Nintendo, Microsoft go for broke on their video game strategy

LOS ANGELES — Nintendo was hemmed in on both sides and in deep trouble.

The company’s Wii U videogame console, an effort to add a small, semiportable screen to the hit motion-sensing Wii, was a flop. And Nintendo’s handheld consoles, descendants of the legendary Game Boy, were suffering as people opted to play games on smartphones instead.

This was in 2014, the year the Japanese gaming giant recorded its third consecutive annual loss, a setback that followed decades of profitability. Critics called for the company to reboot its hardware, or perhaps reduce the emphasis on its own devices by bringing beloved characters like “Super Mario” or “Zelda” to smartphones.

“You gotta either go back and do something that’s more (traditional) consolelike, or go forward and do something that’s all motion, like the Wii,” said Phil Spencer, the head of Microsoft’s Xbox gaming business, describing the prevailing industry opinion at the time. “And they didn’t.”

Instead, Nintendo doubled down on its effort to build a console that combines mobile and living-room gaming, developing the Nintendo Switch.

So far, it has been a wild success. Nintendo has struggled to make enough devices to satisfy demand since its launch in March, and at the E3 trade show here earlier this month, Nintendo had a bit of its swagger back.

Spencer’s Microsoft is trying to pull off a similar rebound. His team is going back to the roots of the Xbox business: pushing the boundaries of the power you can pack into a gaming machine.

The company’s Xbox One X, unveiled at E3, is — as Microsoft’s marketing mantra repeated constantly — the most powerful console ever made, aimed at hard-core gamers who want every bit of graphical realism they can get.

Microsoft and Nintendo had taken a similar path: Facing speculation that they would have to reboot or rethink their video-game businesses to respond to rival Sony’s dominance, they instead doubled down on what makes their devices stand out.

Living-room battlefield

The competition to sell living-room video-game consoles is among the oldest battlefields in video gaming, dating to the emergence in the 1980s of Atari and Nintendo devices that plugged into television sets.

The current generation began in 2012, with Nintendo’s Wii U. Sony’s PlayStation 4 and Microsoft’s Xbox One followed a year later.

Sony, with a hardware package that was easy to use for both game developers and consumers, and a laser focus on drawing the best games, quickly took a wide lead.

In Tokyo and the Seattle area, Nintendo and Microsoft plotted their response. Microsoft’s campus in the Seattle-area city of Redmond is adjacent to Nintendo of America, the Japanese company’s subsidiary for the Western Hemisphere. Nintendo, which set up shop in Redmond a year before Microsoft came to town in 1986, sold Microsoft some of the land that became its campus during one of the company’s growth spurts.

Cultural divide

Far more ground separates the two corporate cultures.

Microsoft, which helped put a computer on every desk with Windows and today runs a sprawling business-software empire, got into gaming at first through experiments in entertainment CD-ROMs. Dabbling in encyclopedias turned into computer games that pushed the boundaries of PC hardware and highlighted the power of Windows.

The company’s dive into consoles began when some leaders in the Windows unit worried that Sony’s popular PlayStation would conquer the living room and shut Microsoft out.

The Xbox console was born in 2001, a brand Microsoft tried to associate with raw computing power and graphical fidelity.

Since then, Xbox — which is far more popular in the U.S. than abroad — has also been closely tied to hard-core gamers. Microsoft’s most popular franchises, “Halo” and “Gears of War,” are both “shooters,” the top U.S. console-game genre.

Nintendo strikes a more lighthearted tone, one explicitly aimed at appealing to a broad range of people — “from 5 to 95,” as Nintendo of America chief Reggie FilsAime says.

Its more recent efforts haven’t fared so well. With the Wii U flagging, Nintendo accounted for about 5 percent of global console and consolegame sales last year, researcher IDC estimates. But instead of dropping the concepts the device explored, Nintendo dug deeper.

In October, the company announced a new console that kept the Wii U’s portable small-screen concept, but rebuilt the device as a sleek, tablelike tool that could be plugged into a television dock for traditional play.