Wait! Before you go any further, make sure you’ve read part 1 (Five Things Nintendo Did Right in 2006) and part 2 (Five More Things Nintendo Did Right in 2006) of this article.

Since I’ve started writing about Nintendo, the Wii has continued to dominate in all three major markets. By all accounts it’s still nearly impossible to find on retail shelves and some early estimates have its worldwide sales already at 60% of the total sales of the current “next-generation” market leader, Microsoft’s Xbox 360.

While total worldwide sales are always a bitch to pin down — and sites like this or especially this are hardly reputable sources — the growing trend is hard to miss: Nintendo is doing extremely well with its Wii console.

But all of this success is early success. For all the good moves Nintendo made in the last year, they’ve also made some bad ones. And these mistakes are what separates statements like “The Wii will sell more in its lifetime than the Gamecube” (which is nearly undoubtedly true) from statements like “The Wii will outsell the Xbox 360 and Playstation 3 worldwide” (which is impossible to know at this point).

Nintendo’s mistakes, though not as numerous at their successes, are still glaring, and in fact stand out even more in light of the Wii’s early sales success. It’s that whole Tortoise and the Hare scenario — everyone criticizes the Hare for taking that nap, because he was in the lead when he made that mistake. Meanwhile the tortoise clearly made a zillion and a half mistakes in the first 75% of the race — not the least of which was improper footwear — but nobody criticized because well, hey, he’s a tortoise in a race.

For the last decade, Nintendo was the tortoise, lagging behind. With the Wii launch, however, they became the hare. And these mistakes are the equivalent of them leaning against a tree and dozing when they could be sprinting toward the finish line.

The following are a list of the five biggest mistakes Nintendo made in 2006:

1. They Fostered A Software Drought

This is hardly surprising. Nintendo has, for the last three console generations, consistently undelivered on software in the six months following launch. Never was this more true than with the Nintendo 64, which launched with a whopping three games, and delivered new software so slowly that Nintendo Power was devoting twenty-page spreads to Cruis’n USA and Wayne Gretzky’s 3D Hockey.

And to be fair, Nintendo did learn from that experience. At the very least, both the Gamecube and Wii launched with strong line-ups. The Wii’s launch line-up, in fact, was one of the best of all time with strong flagship games (Legend of Zelda: Twilight Princess), innovative party games (Rayman, Wii Sports, Super Monkey Ball) and underrated genre titles (Excite Truck, Red Steel). However, after that initial launch wave, the title release schedule has been plagued by holes you could drive a starship through. New software releases in January and February 2007 totals in the low single digits.

Seriously, when you need to delay Wii Play to fill a gap in your software release schedule, you’ve got major problems with your software release schedule.

They build great momentum with their launch titles, but they need new titles on the shelves to ensure that the Wii doesn’t turn into little more than a Wii Sports machine for new gamers. This mistake stands as a huge missed opportunity for Nintendo.

2. They Were Slow to Court Third Parties

There have been two chief complaints about the software library on Nintendo systems in recent years. The first is that their games are “too kiddy”, which is sort of a ridiculous statement that doesn’t really matter for a variety of reasons. (Jack at Infendo addresses the kiddy thing in a recent good post.) The second, however, is more damning, because there’s a lot of truth to it. It says that third party developers do not put their best games on Nintendo consoles.

In fact, in a lot of cases, they don’t put any games on Nintendo consoles. Big hitters like Capcom, Konami, Namco and Square have been so few and far between that it’s actually surprising to see their logos on the boot-up screen. Though there was no shortage of good-selling software on their recent consoles, a ridiculously high percentage of that software was published and developed by Nintendo themselves.

It’s easy to see why third party developers abandoned Nintendo for the original Playstation: Sony offered far lower development costs and Nintendo was being a dick with licensing. What’s harder to understand, though, is why Nintendo hasn’t taken more significant steps to win these companies back.

Sure, we’ve seen more interest from Square-Enix and EA this time around, but we’re still missing commitments from other big Japanese developers. Nintendo’s goodwill in Japan has been building for the last two years with their massive DS successes over there. And so there’s been ample opportunity to make amends and software deals that could help the Wii with the first problem on this list. And yet, so far, we’ve heard very little.

3. They Were Not Ready For Online

On the whole, I think online gaming as most gamers think of it is a very small niche market. Console makers got multiplayer right the first time around — when it was about people playing together in the same room — and this online expansion of that does not really offer any true gameplay benefit to people who aren’t big into playing games to begin with. Online gaming like in Xbox Live is a nice addition to a console, but it’s not a selling addition.

Where online can become a selling feature, however, is in the less gameplay-oriented community aspects. Things like online leaderboards, (free) content downloads, mini games and message board features are the kind of things that are accessible enough to have widespread appeal.

Though the intentions are clearly there, Nintendo’s current online implementation is not up to snuff.

To be blunt, the whole thing looks rushed. Simple tasks like checking and reading your messages or checking the weather take far longer than they should. There’s little in the way of intuitive functionality between menus and console configuration. There are no personalization options outside of the weird Mii system, which is cool, but could be far more expansive. And the less said about the convoluted “friend code” system the better.

They recently announced a partnership with Gamespy on the Wii’s online component, which could be promising. But it would have been even more promising if they had done it at launch.

4. They Hugely Underestimated Demand

This is a point where the numbers speak for themselves. In December 2006 analysts predicted, based on demand and the perceived stock situation, that the Wii would sell 1.3 million units for the month. When all was said and done, Nintendo sold less than half of that figure.

While a stat like that does indicate somewhat that analysts are stupid — and they are! — it’s more important to realize what it means in terms of supply. Pre-launch, conventional wisdom was that pre-orders for Wiis were largely unnecessary. Given that it wasn’t a complicated hardware design like the Playstation 3, and that Nintendo historically hasn’t experienced major hardware shortages, that you could not get a Wii anywhere on launch day — and, then, for weeks after launch day — without lining up outside a store all night took everyone, including Nintendo, by surprise.

But “we were surprised” only works as an excuse for incredibly low shipments for a little while. Nintendo had plenty of opportunity before Christmas to recognize the level of demand and make some adjustments. They’ve had even more time post-Christmas to realize that demand is still incredibly high. And yet shipments are still low.

There’s no doubt in my mind that Nintendo has lost potential buyers because of this. With the console at such a (relatively) low price point, the Wii is a product that could easily be an impulse purchase. But it’s the rare consumer who will actually chase a product in order to buy it. Gamers don’t mind waiting outside in the cold to play Zelda, but someone interested in the new motion control aspects of the Wii isn’t likely to do the same just for Wii Sports. And those are lost sales.

5. They Did Not Capitalize On Early Success

This is more a summation of everything than it is its own point, but I feel like I have so much to reiterate. Nintendo wouldn’t be Nintendo if they weren’t a frustrating company. They’re characterized both by their innovation and their refusal to change, creating a kind of contradictory company that often sees huge potential but then refuses to rise to meet it.

They’ve had management changes in recent years, but at the core there’s still that old Nintendo attitude, holding them back. And, like I said, it’s because Nintendo has the potential to do something really huge with the Wii that these mistakes become all the more glaring.

It’s never been more evident than in the recent announcement of Playstation Home. That announcement should have had far less importance than it did. Nintendo has the roots of a very similar community-driven online system with the Mii Channels, but their lacking execution has allowed Sony to capitalize and unveil something slightly derivative but mostly just better.

A company who could see the finish line wouldn’t have let that happen.

Still, though, I hardly think Nintendo is anywhere near a bad position. In fact, I think they’re in the best position they’ve been in since at least 1995. It’s only given the nature of the opportunity they were given at the end of 2006 — huge launch success coupled with dozens of competitor problems — that these mistakes really become evident.

In 2006, Nintendo got big again. But they could have got bigger. That’s where these mistakes came into play.

See Also

• Five Things Nintendo Did Right in 2006
• Five More Things Nintendo Did Right in 2006