Who Is Nintendo Going To Buy? Don’t Be Shocked If The Answer Is “Nobody”


Image: Nintendo Life / Nintendo

The big news of 2022 is industry consolidation – with Microsoft buying Activision and Sony snapping up Bungie, it’s all about big fish gobbling up the smaller fish. As we discussed yesterday, this isn’t necessarily something we should be cheering on from the sidelines – but rather predictably, it has kickstarted a discussion surrounding Nintendo and what the Japanese giant’s response to all of this activity is likely to be.

On one hand, it’s a perfectly sensible question to ask. As Microsoft and Sony’s recent actions have proven, being a successful platformer holder is very much down to the unique experiences you can offer your customers – and these same experiences can hopefully tempt other people to invest in your product, be it a console or subscription service. In any competitive marketplace, it’s very much about offering the best deal to the buyer, and that often leads to the kind of consolidation we’re seeing.

In an industry where its rivals are hastily trying to turn some of the biggest franchises into platform exclusives, why shouldn’t we be asking how Nintendo is going to buttress its business moving forward?

Nintendo is no different, of course. Sure, people buy the Switch because it offers something unique when compared to the PS5 and Xbox Series X – TV and portable play – but it would be foolish to suggest that Nintendo’s vast stable of famous properties isn’t just as much of a draw. Mario, Zelda, Metroid, Fire Emblem, Kirby, Mario Kart… these are the franchises upon which Nintendo has built an empire, which ultimately suggests that software does indeed sell hardware. So, in an industry where its rivals are hastily trying to turn some of the biggest franchises into platform exclusives, why shouldn’t we be asking how Nintendo is going to buttress its business moving forward?

Of course, Nintendo isn’t like Microsoft and Sony. For starters, its own games – rather than those published by third-parties – tend to sell the best on its systems. That immediately means that Nintendo doesn’t have to get into acquisitions in order to bolster its catalogue of IP, because its franchises are the envy of the gaming world. Also, Nintendo adopts a very different strategy when it comes to developing its games. When you list off some of the company’s most memorable recent hits, it’s amazing how many of them are actually created with the assistance of external studios. Intelligent Systems. HAL. Sora. Good-Feel. Camelot. Game Freak. None of these firms are owned by Nintendo, but instead, have long-standing and robust business relationships with the company that stretch back decades.

It perhaps says a lot about the Japanese way of doing business, which is based on trust and places a lot of value in the importance of long-standing, solid relationships between companies. Buying another firm is certainly one way of aggressively growing your business, but it also means you’re then totally responsible for the welfare of hundreds, if not thousands, of new employees. Nintendo has forged ties with a multitude of external studios and that means it doesn’t have to spend large sums of cash to gobble them up; instead, it can take advantage of their expertise only when it needs to. For the studios, they benefit from having a successful development and publishing partner who is loyal and gives them a lot of repeat business, but they can still maintain their independence and work with other companies when the need arises. It’s a win-win for both sides.

Then there’s the question of why Nintendo would even need to buy HAL, Intelligent Systems or any of its other trusted ‘second party’ partners. While these companies do the development work, the IPs they work with are owned (either fully or partly) by Nintendo. Intelligent Systems (which, contrary to popular belief, isn’t an internal Nintendo studio) couldn’t do a WarioWare game without Nintendo’s permission, so what benefit does Nintendo get from acquiring the studio? If, say, Sony purchased Intelligent Systems tomorrow, it wouldn’t get the benefit of the studio’s most famous titles – so what’s the point? Therefore, you could argue that there’s little need for Nintendo to fear losing Intelligent Systems to another company, and therefore little need to force a purchase.

The exception here is Next Level Games, which Nintendo acquired in 2021. However, the reason for this move was largely down to Next Level’s shareholders wishing to sell their stock; had Nintendo not stepped in and purchased that stock, another party would have, and Nintendo clearly values its relationship with the studio. So, that wasn’t a case of Nintendo aggressively looking to make an acquisition, but rather than its hand was forced. Another exception is Monolith Soft, which Nintendo purchased 15 years ago, and Retro Studios, picked up by Nintendo 20 years ago. With the former, it was more about gaining a valuable support studio for its bigger titles (Monolith Soft has worked on the likes of Splatoon and Zelda: BOTW as well as its own games), while the latter purchase was related to reports of poor working conditions at the Metroid Prime studio. Retro also cost just $1 million – an absolute steal. In contrast, Bungie has just cost Sony $3.6 billion.

It’s worth reflecting on how genuinely amazing it is that so many of the firm’s most popular recent titles haven’t been developed exclusively within Nintendo itself

Of course, Nintendo’s approach isn’t 100% foolproof. AlphaDream, the company behind the Mario & Luigi RPGs, went bankrupt in 2019, and Chibi-Robo studio Skip seems to have gone into an extended hibernation despite its relationship with Nintendo. However, you could argue that, in the latter case, it has more to do with the poor commercial performance of the Chibi-Robo series; Nintendo can’t be expected to bankroll external studios forever if the resultant titles aren’t generating cash.

Then, there’s the small matter of Nintendo’s size and the size of its pot of cash. Nintendo has reserves of $9.36 billion. To give that some context, Microsoft handed over almost $70 billion to purchase Activision and still has money in the bank. Those facts alone should make it clear that Nintendo isn’t in the same ballpark as its rivals, and is therefore highly unlikely to make a sudden swoop for an external publisher or studio.

The real question we should all be asking isn’t “who should Nintendo buy?” but “who should Nintendo work with next?” The company’s strategy might seem odd in an industry where Microsoft is throwing money around like it’s going out of fashion, but you can’t argue that it doesn’t work – at least for Nintendo. Again, it’s worth reflecting on how genuinely amazing it is that so many of the firm’s most popular recent titles haven’t been developed exclusively within Nintendo itself; Metroid Dread, for example, was overseen by Nintendo but developed largely by Spanish studio MercurySteam. And Bayonetta 3, one of the most eagerly-awaited Switch exclusives, is being created by PlatinumGames, a fiercely independent Japanese developer which has ties with several companies, not just Nintendo. The Japanese company has turned the process of working with external studios on its biggest IPs into a fine art.

So, if you’re sitting waiting for Nintendo to gobble up Capcom, Sega or Square Enix (three companies with which, it should be noted, Nintendo also has long-standing publishing relationships), you might want to make yourself comfortable, because you could be there for quite some time.



Share

Leave a Reply

Your email address will not be published.

GIPHY App Key not set. Please check settings