How Nintendo’s ancient business model is killing it, in 1 chart

 

Nintendo’s share price plummeted 19 per cent this morning in Tokyo before finally recovering to close 6.1 per cent lower – the stock's biggest fall since September.

 

The drop was in reaction to a profit warning on Friday which highlighted Nintendo’s core failure to get ahead of the changing market of smartphones and casual gaming.

 

Nintendo’s business model since 1983 has been to sell dedicated gaming hardware at little or no profit, and then charge a license fee on the sale of every game sold for its hardware.

 

 

But as Nintendo’s hardware sales have collapsed and its new consoles, the Nintendo 3DS and Wii U, have failed to make a noticeable impact, Nintendo’s model looks broken.

 

Especially as the real growth segment in gaming is on smartphones.

 

But compare this to both Microsoft and Sony, two competitors who are still finding success in the console gaming market.

 

Both the Xbox One and PlayStation 4 have diversified their offerings, growing to encompass all facets of home entertainment, everything from video rental services to live TV features – with additional subscription charges attached to these features.

 

Nintendo today looks positively prehistoric in comparison.

 

Nintendo plans to unveil a new management strategy on 30 January following its quarterly results.