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Is amiibo Nintendo’s Next Costly Disaster?
by Bryan Cashman on 07/22/14 04:41:00 am   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

amiibo, Nintendo's upcoming toy-line that interacts with Nintendo video games seems like a great way to extend the company's brands to the youth market, but CONSULGAMER sees a number of threats to the product line that could make amiibo another costly disaster for Nintendo.

amiibo has a Small Potential Market, and Nintendo is Overestimating Demand

The target market for amiibo is far smaller than the average toy’s. amiibo will only work with Nintendo current hardware platforms, and the company's current home console, Wii U, is only owned by 6.4 million people.

amiibo for Nintendo Wii U An entire toy-line cannot become a mainstream hit if it launches on a system that very few consumers own.

With only 6.4 million potential customers, amiibo will not get the shelf-space at major retailers needed to make amiibo a mainstream success – and a holiday best seller. When Activision-Blizzard premiered the "toy to game" genre with the Skylanders series, the franchise was playable on any major gaming console. Retailers displayed Skylanders toys in the toy section of retailers, which generated additional interest in the Skylanders video game and accelerated platform adoption. Given the small size of Nintendo’s potential market, retailers will likely only place amiibo toys in the Wii U section of retailers – where only existing customers of Wii U are likely to see the toys. Comparing Nintendo’s potential success to Activision-Blizzard’s Skylanders series is not realistic. Activision sold 30 million toys in the first 6 months of its release. Even if Wii U hardware sales miraculously doubled, Nintendo would still have to sell over two toys for every Wii U owner to match the first six month’s of Activision-Blizzard’s performance. Even worse, Nintendo has to do this with two other competitors, Activision-Blizzard and Disney competing directly in the “toys to game” genre. There is no blue ocean here.

amiibo 3DS Support

Hoping to extend the market size for amiibo, Nintendo is extending amiibo functionality to Nintendo 3DS, via an accessory purchase and OS software update.

The Wii U’s market-size is just too small for the series to have any significant mainstream success. It’s telling that Nintendo is also releasing a separate 3DS toy reader accessory to help boost the potential for amiibo, but given the poor functionality of new features added via 3DS system updates like screenshot posting and Miiverse, it’s unlikely that the add-on will perform well on the portable platform.

amiibo Toy Inventory Management

amiibo toys are real physical assets - they take up space, they may have to be purchased back from retailers when they’re not sold, and they cannot easily be replenished when supply exceeds demand. Manufacturing costs for amiibo toys will far exceed the cost to manufacture a software disc for Nintendo's games, and the significant size of packaged toys brings added inventory and distribution costs. This array of new costs and challenges illustrates the added risks of entering the traditional toy market. Estimating demand for amiibo will be challenging, and Nintendo already has a history of poorly forecasting demand, as seen in steep unofficial retail price drops of Kirby’s Epic Yarn, Star Fox 64 3D and Steel Diver. Nintendo also suffers significant supply constraints when the company releases hits – Mario Kart 8 was sold out at most retailers the day after release, and Nintendo’s last 3DS blockbuster, Animal Crossing, was so hard to find in stores that millions of consumers downloaded the game from the eShop instead.

Too Much amiibo is a Bad Thing

Nintendo may be mismanaging SKUs for amiibo, as the company seems to be offering far more product varieties than retailers will be willing to support. Given the limited shelf-space retailers will provide Nintendo, it’s surprising that Nintendo already has ten toys planned for the launch of amiibo, with additional toy releases planned for the remainder of the Super Smash Brothers line-up, as well as potential toys for Mario Kart 8, Mario Party 10, Captain Toad: Treasure Tracker and Yoshi’s Woolly World.

amiibo Toy Characters

Getting shelf-space at traditional retailers will be hard, but getting shelf-space for Nintendo's second and third-tier of characters will be even harder.

CONSULGAMER expects amiibo to have both limited retail support and inventory management problems for Nintendo, and launching a toy line with a wide range of toy varieties only increases complexity for the company. The individual toys people want may be hard to find, and Nintendo may be left with excess inventory of characters too niche for the average consumer.

amiibo is a Rushed Job

Nintendo developed a reputation over the last few years of releasing products before they’re ready. The company released an upgraded 3DS seventeen months after the original was released, the release of the Wii U was plagued by hours of software patch downloads, and the Wii U’s much-vaunted TVii functionality did not even make the system’s release date. It looks the same with amiibo. With only six months until the toy-line’s release, Nintendo has yet to demo the toy’s functionality. CONSULGAMER isn’t aware of any live amiibo demos occurring behind closed doors at E3, and considering the significant retailer support required to launch a new toy line, it’s striking that Nintendo did not have anything to show at E3, a retailer trade show.

What’s the Point?

Nintendo of America President Reggie Fils-Aime says amiibo will boost Wii U sales, but given the toy’s UK pricing of $22 USD per figure, it’s unlikely that buyers will be anyone beyond hard-core Nintendo fans, who likely already own Wii U. U.S. prices of the toys are not yet available, but without an affordable price tag (or a Wii U hardware price drop, lowering the total out-of-pocket spend), the toys are unlikely to boost demand for the Wii U platform.

How Nintendo Can Succeed with amiibo

Still, amiibo has potential as a highly profitable venture for Nintendo, if executed correctly. amiibo allows Nintendo to better monetize the company’s biggest spending customers – enabling the collection of hundreds of more dollars from each of Nintendo's biggest fans. Consumers can now not only drop $50 on Super Smash Brothers Wii U, but they can also purchase 10-14 action figures, grossing Nintendo another $200 - $300 per big fan. With amiibo, Nintendo can collect money from the company's whales – Nintendo's biggest spenders, following the business model so successful for many free-to-play developers. By focusing on the biggest potential spenders, Nintendo may plan a more limited retail presence with amiibo – only selling the full line of products where the company's biggest core buyers are (ie GameStop), as well as online storefronts with extensive product varieties. Nintendo can also succeed outside of monetizing whales – through real innovation with amiibo. Will the toys just be a physical form of DLC, unlocking content or customization within existing games, or will they provide brand new gameplay experiences? Nintendo also has an advantage over "toy to game" competitors Activision-Blizzard and Disney because of cross-play across a series of Nintendo games, which may boost amiibo’s value-proposition. While Disney Infinity and Skylanders toys only work within those specific games, Nintendo's toys can interact with a series of different Nintendo blockbusters.

This holiday Nintendo will release an ambitious toy-line, and the strength of amiibo to both sell Wii U consoles and create a profitable new product line for Nintendo will finally be tested.

Stay in touch! The author, Bryan Cashman ( @consulgamer ), blogs about business issues in the video game industry at CONSULGAMER. This article represents Bryan's personal opinion only.


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Comments


Ryan Geiger
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I think you are vastly underestimate the collectible market. I don't care about the WiiU functionality, I want those cute little statues, ASAP.

Bryan Cashman
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As someone who almost has all of the McDonald's Mario Kart toys (of course I'm missing Mario!), I know exactly what you mean. But I don't think amiibo will drive significantly more Wii U consoles as Nintendo predicts. amiibo may be best served as pricey collectibles for Nintendo's biggest fans, but Nintendo's strategy on this point doesn't seem clear.

James McWhirter
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Indeed, I don't see Amiibo as something to drive the install base anyway, more something to maximise revenue from existing customers and fans.

To this effect it would appear Nintendo are setting out to make the most of the existing install base of Wii U. I wouldn't call (m)any of the games shown off at E3 as something that fits in with the "Blue Ocean" sort of games made for Wii and DS, and Amiibo itself would allow the bigger fans to dedicate more to the games they love.

Which seems extra important in the case of Smash Bros., a series whose entries have never reached New Super Mario Bros or Mario Kart like sales.

But yes, what Reggie may say about aiming to drive the install base seems secondary to me when compared to what Nintendo have outlined.

Paul Goymerac
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I currently don't own a WiiU and I'm still leaning toward "No" as far as owning one till more games come out for it, yet I'm totally gonna buy a few of these Amiibos of some of my all-time favorite Nintendo figures.

I'm crossing my fingers that Nintendo is planning on releasing more games now in order to boost the sales of their systems and not just relying on their Amiibos to sell the systems for them.

Christian Nutt
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One thing you didn't touch on: The Amiibo functionality in Super Smash Bros looks completely uninteresting, as explained in the last Nintendo Direct on Smash Bros.

Bryan Cashman
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I wasn't going to go there, but my informal survey in Smash lines at E3 brought in a lot of sighs.

It also sounds like you may need a character's toy in order to bring your customized fighter to a friend's house. That just sounds too pay-to-play for Nintendo.

Bob Johnson
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I don't see the rush job here. They already tested the waters with Pokemon figures. And essentially amiibo just act as a type of character save like in rpgs. The games that use these will have been in development for 1-3 years and will only have a few small hooks in them for using the figures.

I don't see why the 3ds portal is not going to work well either. The portal is just a wireless cable. It will allow you to transfer data back and forth between figure and game. And the 3ds spotpass service works great and is part of a good many of their games. Essentially this dumb read/write portal and amiibos
are going to work in a not so different fashion as Spotpass and Miis.

I don't know how much figures will cost in the US. And your quote of the price is what one store is charging for pre-orders and that store didn't post the RRP which I took to mean what we call list price in the US. I think young kids who have Nintendo platforms will love to get the figures. Not just huge fans.

Inventory management is tricky because it isn't an exact science especially in the entertainment business. Obviously though they know their install base and have a low end range for sales of SSB on the Wii U and will go from there. They obviously won't get as much love from retailers when their hardware sales are lower compared to when they are higher.

Overall it all depends on the games and how they use the figures as well as the quality and price of the figures. I think it will be be a bit of a slow burn. The appeal will increase as more games use the figures. And obviously their sales aren't what they were last gen and so expectations should be in line with those sales.

I don't think these things are going to move a ton more hardware on their own. But they won't hurt and they can only help add value to those who already bought a Wii U and 3ds.

James Yee
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Question: Nintendo Started out as a Toy Company, are most Nintendo toys still made by Nintendo or did they license all that kind of stuff out? Depending on how recent and regular their toy experience is could have a big sway on how well they handle the logistical side of these things.

That said I'm with Christian on this one, they honestly don't seem that interesting "in games."

Tielman Cheaney
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First a card company, then a toy company.

Mike Kasprzak
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Honestly, its the only thing from E3 that really disappointed me. Even though there are some original parts to it, it comes off as "Skylanders Me Too".

If it meant we as developers could get access to Nintendo characters for cameos, props and things of the associated amiibo, then that might have a use.

Patrick Davis
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I think people are being too overcritical of this move. I keep hearing things like, "Nintendo should leverage their IPs more." So, they actually make a move to do that. Articles like this is the result? Is there any move Nintendo makes that doesn't get negative journalism right from the beginning?

Honestly, I'm not even big into collectibles and I can see the potential for this. They only showed interaction with it in 1 game so far. It's quite a bit early to start writing it off.

Kujel Selsuru
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Amiibo + pokemon = money printer. This is coming from someone who doesn't care for JRPGs like pokemon but I do see how popular that one is.

Michael Wenk
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I think this article is utterly and totally wrong. Even with a 3 year head start, I strongly suspect that Amiibo will kick the crap out of Skylanders, and it has potential to do the same to Infinity (Though with the comic tie in, I think that will be the winner in the new gen)

So what if the Wii U has a lower installed base. It doesn't really matter as many people will buy the things and never use them on the console. It may push some Wii Us as well.

Consider Funkopops, do you realize how many people collect those? At the very LEAST, Amiibo will ride that wave.

I really don't understand why this site is so anti Nintendo.

James Yee
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I have no idea how well are Funko figures selling. I didn't even know what you were talking about until I looked them up. Where did you find sales numbers?

What would you consider as "Knocking the crap out of Skylanders?" Are you basing that on current sales figures or launch figures? 30 Million Toys in the first 6 months is nothing to sneeze at, so to "knock the crap out of it" you're looking at what? 50 Million in 6 months? At $22 each? (I don't think that will be final pricing) Curious as to what you're looking for here?

Is there a segment of the population who will buy a Mario figure at $22 even if they don't have a Wii U? Sure. Are there more if the price was $5? Heck yeah. The big questions here are what will be final pricing and how "collectable" will they be to those with the money.

Michael Wenk
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I don't have sales numbers for Funkos, they don't seem to publish them. They're pretty freakin popular, you will have to take my word.

And by Infinity beating them, I mean the current selling gen vs the current gen, Example, Infinity 1.0 beat Skylander's Swap Force. Everyone tries to qualify that, but the simple fact is that Infinity beat Swap Force.

So what I think will happen is Disney Infinity 2.0 will pretty much wipe the floor of Skylander's Trap Team. I also think Amiibo will beat Trap Team as well.

Also the 22$ figure is BS. Just because a UK retailer reports a 13 euros, doesn't mean it will release at 22$ in the US. Nintendo said it will be priced comparably to Skylanders and Infinity. And yes in this case I believe it, because it would make utterly no sense to try to make this a premium, nor have they announced it.

George Menhal III
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I'm so glad that someone decided to write this article. I have felt the same way about amiibo since it was announced or even hinted at.

For one, as a Nintendo fan, I don't feel like the company should be following the trend set by Spyro and Disney Infinity. That's directly the opposite of what Nintendo is all about, and it defies the wishes of Gunpei Yokoi, who would always stress that Nintendo's purpose was to be different and more explicitly that they sometimes should go out of their way to avoid doing what their competition does. I don't see the value in betraying this fundamental cornerstone of the Nintendo philosophy.

On top of this, Christian is correct in that the ideas presented thus far for the way amiibo toys will be used in-game is not very interesting. Pricing will also be an issue. As a huge Nintendo fan, I wouldn't mind putting a few of the more beloved toys on my shelf, but I don't want to pay any more than $5 bucks for these toys, and it's almost guaranteed that they will be more expensive. Probably somewhere around the $12 - $15 range, which I feel is not a good value proposition for my money.

I don't know. I just don't see this being a very quality-raising venture on the part of Nintendo. Kids will probably enjoy, but who else? I definitely feel like amiibo is not for me, and that's okay, but I worry about the longer term and about Nintendo diminishing their already absurdly scrutinized reputation within the gaming community.

Somara Atkinson
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Assuming they use the same pricing as Skylanders, these sound like good deals on collectible figures to me. From seeing up close shots of them, they look pretty good.

Robert Carter
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Im torn. As a collector and a Nintendo fan, Im happy to see these, especially with what appear to be detailed models. But as a designer and a gamer, Im really sad to see that there is very little they add to the game outside of the worlds most limited memory card.

I do wonder if this has come out of Nintendos shareholders, who have repeatedly shouted about their lack of understanding on Nintendos business practices. "Why arent you doing things like other companies, why arent you doing mobile" etc. It sounds silly to us, but that is how they view the situation, they see some companies making money hand over fist on free to play games and wonder why Nintendo isnt cashing in on that bubble. This feels kind of rushed out, as if Nintendo is saying "Look, were doing this thing like the other companies did to make all of that money in the Skylander/Infinity, now let us get back to our games please."

Nintendo has been known for trying new things as opposed to copying what has worked for others, but so many of their recent innovations have either been bad ideas or just havent paid out recently that the investors are getting worried.

I think Nintendo can make this work, if the figures start adding some interesting content to their games. I worry it will fall victim to the standard paid-content-within-paid-games problems (The gameplay suffers due to chunks intended to be a part of the main game cut out of it and offered as additional paid content, leaving the game feeling hollow unless you buy it), but if any company can avoid a disaster like that, its Nintendo.

Gord Cooper
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Here's the obvious thing everyone wants to see, that Nintendo will most likely overlook.

Start with - create the amiibo API, and base feature set (ie - each amiibo needs X stats, a shared 'experience bucket' between games', and then a bank of discrete information per game, which will be handled by the discrete game client rather than the API, for game-specific features), then get that out to trusted developers. Obviously, since this is dealing with in-house characters, you're dealing with in-house devs.

Now start the debate internally with the R&D divisions - does a 'Smash' version of corresponding Mario Sports series (Golf, Tennis, Kart, et al) have the potential to tank the 'Mario' version of that series? If so, does the 'Smash' version of it have the potential to outdo the Mario version of it to a degree that it is worth the sacrifice, or can the Mario version live on in some other iteration (handheld only, a mobile offshoot, et al).

If for even a MOMENT, the consideration of Camelot doing 'Super Smash Golf' was leaked, it would be pandemonium. This is what any Nintendo fan wants to see, and subsequently experience across the sport franchises. Nintendo seems so reticent to the concept though. Could it become a specialty brand? Or would it supercede and destroy the original franchise?

It seems like too many variable risks for Nintendo to even consider dipping their toe, but it could also be an amazing opportunity for them to get into the F2P market - offer the 'Smash' series of sports title clients for free, useable with the amiibo platform, and maintain the 'full figured' Mario series of sports titles as $50 retail/download purchases.

Jim Burns
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It is going to be a big success. I 100% disagree with this article. Things are looking up for Nintendo.

The stock is at the highest point it has been in a year, interest in Wii U is up, 3DS is continuing to do well.

Smash Bros. could be the biggest seller this holiday season, Amiibo is just part of the picture.

Bernardo Del Castillo
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Depends on how fast they can make pokemon figurines for the next game.
Honestly, I think it'll be so successful that I fear it will spawn some evil.

Christopher Bohanan
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One of the big parts of the amiibo that the article fails to point out and that I think is what will make these so attractive compared to Disney or Skylanders, is that you can use them across multiple titles. So if you spend $20 on one, which I do admit is a bit steep, and it works on 3 games that would be like spending 6.30 per amiibo, whereas each skylanders or Disney game you would have to buy all new characters for each one at $10 or more a pop.

Paul Goymerac
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I own Skylanders and Disney Infinity and I plan on buying some Amiibo as well. I just wanted to point out that while the Skylanders and Infinity toys may not be backwards compatible, all of them have been forwards compatible. So my original Spyro figure for example has worked on all 3 Skylanders games released and will work for Trap Team. So technically I got 4 games worth of use out of the one figure.

I am excited to hear about the multiple games featuring Amiibo, but with only limited details on the topic I'm still a little skeptical. For example I know the Samus (Metroid Suit) will be featured in Smash Bros for sure, but how many other titles will possibly work with that one figure? I guess I'm just worried about the multi-game playability of the non-Mario figures.


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