In a Turbulent Gaming Industry, Nintendo Has Shown a Better Way

If you’ve been following current events over the last few months, you’ll know that all is not well in the video game industry. Layoffs, studio closures, and downright baffling decisions have become commonplace. “Restructuring” has been popularized as the soft corporate word to mask negative publicity, but the fact of the matter is that the times are changing and a wave of uncertainty has flooded the market. However, amidst all the turmoil, one company seems to be absent from these kinds of negative headlines: Nintendo.

So, let’s take a look at some of the headlines being made by the big names in gaming and see how Nintendo is faring in comparison.

Starting with what is probably the worst of the worst, we have Microsoft. Last month, Microsoft announced the closure of four studios. This comes shortly after their announcement in February that they would be laying off over 1,900 employees, roughly 9% of the workforce at Microsoft’s video game division. Fans were quick to speak out as one of the studios being forced to close its doors was Tango Gameworks. Tango is the studio behind 2023’s Hi-Fi Rush, which released to critical and commercial success. It also nabbed Microsoft a slew of award nominations, winning awards in both audio and animation. Tango, as well as the other affected studios, were all under the parent company ZeniMax Media, which Microsoft acquired in 2021 for $7.5 billion USD.

This isn’t the only bad news for Microsoft, as recent reports show that hardware sales for the Series X and S have been declining almost 30% year-on-year. Xbox sales have been so poor that the PlayStation 5 outsold Xbox hardware nearly 5 to 1 in the first quarter of 2024 and 3 to 1 in 2023, despite the PlayStation 5 seeing declining sales of its own. This is likely the reason behind Microsoft’s decision to release exclusive titles like Hi-Fi Rush, Sea of Thieves, and Grounded on competitors’ consoles earlier this year.

Hi-Fi Rush

Next up, Sony announced in February that they would be laying off about 900 employees, approximately 8% of the total workforce at Sony Interactive Entertainment. This wasn’t the biggest headline to come out of Sony, however. In early May, they announced that a PSN login would be required to play their fastest-selling game ever, Helldivers 2, making the game unplayable in the roughly 170 countries where the PlayStation Network is unavailable. This meant that players who had previously purchased the game on Steam, and who were once able to play the game, would soon lose access. Though Sony walked back that decision, it still left a stain on their brand image and has caused Helldivers 2 to suffer significantly in Steam reviews.

Although Sony has been outperforming Microsoft, their sales have still been declining by about 29% year-to-year. Sony’s announcement that there will be no new “major existing franchise titles” before 2025 will do little to help hardware sales, as a lull in first-party titles will give consumers little incentive to finally make the jump to PlayStation this year. This seems like less of a savvy business move and more a consequence of layoffs, because who wouldn’t want to release familiar first-party titles that are almost guaranteed to make a profit?

Helldivers 2

Other big names in the video game industry aren’t free from trouble either. Square Enix, Ubisoft, Bungie, and others have all announced layoffs, culminating in over 10,000 industry-wide layoffs in 2023, and 6,000 in January 2024 alone.

Such layoff announcements are coming in tandem with some of the most baffling corporate decisions that many of us have ever seen in this industry, as corporate heads scramble fruitlessly to maintain COVID-era revenue. Unity announced price changes that would cost indie developers millions by applying a new fee to games that are already in the marketplace. Unity has since walked back some aspects of the price change, but the damage to developer trust was already done.

Everyone’s favorite company, EA, also shocked fans by excitedly announcing that they would like to incorporate generative AI into their development process as quickly as possible. To avoid getting lost in the weeds of an AI debate, suffice it to say that gamers weren’t as excited about this news as EA was.

In another less-than-popular move, EA doubled down on live-service games, claiming it provides players with a deeper gaming experience. This news was met with a wave of groans as many gamers have attributed the live-service model to ruining promising titles like Suicide Squad: Kill the Justice League and Marvel’s Avengers by diverting developer resources away from crafting a worthwhile story and meaningful gameplay experience. The live service model also comes at the risk of having games shut down after as little as a few months if it falls short of revenue goals.

Suicide Squad: Kill the Justice League

So, where does Nintendo stand in all of this? Well, Nintendo isn’t completely free of negative attention. In March, Nintendo ordered Tropic Haze to shutdown their emulators for the Switch and 3DS. In that same month, Nintendo filed a DMCA takedown notice against Relic Castle, a Pokémon fan game website which has been in operation since 2014. Likewise, it was reported in April that due to another DMCA takedown notice, physics sandbox Garry’s Mod would have to remove all Nintendo-related items from the game’s workshop.

Nintendo also isn’t free of layoffs as they are removing as many as 100 contractor positions at Nintendo of America. These are among the same contractor employees who complained in 2022 that Nintendo of America treated them as “second-class citizens.” These contractors claimed that Nintendo of America kept them in antiquated facilities and with little to no growth potential, among other things. Now, in addition to alleged unfavorable work conditions, they are staring down the barrel of layoffs.

Nintendo did say in the notice where they announced these layoffs, however, that they would be creating “a significant number of new full-time employee positions.” Insiders claim that most of those new positions will be filled by those affected by the contractor layoffs. This is consistent with Reggie Fils-Aimé’s claim that promotions from contracted to full-time positions is the norm at Nintendo of America, but with the side effect of less contractor positions overall. As such, these layoffs are minor when compared to the layoffs that nearly every other major video game publisher is facing because many of them are resulting in promotions to full-time positions.

Now, I’m not here to make excuses for Nintendo or to make it seem like they can do no wrong, because they can. However, it is undeniable that the severity of Nintendo’s negative publicity as of late pales in comparison to what their competitors and contemporaries are doing. While the news regarding DMCA takedowns is certainly unfavorable to some, your feelings towards them is entirely dependent on your attitudes towards copyright laws and piracy. However, much of the news coming from other big names in the gaming industry is universally objectionable.

Layoffs on the other hand are a huge deal. Each layoff is a real person who has at least temporarily lost the source of their livelihood. I’d be lying if I said these industry-wide layoffs weren’t a result of over-staffing during the pandemic lockdowns to meet the increased demand for video games, but Nintendo has somehow managed to avoid it. Recent reports show that Nintendo boasts a lofty 98.8% new employee retention rate where the average for Japan is around 70%. Their attitude towards developers is so positive, in fact, that every developer that worked on the original Zelda is still with the company in some capacity. You won’t find that anywhere in the West.

Lastly, let’s compare the attitudes game publishers have towards developers, studios, and general staff. As we’ve seen, when times get tough, most companies will fire staff while the corporate big wigs continue to line their pockets. Microsoft took it to the next level and shutdown entire studios, at least one of which had developed a successful title just in the last year. Compare that to Nintendo’s former CEO Satoru Iwata who, when facing similar hardships following the commercial flop of the Wii U, took a 50% cut to his salary in order to avoid layoffs.

Iwata said, “If we reduce the number of employees for better short-term financial results, employee morale will decrease, and I sincerely doubt employees who fear that they may be laid off will be able to develop software titles that could impress people around the world.” That type of attitude is severely lacking in this industry, and Nintendo’s continued success is evidence that maybe other publishers would do well to adopt it.

Satoru Iwata

So, what does this mean for the future of the gaming industry? Well, if my opinion is worth anything, I see this turbulence as a temporary issue. These companies saw a boom in profits during pandemic lockdowns because more people were playing video games. Post-pandemic, demand is returning to normal levels. Executives are trying out-of-the-box and sometimes downright despicable tactics to maintain COVID-era revenue, but those efforts won’t pan out in their favor. Once we’re through this transitional period, things will stabilize and things will return to normal.

However, there is one growing trend that bodes well for profit-seeking corporate heads. The rising popularity of video game adaptations for film and television has given publishers an effective new way to advertise their IPs. It worked for children’s television programming like Transformers and G.I. Joe — which were just glorified advertisements for toys — and it will work just as well for the video game industry. We’ve already seen this in action with the massive success of the Fallout show on Amazon Prime. The television show put Fallout back into the public eye and drew in a new audience, launching Fallout 4, as well as other Fallout titles, to the top of the sales charts. Others will undoubtedly attempt to replicate that for better or for worse. Even Nintendo is taking a crack as films with last year’s The Super Mario Bros. Movie and the upcoming Zelda movie. If these adaptations are done well, they have the potential to attract new customers and give executives those COVID-era sales figures they are so desperately seeking.

Amazon Prime’s Fallout

Regardless, these companies need to take a note from Nintendo’s playbook and realize that taking care of your developers provides financial stability through the quality of their output. As Iwata said, employees who fear being laid off cannot produce a quality game, and this is evidenced in Nintendo’s output. Nintendo’s first-party titles have almost consistently been successful without predatory monetization or deplorable pricing structures because the quality speaks for itself. Even at their worst, Nintendo has consistently produced quality games that continue to make them money decades later. For example, Mario Kart 8, a product of the failed Wii U console, was ported over to the Switch and has since become the best-selling Mario game ever. Not only that, but of the top 20 best-selling Switch games, four are either direct ports of Wii U titles or sequels to games conceived on the Wii U. Nintendo developed these titles during financial hardship and reaped the benefit of their labor years later.

So, Nintendo has shown that commitment to staff provides long-term success through the ebbs and flows of financial prosperity. If Nintendo started laying off developers and closing studios during the financial crisis of the Wii U, they would not have had quality teams primed and ready to make the Switch the success that it was. This commitment has improved the quality of their output so that they don’t have to take the kind of ridiculous measures we’re seeing in headlines just to please shareholders. So, amidst a sea of turmoil in the gaming industry, Nintendo has shown that there is a better way.

Now tell us what you think. Has the current state of the video game market improved your opinion of Nintendo? How do you feel about Nintendo’s business practices compared to their competitors? What do you think the future of gaming will look like? Let us know in the comments below.

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