It’s been a busy summer on the economic front, and while gamers may not think any of it affects them, the truth is that what’s going on right now has huge consequences for gamers.
Nintendo did not have a good quarter, coughing up over $300 million in losses over the last few months. The company has struggled to deal with sagging Wii and DS sales, not to mention an underwhelming 3DS launch. In fact, business is so bad that Nintendo expects to see total year earnings drop to levels not seen since Ronald Reagan was president.
While I may not be qualified to armchair quarterback a company that has heretofore enjoyed such remarkable success, I think some of this was a monster of Nintendo’s own making. Their Wii support in North America has been shameful this year, headlined by their refusal to release several solid Japanese titles stateside, and their hype of Wii U only further alienated a fanbase eager to play real games. The decline of DS, meanwhile, was both inevitable and perhaps more understandable, but their weak 3DS launch has compromised what should have been a new pipeline of revenue. Nintendo may turn out okay in the long run, but the shareholders are no doubt disappointed with what the company has accomplished this year. To their credit, Nintendo boss Satoru Iwata and Nintendo’s board of directors have taken responsibility by volunteering for substantial pay cuts.
Not coincidentally, Nintendo’s huge losses corresponded with a serious $70 price cut on 3DS, which was in effect an admission of guilt with respect to what has been widely perceived as a botched launch. Our own staff had plenty to say about the decision, with Adam Sorice sagely noting that those most critical of Nintendo are liable to be early adopters, even with the consolation prize of 20 free games for those who already own the handheld. The early adopters have a point; while potential 3DS suitors in our comments section cheered the news, I think we can all agree that a price drop this early is a bad sign for a company and their product.
As if this weren’t all serious enough, the United States has been embroiled in a highly partisan dispute over the national debt. I’m sure plenty of people have their own opinions as to whether the Democrats or Republicans are in the wrong with respect to this debt ceiling crisis, but the crisis only compounds the misery for gaming companies and potentially harms gamers themselves.
Here’s the problem: Nintendo and many third parties, such as Capcom and Square-Enix, are Japanese companies. Their American subsidiaries live and die to make money for the mothership; in other words, Reggie Fils-Aime’s job is to bring profits to the folks back in Kyoto. The debt crisis imperils U.S. economic credibility worldwide and that could very well make it less profitable for Japanese companies to operate over here.
How? Two ways: the value of the dollar and interest rates. One, the U.S. crisis has compromised the appraisal of the country as a solid investment option, and this serves to weaken the value of the dollar. A weak dollar means that a $50 game, for example, no longer translates to as many Japanese yen as it did before. Since Japanese companies can’t very well hike game prices to compensate, Nintendo and others will have to sell more units to recoup the losses. Why on earth would I want to bring a niche game to America only to see a weak dollar turn what might have been a profit into a loss?
The other item, interest rates, are a more complicated business, but what it boils down to is that rising interest rates precipitated by the crisis make it more difficult and expensive for companies to take out loans to raise capital. This affects both domestic and foreign companies and may also discourage smaller companies for taking major risks.
This makes for a troubling picture for gamers, especially longsuffering Wii owners. Sure, 3DS is getting a price drop, and that’s all fine and good, but now that Nintendo is hurting and the American economic climate has gone sour, how risky is Nintendo going to be? For better or worse, Nintendo has cast its lot with 3DS and Wii U, and there is no going back. With the company already taking a hit financially, it’s not likely anyone overseas or in North America sees any business value out of the cost effort to resuscitate two lame duck systems. It’s just too expensive to bring the momentum back, and too risky for a company already knee-deep in risk. We all know that Nintendo has been cautious enough about bringing new IPs stateside; now the company has even less incentive to venture beyond the familiar sequels and mascots, even if they’re on 3DS. The same goes for other companies, which are liable to scale back less profitable ventures in lieu of cash cows.
Does that mean the door is effectively slammed on Operation Rainfall? To my great disappointment, it would seem so; as much as I want to see those games released here, Nintendo now has even more reasons not to than they did when they first declined to bring the games over. Moreover, people like me who plan to import could also be affected; should the dollar fall with respect to the British pound, the copy of Xenoblade Chronicles I pre-ordered could end up costing more by the time it ships in a few weeks.
It’s been a dark summer for American Nintendo fans on a myriad of fronts, and right now there seems little good in sight. Even the joy of a 3DS price drop is blunted by the realization that Nintendo may not be as likely to give the little system the lineup it really deserves, to say nothing of those who don’t yet own the handheld. We can only hope that Nintendo rights the ship and Congress works out a plan to keep the country out of default. Stay tuned.