The disruptor gets disrupted: how Apple is beating Nintendo at its own game

The Nintendo 3DS

In an industry obsessed with polygon counts and frame rates, Nintendo's Wii console and DS handheld were the proverbial knives at a gunfight. They were grossly underpowered compared to the competition, meaning Nintendo could sell them at a profit from day one. Their innovative control methods ensured they still sold like hotcakes. An animated GIF of Nintendo's Shigeru Miyamoto and Satoru Iwata holding a DS that printed money became the go to picture to run alongside quarterly announcements of Nintendo's gargantuan profits. If a disheveled man emerged from a time-traveling Delorian with tales of a near-future Nintendo struggling to sell its latest handheld, I'd have been more surprised about the Nintendo thing. So what on earth happened?

A wild STEVE JOBS appears! STEVE JOBS uses DESTROY VALUE. It's super effective!

Late last year, Steve Jobs told the press that Apple was activating 230,000 iOS devices every day, with a staggering 200 million already in the wild.

According to 148apps, there are 72,185 games available in the iOS App Store, of which 28% are 99 cents and 38% are free.

To say that 1% of these games would be worth playing would be an overly generous estimate. Most will pale in comparison to the console games they emulate. Many will take longer to download than they will to grow tired of, if they aren't quit in disgust and deleted immediately. Others will be lost in the noise of the App Store. Occasionally, one will appease the zeitgeist and make a fledgling developer very wealthy.

But what exactly is the alternative that Nintendo proposes?

NINTENDO used HEAD IN THE SAND. It's not very effective!

Satoru Iwata told AllThingsD that the ad supported, freemium and high volume/low cost models of mobile gaming "destroy the value of the game software" and made it clear he is not willing to lead Nintendo in that direction.

Unfortunately, the mass market has spoken - a firehose of cheap and disposable games on a multi-purpose device wins over a drip feed of expensive and...well, lessdisposable games on a dedicated gaming handheld.

It might take you somewhere between 30-50 hours to play through The Legend of Zelda: Ocarina of Time, one of the most critically acclaimed games of all time, on your 3DS...but how many iPhone games can you get for that US$40? How many can you get for the price of the 3DS itself?

EA CEO John Riccitiello recently told Industry Gamers that consoles represent just 40% of the market, down from 80% in 2000. The casual market that Nintendo fueled with the Wii has jumped ship to cheaper pastures.

Big publishers like EA are coming along for the ride. That NBA Jam game you can get for $0.99 on the iPhone and $4.99 on the iPad is exactly the same as the $39.99 console version (...and it's one of those rare ports that plays beautifully without physical buttons). This probably sounds insane to someone who doesn't realize that they're completely different markets, or that there's people like me who will buy the iPad version and the Xbox 360 version.

What about testing the waters with a stripped-back Mario title in the vein ofCanabalt? Basically guaranteed to sell millions, and won't devalue the Mario brand at all - indeed, it would introduce Mario to a generation of kids who had never had a Nintendo at home. Give them the first hit for next to nothing, and get them nagging Mom and Dad for a 3DS in time for Super Mario 3D Land.

What about releasing a SNES controller dock for the iPhone with some classics from the 16-bit era like Super Mario World and Donkey Kong Country? Charge $50 for the controller and $5-10 for the games. That's like a license to print money. Alternatively, what about a strategic move against Apple by throwing its support behind the Android platform, or a partnership with HTC or Samsung?

According to the San Francisco Chronicle, investors are pushing for an embrace of mobile too. Nintendo's share price jumped after JPMorgan Chase & Co. told its clients that Nintendo may start making games for non-Nintendo hardware in June, and fell again after an official rebuttal just hours later.

Qualcomm, makers of the Snapdragon chipset that powers many modern smartphones, also sees mobile phones becoming the consoles of the future. Already some Android phones and tablets feature HDMI outputs and the ability to connect to a console controller via USB or Bluetooth.

There's only so long a company can ignore the market, the industry, and investors.

SONY wants to fight NINTENDO. SONY uses IMPRESSIVE LAUNCH LINEUP! It missed!

With the casual market adequately catered for by the mobile space, Nintendo is increasingly reliant on adoption from the hardcore market. What a shame that Sony had to go and unveil the PS Vita this year, a device that has the hardcore set drooling over its dual analog joysticks, generous 5-inch OLED screen and console-caliber graphical prowess.

On launch, the Vita will have Wipeout 2048, Uncharted: Golden Abyss, LittleBigPlanet and Super Stardust Delta - and titles from system-selling franchises like Assassin's Creed, Bioshock, Call of Duty, Killzone, Mortal Kombat andResistance are in the pipeline.

With Sony's recent admission that the PS Vita won't be released outside Japan until 2012, contrary to its original statement, the executives at Nintendo must be feeling like they've just dodged a bullet.

But can one original Mario title (Super Mario 3D Land), two Nintendo 64 ports (Star Fox 64 3D and The Legend of Zelda: Ocarina of Time 3D Edition) and a few third-party titles really compete with the generous array of games headed for the Vita?

NINTENDO used PRICE DROP. It's...?

There's a chicken/egg situation with consoles - people don't want to buy a console without a large library of games, but developers don't want to make games for a console without a large install base.

The 3DS is hurting as a result. With big third-party titles like Assassin's Creed, Megaman and Saints Row being cancelled, and Nintendo looking massively unprepared with its own meager software lineup, there's no rush to buy a 3DS.

Late last month, Nintendo announced it would drop the price of the 3DS from $250 to $170 on August 12. Is this enough to push the 3DS to a critical mass by the time the Vita drops? Only time will tell.

Feel free to chime in in the comments section.

By Tim Hanlon