The NPD Group will report its US video game retail data this Thursday, and in a preview note Wedbush Securities analyst Michael Pachter commented that he’s expecting Nintendo to post yet another weak month of Wii U sales. For the Wii U’s fifth month on the market, he’s forecasting that Nintendo sold just 55,000 units, which would represent a 17 percent decline month-over-month. Moreover, Pachter’s expecting this slide to continue for Wii U, even if Nintendo chooses to implement a price cut.
“The only key hardware device to under-perform our expectations was the Wii U,” Pachter said of last month’s numbers, “and its fortunes appear unlikely to improve for several months, even if Nintendo decides to drop price, as there are an insufficient number of core titles that are generating interest in the console. We think that core gamers are far more likely to turn their attention to the PS4 (due in the holiday season) and the next Xbox, which we believe will be unveiled before E3 and have a launch alongside that of the PS4, and believe that the long-term appeal of the Wii U will be severely limited by the perception that the PS4 and next Xbox will be much more powerful with greater online integration and multimedia functionality.”
And if the pricing on the PS4 and next Xbox is reasonable, it could really put Wii U in a bind, Pachter added: “Should the new consoles from Sony and Microsoft be price competitive, we think that Wii U sales may continue to stagnate.” In fact, Pachter believes that next-gen consoles are likely to be subsidized and will therefore look even more affordable to consumers.
“We think that the next-generation consoles will perform a wide range of multimedia functions. We should learn more in the coming months, but we expect the next Xbox to have an IPTV tuner that will allow an MSO to deliver services over the Internet outside of the MSO’s regulated geographic boundaries. If we are right, any of Microsoft’s MSO partners will have an incentive to subsidize the purchase of the next Xbox in exchange for a long-term service commitment (similar to the cell phone model). If the subsidies are steep, it is likely that the next Xbox will appear more affordable to many consumers than currently anticipated, and it may capture market share faster than many expect. We don’t expect Sony to sit idly by watching, and believe that the PS4 will follow Microsoft’s lead in short order, suggesting to us that next-generation consoles could have lower starting prices than any in history,” he said.
As for March retail game sales overall, Pachter expects the numbers to be up slightly (just one percent) thanks to big AAA releases like Gears of War: Judgment, Tomb Raider and BioShock Infinite.
Sources that we have spoken with from several studios have indicated that their publishing partners are pulling back a bit for the time being on the development of additional Wii U titles. The reason is simply the lack of sales on the Wii U console.
Despite coming out of the blocks fast, sales have not been that strong; and both the Xbox 360 and PlayStation 3 had sales numbers in January that topped the Wii U. This, of course, has not gone unnoticed by publishers and developers alike.
As one source told us, “While planning for the platforms that our next titles would be released on, it was obvious that our titles for this year and at least the first half of next year would be primarily focused on the Xbox 360 and PlayStation 3, with several titles for the next-generation systems. Talk of Wii U ports for any these projects was met with a negative reaction, saying there just was not enough sales to warrant the development cost associated with it.”
Another source said to us, “We are only planning the couple of Wii U releases that we are already committed to doing and we might do one or two ports, but right now there just does not seem to be a demand. Our thinking is that the safe bet is to focus on the 2013 releases for Xbox 360 and PlayStation 3, and a couple of those will be converted to the new next-gen systems. In 2014, however, we expect our titles that come out after mid-year to be focused on the next-gen consoles, with only a few those being released for the Xbox 360 and PlayStation 3, as well, unless sales of the next-gen consoles don’t go well. The Wii U would have to make very significant gains to figure into our 2014 and 2015 planning at this point.”
Nintendo needs something to happen to help get the Wii U flying off the shelf again; but many are now waiting to see what the Next-Generation Microsoft and Sony systems are going to offer and at what price before trying to choose which one to buy or if they will ride it out. If cost is the main factor, we could see a lot of gamers waiting, as long as they continue to get ample software flowing to their current systems, which is no real help to sales of the Wii U.
Is this another nail in the coffin of the dedicated games consoles? Nintendo’s Dreamcast had it’s moment. The vultures were out in force to greet Nintendo’s latest revision of its sales forecasts, circling the Kyoto-based company with a naked and unseemly hunger. Wii U has missed Nintendo’s own sales targets; the clouds are gathering, the doom-mongers are checking their funeral outfits.
The headline figure that drew absolutely everyone’s attention was this – by the end of March, Nintendo will have sold 4 million units of the Wii U, which is significantly down from the 5.5 million it had originally expected to sell. 3DS sales are also down somewhat on projections, at 15 million rather than 17.5 million for the full financial year, though less attention has been paid to that stat, largely because 3DS is already solidly established in the market, with a 30 million installed base.
So here’s the bleak scenario – the Wii U, with only 4 million installed at the end of what might reasonably be considered its “launch window”, has failed to capture consumer imagination and isn’t a viable platform for third parties. Software projects get cancelled, publishers draw back their support, sales slow down even further and the platform enters a death spiral. Within a few years, Nintendo is forced out of the hardware business and follows Sega into third-party publishing – on tablets and mobiles, most likely.
I have quite a lot of problems with that scenario (and with some of the more moderate versions of it which have also been floating around). For a start, it may not match Nintendo’s targets, but 4 million units sold after a few months on the market isn’t actually that bad for a new console. It’s very significantly better than either the PS3 or the Xbox 360 managed; in fact, the only home console that has outperformed the Wii U’s launch window, in terms of units sold, is the Wii itself.
“Nintendo’s new home console is always going to be stacked up against its old home console, and that’s a tough thing to measure up against.”
That’s what you might call a tough comparison, even if there’s a harsh fairness to it. Nintendo’s new home console is always going to be stacked up against its old home console, and that’s a tough thing to measure up against given that its old home console was the fastest selling and most profitable home console in history. Old hands at Sony might wince sympathetically; the PS3, despite matching the Xbox 360′s worldwide sales curve at almost every step on the way, has often been portrayed as a bit of a failure due to comparisons with the all-conquering PS2. The 360, by contrast, is enshrined in conventional wisdom as a triumph, because it built so strongly on the not-terribly-successful original Xbox business.
Comparisons like those are useful for building narratives – especially bull-and-bear market narratives, in which a company’s actual performance is vastly less important than its trajectory. They’re not, however, very useful for building an accurate picture of a product’s viability. Wii U has missed its targets (Nintendo’s own, so the company can’t even accuse analysts of over-egging the pudding in this case) and hasn’t performed as well as the Wii did; there’s a bearish narrative about decline in there. On a practical level, though, Wii U has sold more units than Xbox 360 or PS3 did at launch, it’s lost far less money (in fact, Nintendo will record a full-year profit, compared to multi-billion dollar losses for Microsoft and Sony’s games divisions in their launch periods) and, crucially, it can’t lose the support of its largest developer and publisher, because its largest developer and publisher is Nintendo itself.
Is this to say, then, that all is rosy in the Wii U garden? No, of course not. The console clearly hasn’t captured consumer imagination to the extent to which Nintendo expected, and a major push will now be needed both in terms of software and in terms of marketing and communication. The biggest risk Nintendo faces is that of failing to address the huge audience of casual consumers who bought in to the Wii, which would confine the firm to its core audience – but that core audience is itself quite significant, on the sale of 20 to 30 million consumers worldwide. Capturing additional casual consumers (or core consumers who fall more readily into the Sony and Microsoft camps, but may be swayed by certain software titles) would drive the console past those levels; even if it achieves only half the success of its predecessor at this task, it’s hard to see the Wii U ending up with an installed base much south of 50 million.
The stock market won’t like that, and that’s fair enough. Nintendo was ludicrously overvalued in the previous generation – at one point becoming Japan’s most valuable company, ahead of the world’s top car-maker, Toyota – and if the Wii U and 3DS don’t match up to the sales trajectory of their predecessors, the next generation will see an undervaluation that may be equally ludicrous. There will undoubtedly be grumbling at this from shareholders, but Nintendo is more insulated from shareholder discontent than many other firms, thanks to the large shareholdings of former president Hiroshi Yamauchi (who owns the single largest voting bloc in the firm) and of Japanese banks and institutions, who are generally less activist as shareholders than their western counterparts.
Share price decline, however, does not equate to product non-viability, nor does it precipitate a collapse in a company’s own market – or even its profits. The viability of a product needs to be considered in more solid and less sentiment-driven terms. Does it make a profit? Does it have a large enough installed base to justify continued development?
These are, of course, moving targets. Profitability rises as a console’s lifespan continues, with production costs generally dropping off faster than hardware price cuts reduce revenue (although there are exceptions, the 3DS being an obvious one). Rising software sales also increase profitability – note that the Wii U, despite being Nintendo’s first console to launch as a subsidised piece of hardware, is comfortably in the black after its launch, having sold 3.8 units of software for every console so far. That can be expected to rise significantly; the Wii, often decried as the console that sat unloved and gathered dust, actually has an attach rate of 8.7 software units for every console sold. Finally, foreign exchange movements also influence profitability, and after a few very tough years, the Yen is finally nudging in a positive direction for Nintendo (and Sony). After trading at under 80 Yen to the dollar for most of 2011 and 2012, it’s now over 90 Yen to the dollar, a level it hasn’t reached since mid-2012. It’s still a long way from the pre-financial crisis levels, which rarely dipped below 100 Yen to the dollar, but it’s enough to win Japanese manufacturers some breathing room in their profit figures.
Installed base viability is also a moving target. Bigger is better, but it’s not as simple as that; you can’t simply say “well, there are half a billion iOS devices out there and even more Android devices, so games consoles are irrelevant now”, even though some commentators try to do exactly that. For many types of software, a machine with a 30 million installed base made up entirely of active gamers who are willing to spend $40 on software every few months is more viable than a system with a 150 million installed base whose users aren’t hugely engaged with game software and only spend sporadically, in smaller amounts. Conversely, there are many types of software which absolutely thrive in the latter environment, and would fail utterly in the former. Development costs are also a big factor, because if your development budget soars, you must be able to address a bigger market (or somehow charge them more money) in order to counterbalance that.
In other words, when it comes to Nintendo, stop trying to bring everything back to bull and bear market perspectives. Those have their place, but they’re not terribly useful in attempting to predict the shape of the games industry as we proceed towards an uncertain future. They tend to give us extremes and ignore subtlety; where any individual with a shred of intelligence and insight can look at the news that “Wii U isn’t doing as well as Wii” and interpret that in context as a decline but not necessarily a catastrophe or a herald of collapse, a market-led approach allows for little if any of that subtlety.
Nintendo has a lot of work to do on Wii U, but we’ve been here before – it had a lot of work to do on the 3DS as well. While 3DS’ price cut helped a great deal, much of the real work was done through significantly improving and bulking out the console’s software line-up, and a similar process is underway with Wii U. One need only look to the rapt response which the recent Nintendo Direct broadcast received from media and Nintendo fans alike to see the truth of Nintendo’s situation. This is a software company at heart. Its consoles are enabling hardware for its software, and as such, they sell in parallel with major software launches. Of course, this is a valid argument in favour of Nintendo’s ultimate destiny outside the hardware market entirely, but for now, the company isn’t willing to give up that level of control – and for now, it doesn’t look like it needs to. I don’t expect Wii U to match the success of Wii, in the medium or long term – but equally, I don’t count myself among those who expect it to be Nintendo’s last console. Sentiment is negative right now, but fundamentals aren’t, and for a business like Nintendo, it’s the latter that counts.
Nintendo has cut forecasts for its consoles, expecting to sell 4 million Wii U units by the end of March – down from a prediction of 5.5 million units.
It also said it projected 3DS sales to hit 15 million rather than 17.5 million and dropped DS expectations from 2.5 million to 2.3 million.
“Wii U hardware sales have a negative impact on Nintendo’s profits”
The company has raised its full-year profits expectations to ¥14 billion ($153.8m) following the launch of the Wii U console. The system sold just over 3 million units from November to the end of December.
That’s up from the ¥6 billion it predicted back in October following slow sales of the 3DS handheld.
For the nine months ended December 31, the company recorded net profits of ¥14.5 billion ($159m) compared to a loss of ¥48 billion the previous year, with sales of ¥543 billion ($5.9bn). Nintendo noted that “owing to the fact that the Wii U hardware sales have a negative impact on Nintendo’s profits, the operating loss was ¥5.8 billion.”
The Wii U has sold 3.06 million units since launching in November and December last year, with 11.69 million game sales for the system.
New Super Mario Bros U had sold 2.01 million units and Nintendo Land 2.33 million.
The original Wii is still outselling the Wii U, with 3.53 million hardware sales and 45.08 million software sales.
During the nine months Nintendo sold 12.71 million 3DS consoles and 39.56 million games for the systems. The company noted success with the 3DS console cut in to sales of the regular DS, with only 2.15 million sales of hardware and 30.24 games.
Many insiders are reporting that despite no official word yet from EA nor developer Criterion, the release of the Wii version of Need for Speed: Most Wanted looks to be set for mid-March for North America and Europe, with a Japanese release expected for March 14th.
The Japanese release seems to be backed by an EA press release in Japan, but the North American and European releases have yet to be confirmed. Sources believe that we could see the North America release on March 12th, with the European release to arrive on March 15th. Whispers suggest that we will see an official announcement from EA confirming the North American and European releases soon.
The Wii U version is said to support Off-TV Play, which translates into the entire gaming experience able to be played on the Wii U GamePad screen in addition to the regular TV on screen play. Special Wii U features beyond that remain unknown at this time.
Still no news about the expected release date for the PlayStation Vita version, but our sources tell us that it is still in development; and despite rumors, it has not been cancelled.
IGN is going up for auction, according to a Wall Street Journal report. After a year of fruitless talks with potential bidders, parent company News Corp. is working with investment bank Allen & Co. to auction off the group of entertainment and video game websites.
News Corp purchased IGN in 2005 for $650 million. Last year, the company also acquired online gaming network UGO and folded its properties (including 1Up.com) into its one-time rival. IGN has also sold a handful of businesses in recent years, including Rotten Tomatoes, Direct2Drive, and GameSpy Technologies. The Wall Street Journal (another News Corp. publication) reports that IGN is expected to sell for about $100 million now.
The paper reports that a number of companies have expressed “at least some interest” in picking up IGN, including Break Media and SAY Media. Recent turnover in IGN management, including president Roy Bahat and News Corp. chief digital officer Jon Miller, was said to have hampered the sales process.
Sources have whispered to us that Nintendo is going to be spending heavily this holiday season to promote both the Wii U and 3DS XL. The advertising push will not be limited to just North America, but Europe and Japan will see a very significant spend as the company will heavily promote using TV, social media and print.
It is believed that Nintendo’s plan is to promote the 3DS XL very hard, with a bit of the Wii U sprinkled in. Nintendo is expected to be targeting both first time buyers as well as upgraders this holiday season. It is believed that Nintendo is looking to place a lot of focus on the 3DS XL because inventories for the unit are good; whereas the Wii U does seem to be much tighter than anyone expected it to be. The Wii U inventory shortage is already leading to wait lists, and some retailers are telling customers that they honestly don’t know if they are going to be able to fill all the requests they have for Wii U hardware.
Nintendo, of course, has a lot riding on this holiday season and the company is hopeful that they will be able to see significant sales increases over what they have seen the last couple of years; which will show that Nintendo had the right strategy all along. We just don’t know how well the Wii U and 3DS XL will do this holiday season, but Nintendo seems poised for it to be a successful holiday selling season if they can deliver enough product.
The Q4 debut for Nintendo Wii U signals the coming of the next-gen consoles and the final hurrah for the Xbox 360 and PlayStation 3 – before the debut of their replacements next year, at least. Is it a time to maximise userbase, slashing prices and recouping the investment through software sales? Or alternatively, should the platform holders play it safe and keep prices high? Initial indicators seem to suggest that it’s the latter strategy that is being pursued, provoking some level of controversy within the industry.
It’s Nintendo’s pricing on Wii U that has surprised many, with the 8GB pack coming in at $299 while the 32GB premium version with Nintendo Land pack-in weighs in at $349. As launch prices go, this isn’t bad in comparison to the precedents set by previous console releases, and Nintendo will point to its innovative tablet controller and exclusive games to set it apart from the competition.
However, it’s safe to say that the Wii U isn’t a typical launch – at its core, the guts of the unit itself has far more in common with current-gen consoles than Nintendo would probably care to admit, improved by various measures in some regards, but noticeably weaker elsewhere. There’s also the fact that a lot of the launch software will already be available on consoles that cost significantly less.
To a great degree, price-points are defined by BOM – the Bill of Materials. On the plus side, Wii U benefits from a significantly more modern graphics core, equated by many with an entry-level enthusiast GPU a couple of generations old, provided by AMD. Our sources tell us that the hardware is rich in features compared to the Xenos core within the Xbox 360 (also supplied by AMD) but somewhat lacking in sheer horsepower: still a useful upgrade overall though. However, on the flipside, the tri-core IBM “Espresso” CPU is an acknowledged weakness compared to the current-gen consoles – the processors consisting of revised, upgraded versions of the Wii’s Broadway architecture, in itself an overclocked version of the main core at the heart of the ancient GameCube. Nintendo clearly hoped that tripling up on cores, upping clock speed and adding useful features such as out of order execution would do the trick, but key developers are saying otherwise: GPU-heavy games get a boost, but CPU-dependent titles are challenging to bring over to the new platform. Debate still rages over the extent to which Wii U is a next-gen console at all, and whether its pricing fits accordingly.
The overall conclusion one can draw from the core components here is that Nintendo hasn’t really paid so much attention to competitive forces, targeting a spec that can be mass-produced relatively cheaply. Areas where we know Nintendo easily outperforms Xbox 360 come to down commodity items such as RAM and flash storage: these are upgrades that won’t significantly affect the bottom line. We also know that the silicon is manufactured in the 40-45nm range, giving the platform holder significant leeway to cut costs going forward in the medium to longer term (next-gen consoles will all be fabricated in the region of 28nm next year).
Wii U is a console built to a budget, its silicon almost certainly produced at the same 45nm process as the Xbox 360 and PlayStation 3. While some may argue its premium comes from its tablet controller, even the build cost there is very modest indeed.
Of course, Nintendo’s key point of differentiation is the tablet controller – which obviously adds to the bill of materials, but once again we see a piece of technology built to a price. In a world where Chinese no-name manufacturers can develop capacitive 7-inch touchscreen Android tablets with ARM processors, 8GB of flash storage and 512MB/1GB of RAM priced at $85.00, Nintendo’s resistive screen tablet produced in the millions would clearly be significantly cheaper to mass-manufacture – even factoring in the latency free AV transmission tech.
Bearing in mind the challenge Nintendo faces in competing against Microsoft and Sony – with a significant amount of its launch titles already out on the rival platforms – the pricing on the Nintendo console does look a touch on the expensive side, and I expected price-points closer to the original Wii -$250 was instrumental in Nintendo’s success back in 2006. Up against the $249 4GB Xbox 360 (where prices fluctuate downwards significantly) there is the sense that Nintendo could well be repeating the mistake it made with 3DS. However, this time I suspect there is more leeway for the platform holder to cut costs if it has to.
Over the weekend we spent some time trying to actually figure out what titles you will be able to buy on day one if you take the plunge and buy a Wii U. Despite a lot of confusion due to announcements and such, it has been harder than you might think to figure out which titles are going to be available for purchase on day one when the console releases in North America and Europe.
From what we have been able to figure out from what Nintendo has announced and what third party developers are telling us, it would appear that only seven titles will arrive on launch, and the number is actually only six if you count the Nintendo Land Mine Game collection that will be coming with the Premium model as one of the releases.
We expect to see FIFA 13, Rayman Legends, Mass Effect 3, Super Mario Bros U, ZombiU, Trine 2: Director’s Cut, Toki Tori 2, and Nano Assault Neo as the day one titles in North America and Europe.
The one mystery might actually be Call of Duty: Black Ops 2, as it has been called a “Launch Day Title”, but neither Activision nor Nintendo have provided a release date. We do know that the game is set to arrive ahead of the Wii U launch on the Xbox 360, PlayStation 3, and PC; so we think that it is possible we will see this as well as a day one title release or very close to launch day.
Nintendo claims that another couple of dozen titles will be arriving before the end of the March Launch window for the Wii U. These will include: 007 Legends, Aliens: Colonial Marines, Assassin’s Creed 3, Batman: Arkham City Armoured Edition, Ben 10 Omniverse, Cabela’s Dangerous Hunts 2012, Darksiders 2, Disney Epic Mickey 2: The Power of Two, Family Party: 30 Great Games Obstacle Arcade, Funky Barn Game & Mario, Game Party Champions, Just Dance 4, Lego City: Undercover, Madden NFL 13, Marvel Avengers: Battle for Earth, Monster Hunter 3 Ultimate, NBA 2K13, Ninja Gaiden 3: Razor’s Edge, Rabbids Land, Rise of the Guardians: The Video Game, Runner 2: Future Legend of Rhythm Alien, Scribblenauts Unlimited, SiNG Party, Sonic & All-Stars Racing Transformed, Sports Connection, Tank! Tank! Tank!, Tekken Tag Tournament 2 Wii U Edition, Transformers Prime, Warriors Orochi 3 Hyper, Your Shape: Fitness Evolved 2013. Of the majority of these titles the actual release date isn’t clear, but sources tell us to look for 3rd Party Publishers to start firming that up in the next week or so.
The latest rumors on the Wii U making the rounds say that Nintendo has decided to only offer 8GB of internal flash storage. It was thought that Nintendo would be pushing for more digital distribution and because of this the unit would come with more built-in storage.
Nintendo has apparently decided that it will count on SD flash cards up to 2GB and SDHC flash cards up to 32GB, as well as hard drives connected to the system via the USB 2.0 interface, to allow owners to grow the storage capacity based on their needs.
The decision to only go with 8GB could end up being a deal breaker for many, but it does save money that will allow Nintendo to pass the saving on to users. While some wild rumors do suggest that Nintendo has room for an internal hard drive within the unit, we can’t actually final anyone that will confirm or deny this.
We will don’t have long to wait, as Nintendo is expected to pull the curtain back on the Wii U today and we expect that they will confirm both the hardware in the unit as well what the pricing is going to look like for the North American market. The company is also expected to announce their plans for Europe today.
While there are NDAs in force, is seems some in the development community have confirmed what Nintendo has yet to confirm: the final specifications for the Wii U. While we expect Nintendo to officially confirm these specs in their upcoming press conference on September 13th, we have the majority of the low-down for those who don’t want to wait.
As we have mostly known all along, the Wii U will be powered by the IBM Power PC using a three-core variety that we are told is similar to the CPU in the Xbox 360, but a bit different. We still do not know at what speed this CPU is operating, but we hear whispers that it is clocked slower than the processor in the Xbox 360 (which we suspect is partly because they wanted to stay away from potential heat issues). The CPU choice is also good for Nintendo because IBM is likely giving them a very good deal on the CPU in this configuration; it is previous generation, only 3 cores, clocked slower than the Xbox 360 CPU, but we do suspect that it is using a reliable process for the die, which will produce good yields as well as low heat.
As we have told you previously, the graphics will be powered by an AMD/ATI 7 series GPU that has some customization done on it for Nintendo. It does feature a significant advantage in architecture over the current competing GPUs in the Xbox 360 and PlayStation 3. We expect a conservative clock speed for the GPU to avoid heat issues, but we hear that it has type 4 shader support with a DirectX 10 feature set that includes embedded eDRAM. The Wii U will sport 1GB of RAM, which is about double what the Xbox 360 has; which is a clear advantage and something developers have been asking for.
So, there you have it. It is pretty much what we told you way back when we first started. The decisions make a lot of sense for Nintendo, as they want performance, but also need to hit a price point. Our crystal ball says the Wii U is still going to be a bit expensive, but that is not a real surprise to anyone at this point because of the second screen and other technology. We think you will see a price point right at $300, or a little less, but those hopeful for a $250 or $200 price tag are going to be disappointed. We would still like to know the actual clock speeds; but it is clear that it will have some graphics performance advantages over the Xbox 360 and PlayStation 3, which means the potential does exist for some titles to look a bit better. We will have to wait and see how it shakes out, because September 13th isn’t that far off.
In a strange twist, Nintendo has still made no announcement about the Japanese launch details for the unit, and as far as we know has yet to schedule a press conference for Japan. The press conference on the 13th will likely only release the launch details for the North American launch of the unit, which could mean that supplies will remain tight till after the 1st of the year.
Nintendo’s launch of the Wii U this holiday season will be one of the most interesting hardware launches to watch in the venerable company’s long history. Both the economy and the games industry landscape have changed tremendously since the Wii was launched back in 2006. Consumers have less money to spend (or just don’t want to spend as much) and there are now more options than ever, with the rise of smartphones, tablets, social and free-to-play. On top of that, price cuts and/or bundles are almost certainly on the way for Xbox 360 and PS3.
Nintendo in some ways caught lightning in a bottle with the Wii, and as the saying goes, lightning never strikes twice in the same place. Even the top brass at the company would fully admit that repeating the success of the Wii is a daunting task, to say the least.
One of the keys for the Wii U will be to engender strong third-party support – a feat that has always been difficult for Nintendo platforms, where first-party dominates sales and consumers’ interest. While there are plenty of Wii U announcements to come still, the third-party software shown thus far has mostly failed to impress. With Batman: Arkham City as the third-party highlight for Nintendo at E3, and more recently, EA Sports confirming that the Wii U version of Madden 13 will be missing key features that 360/PS3 versions have (including physics), it’s hard to be encouraged.
Moreover, just last week, Warner Bros. announced Game Party Champions for Wii U, an assortment of sports or arcade-style games. Is this actually the Wii U’s destiny… either 360/ PS3 ports or casual fare of the sort the Wii was flooded with? Is this how third parties truly see the Wii U? And if so, how can this be anything but terrible news for the Wii U’s prospects in a challenging market?
The writers share their thoughts in the roundtable below.
I think it’s probably far too early to make a judgement call on this. If there’s one thing Nintendo does consistently, it’s to surprise those who’ve spelled out its doom. Having said that, software is obviously key to success, but I’m not sure that third-party is going to be what attracts buyers.
Until Nintendo started hitting the 3DS with its incredibly valuable first-party IP, it was going nowhere. Labelled as overpriced and based on a gimmick, the handheld was underselling enormously. One Zelda, a couple of Marios and the odd Yoshi later and it’s hit its stride magnificently, powering ahead of competition across the globe.
So yes, we’ll see more of the same from Nintendo – they’ll likely never stop iterating their solid-gold franchises – but they will sell, and they will sell systems. Games like Assassin’s Creed III and Madden might sell a few, but I doubt anyone who really wants to get them early will wait for the Wii U version. Even more so for Call of Duty or Battlefield.
Third-party minigame collections and dance or exercise titles may review poorly and be labelled as shovelware, but they populate the system with titles you can’t get elsewhere, playable in ways they wouldn’t be on other systems. What matters now is whether all of those millions of households with a Wii festering in a cupboard under the stairs will fall for it again.
Yes, it certainly looks like the third-party support for the Wii U is weak, consisting so far mostly of ports and casual/party games (the interesting ZombiU and gorgeous Pikmin 3 notwithstanding). We shouldn’t really be surprised; Nintendo has traditionally not worked very hard at lining up third-party support for their consoles because publishers were eager to put titles out for Nintendo’s industry-leading hardware. By the time the Wii launched, Nintendo was no longer the console leader, and publishers mostly gave it perfunctory support.
Of course, the Wii rapidly became a huge hit, owing to its low price (half that of the Xbox 360 or the PS3) and innovative, easy-to-use motion controller. Those two factors propelled it to the #1 console position, and only then did publishers push hard to put out titles for it. Fast-forward to 2012, and once again publishers aren’t paying much attention to Nintendo’s new console: The Wii U. Now publishers have many other places to put development resources, including DLC and mobile, not to mention other next-gen consoles on the horizon. It’s tough to convince them to put resources into new hardware that so far hasn’t generated wild enthusiasm… not that Nintendo seems to be trying very hard to get third parties to sign on. Only one of the big multiplatform titles for the holiday (Assassin’s Creed 3) is on Wii U? Did Nintendo even pick up the phone and call Activision or EA or Take-Two? The bottom line is that third-party support will strengthen only if Nintendo demonstrates strong sales of the Wii U.
The Wii U’s success, like that of the Wii, won’t really depend initially on third-party support anyway. What really matters is the price point Nintendo chooses, and the strength of its own software lineup. At launch Nintendo may not have a very strong lineup of titles, and its price for the Wii U may be too high. As we saw with the 3DS, though, Nintendo can recover from both of those problems in six months or so if they have some strong titles (hello, Zelda? A truly original Mario title?) and reach a price more in line with what consumers are willing to spend.
If they have strong sales then, third-party support will follow… though there may be fewer titles than in the past for any new console, given the state of the industry. Maybe by holiday 2013 Nintendo will have the Wii U in fighting trim, with a strong software lineup and a price half that of the next-gen consoles. I hope so…
The way the Wii U will perform is an enigma for much of the industry, much like the Wii was. Many expected great things for the Wii, but the system rocketed past the most optimistic projections of fanboys, pundits and even Nintendo itself in how well it would sell. This early success was built on the strength of Nintendo’s first-party offerings and third-party offerings that tended towards the casual and mainstream.
2012 is a whole different industry. Developers looking to the “mainstream” now see consoles as a secondary concern – they’re looking at the smartphones in people’s pockets or the laptops they have for utility. As for AAA console developers, it’s been established that retail has become the realm of the biggest of hits and almost everything else loses money. The “middle class” of developers looks to online options, and that hasn’t exactly been Nintendo’s specialty.
That’s not a good sign when the Wii U will no doubt be trumped in hardware power by Microsoft’s next Xbox and Sony’s next PlayStation. What we’re left with is the tablet controller (or “GamePad” as Nintendo likes to call it) which I’ve best heard classified as a solution in search of a problem. Many gamers and developers are wary of the device as a gimmick that won’t add significantly to a game experience; at the same time, it lacks the simple appeal of the Wii Remote that was simplistic and appealing enough for any member of the family to pick up. Even the NintendoLand games (which Nintendo wants to assert as the Wii U’s Wii Sports) lack the simple, elemental appeal of sports games recreated in a rudimentary form.
In synopsis, I expect third-party support for the Wii U to be about on par with the Wii, which is to say it won’t be very good. There will be certain exceptions (ZombiU and Rayman Legends look to be a couple of early examples) but otherwise I’d expect the good-faith efforts to be drowned out by the shovelware. And getting the same mainstream audience to pony up again for another system in the same numbers will be difficult, though I expect it to sell well early on. I hope things go well and the system does better than I and others expect; if it doesn’t, it is dark portent for those who are fans of console games in general.
What an ungrateful bunch of babies we are. The Wii U isn’t even out yet and already we’re throwing our 3DS XL’s out of the pram and calling its games unimpressive.
Yes there are a lot of ports; it’s a new machine that people want a presence on, and fast, but there are also signs of real ingenuity. Ubisoft’s ZombiU looked pretty damn cool from where I was sitting, and LEGO City Undercover suggested developers are coming up with stuff that manages to be family friendly and original at the same time. You can’t really blame the big third-party studios for being a little careful with their money. Some people are cutting back on holidays – they’re cutting back on risky development projects.
No one has money to throw around at the moment, on any of the platforms, and until the Wii U has hit the market and shown its stuff, the Nintendo range of titles will more than fill the gap for the average gamer. Pikmin or death!
Also, what’s wrong with a machine that is aimed at the more casual end of the market? It didn’t do the Wii any harm. Members of my family who didn’t even know how to turn on their PC without help bought a Wii. And their friends bought a Wii. And then their friends did. All because it was a machine they had played with at a party. Do you know how often they moaned about graphics? I’ll give you a clue – NEVER. To them the Wii U will be just another household appliance to upgrade to next time they’re in John Lewis.
To start calling it “terrible news” is a mix of snobbery and naysaying, and not much else. We can’t pass any judgements until the Wii U is actually released at Christmas, and by then I imagine we’ll all be too busy playing Project P-100 with our grandmas to remember.
The current problem with the Wii U is Nintendo’s message for the console is muddled. What’s the reason to consumers to upgrade to the new system? For PlayStation 3 and Xbox 360 owners, will the promise of games they already have access to with additional touchscreen controls be enough? For casual owners of the original Wii, will HD Nintendo titles be enticing?
Then there’s the issue with third-party Wii U titles. Nintendo’s first-party efforts always make the hardware look good, but the third-party titles shown at E3 had the same problems some early DS games had: features crammed in to justify the system. Batman: Arkham City is just one example with its gimmicky Batarang control method using the Wii U tablet. The mode ends up detracting from the game more than it helps.
Nintendo needs to hit the right price point with the Wii U. Consumers need to be told clearly that the Wii U is a standalone system, not an additional controller for the existing Wii. Marketing needs to show off the best of the system, probably hitting hard on the group aspects and asymmetric play. Nintendo needs to make sure that the system’s strengths dovetail with the development efforts of its third-party partners.
I doubt Nintendo can reach the same success they did the Wii, but at least the Wii U has the potential to be a solid contender in the next console cycle. With the rise of mobile gaming and the next generation coming from Sony and Microsoft, Nintendo will only have one chance to get it right. Fingers crossed.
Independent success story Limbo eventually made its way to PlayStation Network, but Sony could have secured the game first if it had been willing to play nice with developer Playdead. Sony Computer Entertainment executive producer Pete Smith admitted during Develop last week that Sony lost out on the deal because the company wanted the rights to the Limbo IP.
Playdead went on to sign a deal with Microsoft, the game released in July 2010 on Xbox Live Arcade, and then it took a year to reach PSN and Steam. Limbo sold 300,000 copies in its first month on XBLA and the game had passed 1 million by the end of last year.
Smith talked about the pros and cons of trying to gain full IP rights during his Develop session.
“There are obvious benefits to keeping it, but also to giving it up: you’re way more likely to get the deal,” he said. “Remember: 100 percent of nothing is nothing. A publisher is much more likely to commit to marketing and merchandising if they own the IP.
“Sometimes all we want is protection so [devs] don’t make a game, finish it then go to one of our rivals. We look at IP on a case by case basis. With a bit of common sense, you can find common ground.”
The world isn’t ready for cloud gaming,” says Rob Fahey. That may be true, but for how much longer? Sony has to prepare for a potentially all-digital future, and most of the analysts believe the Gaikai purchase is a very smart move, and even worth the seemingly high $380 million price tag.
But what impact will the Gaikai deal have on Sony in this generation and the next and how will it affect the video game business as a whole? Will Microsoft have to react by buying OnLive? Will Nintendo do anything at all? How will this affect the upcoming console battle? These are questions we put to several leading games industry analysts in our roundtable below.
Lewis Ward, IDC Research Manager
I think it’s kind of a bombshell. $380 million isn’t chicken feed, especially for a company that’s had a rough financial ride in the past year. I don’t know the particulars of the Zipper interactive, Sucker Punch, or Guerilla Games buyouts but this has to be one of the biggest deals in the history of Sony Computer Entertainment. That gives you a sense on how strategic Sony views the Gaikai platform.
I think this is ultimately more about the PS4 platform than PS3, although I wouldn’t be surprised to see some streaming game demos at least surface in Home and in the PS Store within the next year. I think Sony will hold off on the streaming of AAA games until the PS4 arrives and they can offer some interesting subscription levels.
I also believe the deal is important in the context of PlayStation Mobile: There’s no reason games and game demos couldn’t be streamed over WiFi to PS Certified smartphones and tablets. That may be phase two though, after it’s up and running in a PSN/PS4 context. I suspect Microsoft is working on their own cloud platform and won’t buy OnLive and it would be out of character for Nintendo to buy a company like OnLive. So buckle up – it’s going to be an interesting ride in the next year!
Jesse Divnich, EEDAR
Without a doubt this was a genius move by Sony. Although they’ve been doing quite well in video games, as a company Sony has been struggling. What the acquisition of Gaikai really does is it helps to future proof Sony, because no matter where the industry transitions, whether we’re getting entertainment through Wi-Fi, through a Blu-ray player or discs at the store, it doesn’t matter because no matter where technology goes over the next 10 years, they will be able to utilize Gaikai and its technologies to deliver entertainment straight to the consumer.
I think a lot of industry insiders thought the price of the acquisition was quite high, but really it’s pretty reasonable when you think about the value this is going to give Sony five years from now, even 10 years from now. I don’t think the market necessarily realizes how impactful and important this acquisition is for them. They may not realize all the potential of the Gaikai acquisition initially – obviously there’s bandwidth issues, but I don’t think anyone would argue with you that cloud won’t be the dominant form of entertainment delivery five years from now. It works beautifully now and once we get the bandwidth there – it’s more a problem in North America – Sony will be there. And this could be theoretically that five years from now, everything literally goes straight to the TV. You don’t need a Blu-ray player or a game console; all you need is a TV and it could very well be a Sony TV.
Microsoft is working on their own forms of cloud technology, but I don’t think this Gaikai move forces Microsoft to make an acquisition. I think this is something they will probably handle internally – they certainly have the skills and money to throw at this. Purchasing OnLive, which is probably valued at a lot more than $380 million, I don’t see Microsoft making a play to acquire OnLive, whioch would probably be well over a billion dollar valuation. I think the Gaikai purchase puts OnLive’s valuation beyond the reach of most entertainment players now – but I could see some cable companies or cell phone companies potentially looking at OnLive. I don’t think anything’s going to happen with OnLive for at least the next 12 months. OnLive only works when it’s part of a bigger network, so I think it’s going to happen. It’s a matter of price and I think it’s a little bit too early for anyone to make an acquisition, especially after the valuation Gaikai got today.
Billy Pidgeon, M2 Research
I think acquiring Gaikai is a good move by Sony, but this buy will pay out in the long term. Cloud gaming has terrific potential and will have a substantial disruptive impact on the industry realized gradually over the next ten to twelve years. Streaming high end console games will add value to free or inexpensive online services currently available from console vendors. However, cloud gaming isn’t cheap and will have to be subsidized by subscriptions and advertising. I think we’ll be likely to see tiered service levels and pricing for streamed games, with lower end casual games offered for free with advertising and high end game services bundled for premium subscriptions.
Streaming games are going to be an important feature in Sony’s next generation console, but I’d like to see Sony integrate cloud gaming with PSN for PS3. In the short term, Gaikai’s cloud gaming service will help Sony provide wider game demo distribution and back catalog PS One and PS2 games to PSN consumers. It might seem counter-intuitive, but I think Sony should use Gaikai to bypass consoles and use streaming games to bring PSN to PC, tablets, smartphones and televisions. Consumers are going to be able to access games on multiple devices from a variety of hardware vendors using networked services from Apple, Google and Microsoft, and Sony will also have to compete on hardware other than its own.
Microsoft may be working on a proprietary cloud gaming system, but could buy OnLive or (another cloud gaming provider) to acquire any patents or unique technology that would help Microsoft to match or outperform Sony’s Gaikai service. Cloud gaming is likely to be included in the next generation of Xbox, but could also be a valuable add for the Windows 8 platform on PC, tablets and smartphones. Microsoft should also consider using cloud gaming outside its usual hardware, specifically for television.
Wii U will allow local streaming, as games processed on the console can be played on the GamePad. Still, Nintendo should also invest in technology for streaming games from the network, as cloud gaming could be a “must have” feature in the next generation Xbox and PlayStation even though the potential won’t be realized until further out. Dedicated console vendors without cloud gaming could be squeezed out between services provided by competitors and more accessible networked games from Google, Microsoft or Apple on multiple devices. And even with cloud gaming Nintendo will have to work harder to compete as its business model doesn’t extend to convergent devices.
Michael Pachter, Wedbush Securities
I think that Sony is doing this for strategic reasons, and think that they want to control the migration from consoles to the cloud. Owning Gaikai lets them integrate the service into Sony smart TVs, and allows them to integrate with PSN and PS4 as they see fit. It also keeps Gaikai from competing or falling into the hands of a competitor.
I do not think Microsoft buys OnLive for this reason, although it makes sense from a cloud-computing/enterprise software as a service perspective.
Nintendo will do nothing at all.
This won’t impact next gen at all.
David Cole, DFC Intelligence
It is a major deal because it shows Sony’s long term commitment to the game business. The thing about services like Gaikai and OnLive is you still need a screen. In the case of Gaikai the service was also about driving users to buy a full version of the product for their specific hardware device. So in this case Sony is a good fit because they have multiple hardware devices and a service like Gaikai can help tie them together and also bring in users to the PlayStation brand that do not own a Sony hardware device.
Microsoft does not necessarily have to react by buying OnLive. It would really depend on how OnLive’s technology ties in with what Microsoft has developed internally. But it does come down to a build versus buy issue. Presumably Microsoft has been planning for cloud distribution for years so they have their own technology. Of course, they do need to do something.
Short term this will have minimal impact on the game industry so I don’t expect Nintendo to announce anything radical anytime soon. Also Nintendo has not really been focused on the cross platform issue that is a big reason for Sony’s purchase.
I really see this as a purchase about planning for the future.
Jeremy Miller, DFC Intelligence
One of many starting questions out there is when will we see fully streamed game demos on the PS3? Further, will that mean Sony gets into the marketing distribution business for its 3rd party developers? (i.e., pick up Gaikai’s business model?) Would that mean, say, EA pays Sony to serve up demos of the next FIFA this year and pay per minute of demo served? That’s getting into the details a bit, but it seems like an obvious initial question to explore. For that matter, I’d be curious to see when/how they’d serve demos on Sony televisions, and will consumers need a PS3 controller to play them?
If you really want to get into details, would this enable streamed gameplay to a PS Vita connected wirelessly to a PS3? Lots and lots of questions will come out of this and one could go on for a long time. Whether one thought today’s announcement was inevitable or not based on the talk in June, it’s certainly very interesting and should go down as a top 10 story for the games industry this year even if the short term impact is minimal as David says.
Many retail sources are telling us that they believe that Nintendo has learned its lesson from the pricing of the 3DS, and the company will come out of the gate with very aggressive pricing for the Wii U. Nintendo, on the other hand, still isn’t talking about what the Wii U is going to cost, which has led to wild speculation on the pricing of the console.
Sources tell us that at least some of the reason that Nintendo has been unwilling to talk pricing is that they actually don’t know yet what the unit is going to cost. The reason for this is that they are still working on pricing for the many parts that will make up the unit, and trying to figure out how that pricing will influence the final price of the Wii U. Whispers suggest that they will wait as long as possible to put the Wii U into full production, with the hope that prices will continue to fall on a number items that make up the parts necessary for the unit.
No matter who you talk to behind closed doors in this industry, everyone seems to have a theory on why Nintendo will charge what it will charge for the Wii U, or why they believe that Nintendo has already targeted a specific price point. The speculation that we hear seems to think that while Nintendo might like to come out of the gate with a $249 price tag, at least initially it is likely that the price will be at least $299; and the company will not be making money on the unit, or will be making very, very little to start with.
One source believes that Nintendo will attempt to strip as much as it can out of the Wii U in the area of extras to help reduce costs. For example, we look for the unit to perhaps not include a pack-in title to start with; and extras like cables will be the bare minimum necessary as the company looks to squeeze every last dollar it can at release time.