very little to fall back on.

In the video game industry, nothing matters more for a hardware company than establishing a large installed base and then maintaining strong relationships with developers to ensure its library of games is strong going forward. And while Nintendo has succeeded in achieving the first goal, it has yet to capitalize on its success and entice more developers to create better games.

Invariably, the Nintendo zealots will come out in force trying to disprove the notion that Nintendo isn't doing well enough at selling games, but I think they will be hard-pressed to defend that point. The figures are solid and the notion makes sense -- Nintendo is simply not going to win the hearts and minds of game seekers by offering more follow ups to its popular franchises.

So what can it do? Simple really -- improve its relationships with third-party developers, improve its spending platform so it can entice more people to buy games and continually point to the fact that it produces the world's most popular video game console. In the end, developers will follow the cash. But if they can't find what they're looking for on the Wii because games simply don't sell nearly as well as they should, Nintendo's console may go the way of the Gamecube and the Nintendo 64.

And I, for one, don't want to see that happen.