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Nintendo at crossroads as it falls behind in console wars

Nintendo has booked a net loss of close to US$230 million for the financial year -- its third year of losses, no thanks to falling sales of its Wii U console. But the Japanese gaming giant is confident new video games like Mario Kart 8 will revive sales spur a return to profit.

SINGAPORE: Why won't you just license Super Mario and Donkey Kong? -- that is the question Nintendo keeps coming up against quarter after quarter.

With few signs sales of its flagship Wii U console will pick up, it has been said the only way for the company to survive is to get out of hardware and license its software.

But that could ultimately do more harm than good.

Lewis Ward, research director for gaming at IDC, said: "They view their hardware and software assets as unique... It's really the union of those two that they think will drive long-term revenues for the company.

"So I'm not of the school that Nintendo should start offering its games on other devices. I think that would ultimately not be a good thing... Or at least over the next 5 years, it would probably not be a net winner for Nintendo."

Analysts said it is time for Nintendo to face up to a hard truth -- its core demographic, the casual gamers, are not coming back as they have moved on to smartphones and tablets.

Mobile apps generated US$16 billion in revenue in 2013, with some of that money likely coming at the expense of traditional gaming devices. And Nintendo's rivals seem to understand this, said Mr Ward

He added: "What Microsoft and Sony have done pretty well is to keep that hardcore gamer customer base, which goes out and buys Call of Duty, and some of these other triple-A game titles -- Halos and Uncharted and stuff like that... where they're going to pay US$50, US$60 for a disc, and then they're going to buy add-on content, and get that community interaction going."

One bright spot is China, which lifted its 13-year ban on foreign-made consoles in 2013. Consulting firm PWC estimates at least US$10 billion in sales for the industry by next year -- but only if the price is right.

"With perhaps a US$50 price cut, it would really put Nintendo back where it used to be, which is in the value proposition place in the console market," said Mr Ward.

With the video game landscape growing increasingly crowded, analysts said the Japanese game-maker cannot afford to take its eye off the ball for one minute -- one wrong move and it could be game over. 

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