This Sleeping Giant Tests Your Faith & Investment for True Innovation

Danny is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Almost by definition, innovators are overlooked when gauged by sensible and common standards.  Read the signs below to see why counting out Nintendo (NASDAQOTH: NTDOY.PK) will end as a missed opportunity for investors.

Retailers are Weakening, But…

Retailers like GameStop and Best Buy are indeed reporting sharply lower traffic lately, but that traffic is apparently buying out all available preorders for the new Wii U console.  You’d think this were Apple (NASDAQ: AAPL) selling iPhones! 

Apple's iOS devices, as with Google (NASDAQ: GOOG) Android, do attract an entirely new demographic of gamers to their platforms, but the early adopters for Nintendo come from their main demographic built on nostalgia reaching back to the 1980s.  The Google and Apple platforms widen the pool of gamers – a growth that makes for comfortable entry into what Nintendo markets as a family-friendly console space.

The Power of Brand

Long-time gamers might agree that Nintendo is the Apple of video games, and not just because the company is selling out on preorders.  The brand that Nintendo has built should not be underestimated.

When Blizzard Entertainment launched World of Warcraft, expectations were set against the previously dominant MMO, Everquest, and easily shattered by a community that kept World of Warcraft out of inventory and propelled the game to record-breaking heights.  Years later, that same connection to the company maintains loyalty today, while ties between players maintain subscriptions.

In video games, community is pivotal. Nintendo’s rich history sets up a particularly strong and unique one.

A Moat of Innovation

Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT) followed Nintendo’s motion-based gaming console in 2009 and 2010, well after the Wii’s debut in 2006. 

The 3DS, understandably considered a disappointment to investors, is an example of Nintendo failing when it is not innovative enough.  Sony and Microsoft would have easily followed on Nintendo’s heels as they dug into paths of success; 3D technology, as a whole, would have been a shallow moat, and investors should take such shallowness as a cautionary signal.

However, an iPad of any size has yet to match the innovation of a single Nintendo console, and this console establishes quite the moat.  Gather four Google or Apple tablets and you still won’t be able to do what the Wii U is promising.  There’s not an app for that; the Wii U breaks the mold of multiplayer design, challenging developers to not simply think of identical perspectives in a single shared experience.

Follow the Leader

Microsoft and Sony consoles are literally incapable of offering anything similar with their current controllers.  Nintendo is also stepping ahead of its Japanese counterparts by learning to clearly enable independent developers on its platform, further carving a moat full of indie titles with which developers can't catch up to on Google's Android or Apple's iOS American platforms.

Despite each of these steps, the future may still require some imagination.  Fortunately, Nintendo always has been -- and still looks to be -- a consistent partner in that field.

The Big Picture

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dfavela owns shares of Activision Blizzard, Google, and Nintendo. The Motley Fool owns shares of Apple, Activision Blizzard, GameStop, and Google. Motley Fool newsletter services recommend Apple, Activision Blizzard, GameStop, and Google. Try any of our Foolish newsletter services free for 30 days. This piece was a short response to Demitri Kalogeropoulos. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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