Nintendo has long been a favourite of video-game fans, from its arcade games in the 70s to the multi-million-selling Wii console in the 2000s.
Last year's unveiling of the 3DS whetted gamers' appetites once again. Yet the handheld system, which uses glasses-free 3D technology, did not hit shelves in time for Christmas, but went on sale this spring, losing pre-launch momentum in the process.
Nintendo's target for full-year sales of the 3DS were 16m, but in the first half it sold only 3.1m units - despite summer price cuts. Sales of the Wii also dived; however, this is at least partly attributable to the unveiling of its successor console, the Wii U, in June.
Now, the company faces making its first full-year loss in 30 years. So, what's gone wrong? Analysts suggest that Nintendo's once-lauded strategy to broaden its generational appeal might be to blame, as smartphones have effectively become gaming devices and Microsoft's Xbox and Sony's PlayStation 3 have added family-friendly motion-sensor controls similar to those of the Wii.
Nintendo's pre-Christmas focus will be the latest Legend of Zelda game, and 2012 brings the Wii U. There are even rumours it is planning in-game microtransactions for 3DS.
Is all this enough to get Nintendo back in the game? We asked former PlayStation marketer Owen Jenkinson, now head of marketing at Freeview, and Ben Shaw, strategist at Bartle Bogle Hegarty, who created the Barclays 56 Sage Street social game.
Owen Jenkinson head of marketing, Freeview
Nintendo seems to be caught in the crossfire. On one hand, the consumer electronics sector is being hit by the downturn and consequent tightening of belts; on the other, the proliferation of multifunction products, smartphones and tablets in the portable market, Kinect and even smart TVs in the 'at-home' market has made its offer look dated and irrelevant.
It has also created a bit of a monster in the Wii, which elevated gaming from the dank rooms of teenage boys and into the front room. Yet the Wii offered a genuine product innovation with mass appeal that has since been eroded by PS3 and Xbox - and Nintendo has failed to react.
Meanwhile, 3DS launched with no big-hitting games and concerns about the effects of 3D games on children's eyes. Nintendo's marketing suggests that it is concentrating on an older mainstream audience. It seems to have lost sight of its core positioning, which I've always seen as 'the gaming company for kids'.
- Don't try to be all things to all men (and women, children and pets). To maintain the mainstream positioning, evolve the product to offer genuine innovation, and deliver the killer software that will drive console sales.
- Do some good advertising. Not the stuff that sails through focus groups because it's laden with 'product messages', but ads that mark out a clear piece of real estate in consumers' minds, labelled 'fun', 'youth', 'Mario' and whatever else drives Nintendo's salience.
- If that fails, remove the walled-garden business model - license software to Apple and Android platforms.
Ben Shaw strategist, Bartle Bogle Hegarty
The disappointing launch of the 3DS and somewhat lacklustre reaction to the Wii U announcement highlights Nintendo's recent inability to innovate enough to spark interest beyond the serious gamer market. The continued sub-standard release of 'me-too' franchise games like FIFA or Call of Duty has muddied its positioning, while the launch of PS Move and Kinect means the Wii is no longer unique in motion-tracking gameplay.
The Wii racked up massive sales upon its release and quickly owned the market as the family-entertainment console - it was the most social purchase a family could make. The company seems to have subsequently forgotten its roots and the special place it holds in gamers' hearts.
Nintendo has always been a kids' brand. Even when the Wii was positioned as a family-entertainment console, it was only ever for kids' enjoyment. Bowling an imaginary ball or going on a quest to save the Princess spark the imagination, but they don't immerse you in realism like offerings on rival consoles.
- The Nintendo brand of gameplay is simple, social and fun - don't move away from this heritage.
- Innovate on the 3DS - the value proposition against the iPod Touch won't be enough with the constant stream of new apps available.
- The launch of the Wii U will give Nintendo some new news (and an opportunity to downgrade the original Wii to sub-£100) - the company must re-establish the Wii as an essential family entertainment purchase.
- Innovate in social gameplay - people are bored of dancing and bowling. Beat PlayStation and Microsoft by becoming the fun and accessible motion-tracking console.