Wedbush Securities analyst Michael Pachter spoke at the Game Monetization USA Summit in San Francisco, and once again made some bold predictions about the future of the game industry. He pulled no punches as he evaluated the current state of affairs in the business, and he had some hard advice for a number of companies.
Pachter noted that more people are playing games on more devices than ever before, but he doesn’t think the console market will be growing. “I don’t think you’re ever going to see 500 million consoles out there,” Pachter said. For lifetime sales, Pachter expects the Wii U will ultimately sell 30 million “or fewer” units, the PS4 will sell 100 to 120 million units, and the Xbox One will sell 90 to 110 million units.
“The reason Sony beats Microsoft is solely the price,” Pachter noted. “Microsoft loses the next generation unless they cut price. If Microsoft drops its price to $399, I expect the sales to be equal to the PS4.”
The lifetime sales Pachter predicts compare to current sales of the PS3 and the Xbox 360 at about 80 million units apiece, but it’s far below some estimates of hundreds of millions of next-gen consoles. “I don’t know where they get those numbers,” Pachter said. He feels that at several hundred dollars, with games costing $60 or more, consoles are just too pricey to ever sell hundreds of millions of units.
The Wii U’s performance so far Pachter characterized as “underwhelming,” but noted it’s possible “but unlikely” that exciting new titles will reinvigorate growth. He believes that Nintendo is missing a huge opportunity to bring new gamers into their brands: Nintendo should put old GameBoy Advance content on phones and tablets for free, and charge $3 to $5 for more recent titles from the DS. Pachter feels this would generate enormous revenue for Nintendo and bring millions of new fans into their brands, and give them a strong way to sell newer titles on the 3DS and Wii U that use those brands.
“I don’t know why Iwata is still employed,” Pachter said, given that he refuses to take advantage of this opportunity while the handheld market continues to shrink and the Wii U has failed so far to catch on in a big way.
Pachter is more positive on the PlayStation 4 – “Sony thrives, Nintendo doesn’t” – saying it’s impressive as a game playing device. “The graphics are phenomenal, and the huge RAM makes future innovation likely,” Pachter pointed out. He noted that the multimedia features remain unclear, but the CPU power of the PS4 allows the potential for huge improvement in the future. As for the Xbox One, Pachter noted it’s impressive as a multimedia device, and the added features of Kinect and Skype give it additional value. “We’re sticking with our prediction of a built-in TV tuner” for the Xbox One, Pachter said, which would simplify the ability of the Xbox One to control your television viewing.
“The next generation of consoles is probably the last,” Pachter said. “We expect frequent model updates instead of new consoles.” Moreover, there’s going to be renewed interest in the PC, he predicted. “I think the PC is going to make a comeback, the PC will be the hub of all this stuff,” he stated. He feels Smart TVs are a dumb idea, noting that you don’t have a smart monitor connected to your computer. He envisions there will be a number of screens around the home, perhaps controlled by a tablet, being driven by a supercomputer in your pocket that we call a smartphone.
The Wii U gets a new system update from Nintendo. While details are a bit vague on what all the new system updates actually does, Nintendo says it “improves overall system stability” and also includes minor adjustments “to enhance the user experience”.
The update comes ahead of a planned Nintendo update for the 3DS that is scheduled to arrive next month. The 3DS update will bring the Miiverse to the 3DS as well as adds the ability to combine eShop balances on both the 3DS and Wii U systems. In addition it will add Network IDs to the 3DS to access the eShop. Apparently 3DS owners will not have to take advantage of using a NNID to combine their eShop purchases and will still be allowed to download software from the eShop without a NNID.
Rumors suggest that another system update for the Wii U is just around the corner, but will likely not arrive till early next year, unless Nintendo has a reason to release it sooner. On the software front, the Wii U is still struggling, but the recent sales boost has helped, but Nintendo needs strong sales for the Wii U this holiday season in order to help get published and developers re-engaged in developing for the console. Whispers suggest that Nintendo expects supplies of the Wii U to be plentiful this holiday season and does not foresee shortages like what has plagued the Wii consoles of the past. The problem is however that the lack of software will likely keep many buyers away.
Bethesda’s Pete Hines had some choice words regarding Nintendo’s third-party strategy, suggesting that the time for getting better software support for the Wii U may have already passed.
In an interview with Game Trailers’ Bonus Round, Bethesda’s vice president of PR and marketing underlined the company’s commitment to making its games available on every platform – as long as those platforms don’t require compromise on the original vision.
As far as Bethesda’s games are concerned, that has led to their absence on Nintendo hardware despite their huge popularity. And Hines intimated that the situation is representative of Nintendo’s approach to third-party developers as a whole.
“The time for convincing publishers and developers to support Wii U has long past. The box is out,” Hine said, while sitting on a panel that also included Borderlands 2 lead writer Anthony Burch.
Hines pointed to Sony and Microsoft’s diligent and long-running efforts to communicate with third parties during the hardware design process as a better strategy for most developers.
“It’s not that every time we met with them we got all the answers we wanted, but they involved us very early on, and talking to folks like Bethesda and Gearbox, they say ‘here’s what we’re doing, here’s what we’re planning, here’s how we think it’s going to work’ to hear what we thought – from our tech guys and from an experience standpoint.
“You have to spend an unbelievable amount of time upfront doing that. If you’re just going, ‘we’re going to make a box and this is how it works and you should make games for it.’ Well, no. No is my answer. I’m going to focus on other ones that better support what it is we’re trying to do.”
This adds colour to comments Hines made in an earlier interview, where he stated that the Wii U was, “not on [Bethesda's] radar.” Nintendo is now attempting to address the Wii U’s less than admirable position by cutting $50 off its price.
Nintendo president Satoru Iwata has attributed slow sales of the Wii U to the available games, rather than the price of the console, in his most recent interview.
“I understand that the real issue is the lack of software, and the only solution is to provide the mass-market with a number of quality software titles,” he told CVG.
“If the price is actually an issue [with Wii U], then there is some contradiction between the current sales balance between the Basic and Premium versions of the Wii U. The basic version should have sold a lot, but the fact of the matter is that people are buying more of the premium version. So the issue is not there.”
Last week a Nintendo representative confirmed that the Wii U console was still being sold at a loss, making it a price cut in the near future unlikely.
Recent financial results also revealed that in the past three months the machine had only sold 160,000 units worldwide.
Nintendo’s battle for Wii U support from third-party publishers isn’t just about the installed user base. It’s also about the system’s horsepower, according to Bethesda Softworks. Speaking with Joystiq at QuakeCon, Bethesda VP of PR and marketing Pete Hines explained the company’s absence from the system.
“It’s largely a hardware thing,” Hines said, adding that Bethesda’s plan is to “make the games that we want to make, on whatever platforms will support them as developed.”
The company’s slate of upcoming games includes The Elder Scrolls Online, Wolfenstein: The New Order, and The Evil Within. While Elder Scrolls Online is only being developed for the PC, Xbox One, and PlayStation 4, the other two games are also coming to the Xbox 360 and PlayStation 3. Hines wouldn’t rule out Bethesda eventually working on Nintendo’s console, but it’s clearly not a priority for the company.
“None of the game’s we’ve announced are being developed for the Wii U, so it’s guaranteed that none of those games are coming to Wii U,” Hines said. “Will any future ones come out? I can’t say for sure, in our near-term focus it’s not on our radar.”
Let’s get this out of the way up front. Yes, you never, ever count Nintendo out of the game.
That’s the go-to response for pretty much anyone in this industry when asked if the company will be able to dig itself out of the hole the Wii U has created – and it’s usually a valid one. (Think back to the GameCube days and things were just as dire as they seem today – but it managed to turn things around.)
But as we head into the Wii U’s second holiday season, the pessimism about the system is starting to crest. And despite Nintendo’s push of first party software coming in the next year, there’s nothing to suggest that a turnaround of any sort is imminent.
Third party partners are, in a word, disappointed with Nintendo. And while you’ll still hear the usual refrain about not giving up on the company at some point, you’re more likely to hear dissatisfaction when you speak with executives.
Yves Guillemot, Chairman and CEO of Ubisoft, is typically one of the biggest proponents of new systems, but betting big on the Wii U didn’t work out well for the company. ZombiU, one of the most popular launch titles for the system with players, was not profitable, he says. Not even close. As such, he says, there are no plans (or even desire) for a sequel.
“It seems like a box that’s out of sync with the future of EA – which is one that gives a real social feel to our games. The Wii U feels like an offline experience right now”
It was, in fact, because of that game’s performance that Ubisoft decided to make Rayman Legends a multiplatform game.
“We must find a way to ensure the creativity of those games could have a big enough audience,” he says. “We hope it will take off. At the moment, we’ve said ‘let’s do through Christmas and see where we are from there.’”
Activision, also, was a notable launch partner for the Wii U, but like Ubisoft, the results haven’t been strong enough to justify a notable further investment in the system.
“We came to the table with a robust slate,” says Eric Hirshberg, president and CEO of Activision Publishing, at E3. “But we have no announcements now.”
No one, however, is more direct than EA’s Peter Moore. EA, at present, has no games in development for the Wii U – and its AAA game engine isn’t compatible with the system.
“We were there with four games for them [at launch],” he says. “It’s been a disappointment when you look at sell-through and, as a company, we have to be very judicious where we deploy our resources.”
For EA, at least, it’s the system’s lack of a rich multiplayer environment that’s one of the big concerns – especially for sports titles. (That’s part of the reason Madden won’t appear on the system this year.)
“The lack of online engagement that we see on Wii U [is troubling],” says Moore. “It’s so integral to what we do. They’re so small it’s hardly worth running the servers. It seems like a box that’s out of sync with the future of EA – which is one that gives a real social feel to our games. The Wii U feels like an offline experience right now.”
Nintendo systems have always been led by the rich slate of first party titles, but the company isn’t an island – and knows it can’t remain competitive without the cooperation of third party publishers. And while some, like Capcom, are sticking with the Wii U, even Nintendo admits it needs to woo back its publishing partners by boosting sales.
Rather than focusing on the negativity surrounding the platform, Nintendo itself says it’s making software development its primary focus. With no price cuts on the horizon (something global CEO Satoru Iwata has been very insistent about), it realizes that the only way to boost hardware sales is to come up with a must-have game. And while the company is counting on Mario Kart and Super Smash Bros. to do their part, it realizes that those alone won’t convince people to invest in the system.
“We have been unsuccessful in coming up with one single software with which people can understand ‘OK, this is really different’ and I can understand the real value of that as soon as I saw that,” says Iwata. “Because there’s no software that’s simple and obvious for people as ‘Wii Sports’ for the Wii, potential consumers do not even feel like trying to touch the Wii U. Our challenge today is with the software lineup we are introducing now; we have to encourage them to want to experience the Wii U in the first place.”
The problem is: That game’s not coming out this holiday, based on what the company showed at E3. And if the Wii U tanks for a second holiday in a row, it’s going to be that much harder to get publishers back on board.
Electronic toy maker Nintendo’s CEO Satoru Iwata thinks that the reason that the toilet themed Wii U console didn’t sell was because of poor marketing.
Talking to CNBC, Iwata said that the outfit had relaxed its marketing efforts, so the consumers today still cannot understand what’s so good and unique about the Wii U. After all few people told “You Wii” will do so without someone turning a tap first. He said that Nintendo had been unsuccessful in coming up with one single software with which people can understand.
People who have hands-on experience can appreciate the value of the Wii U, but because there’s not software that’s simple and obvious for people as ‘Wii Sports’ for the Wii, potential consumers do not feel like trying it. The Wii U console sold 3.45 million units worldwide for the 2012-13 fiscal year, which ended March 2013.
Nintendo cut its Wii U sales forecast in January as a result of lower-than-anticipated sales. Expectations were set for 4 million units sold, down from an initial target of 5.5 million.
A day that SEGA fans thought would never come has arrived: SEGA has entered into a deal with Nintendo where Nintendo consoles will get the next three Sonic the Hedgehog titles as platform exclusives. The once bitter rivals are calling this a “worldwide partnership,” which despite being a bit short on details apparently leads us to believe that SEGA will be developing additional new software for the Wii U and 3DS consoles going forward.
The next three Sonic titles will include Sonic: Lost World, Mario & Sonic at the Sochi 2014 Winter Olympic Games, and a third unannounced title that the company is expected to officially announce at E3. The reason for the Sonic exclusive deal has to do with the past performance of Sonic titles on Nintendo consoles, and since they have proven to be good sellers, the deal does seem to make a lot of sense for both companies.
What is more interesting, however, is the other aspects of the partnership that will see additional titles developed for the Wii U. Nintendo needs all of the software support it can get for the Wii U, and just getting SEGA to continue to release new titles for the Wii U is a good thing. Sources tell us that SEGA has some new Wii U titles planned for announcement at E3, but it isn’t known exactly what SEGA might be cooking up.
While a big deal with Activision or Take-Two is really what Wii U owners might want, at least getting SEGA to continue producing Wii U titles is a positive news thing. It does remain to be seen, however, if SEGA can deliver the kinds of titles that will be successful sellers on the Wii U when so many owners are looking for the big titles from some of the other publishers.
Electronic Arts may be through with the Wii U. According to a Kotaku report, EA has confirmed that it is no longer working on Nintendo’s new console.
“We have no games in development for the Wii U currently,” EA’s Jeff Brown is quoted as saying. Brown did not indicate if EA would resume development on the system in the future
Earlier this month, EA confirmed it would not be bringing this year’s Madden NFL 25 to the Wii U. At the time, a representative said, “We have a strong partnership with Nintendo and will continue to evaluate opportunities for delivering additional Madden NFL products for Nintendo fans in the future.”
EA has released four games for the Wii U to date. The first three (Mass Effect 3, Madden NFL 13, and FIFA Soccer 13) were system-launch-day ports of titles that had shipped earlier on other platforms. The fourth game, Need for Speed Most Wanted, hit stores in March, months after that game debuted for Xbox 360, PlayStation 3, and PC.
The brief duration of support for the Wii U is surprising given EA’s vocal endorsement of the system at Nintendo’s 2011 Electronic Entertainment Expo media briefing. To cap off the event, then-EA CEO John Riccitiello promised the publisher’s support for the system. Brown told Kotaku that the quartet of titles already released represented EA making good on that promise.
Nintendo representatives did not immediately return requests for comment.
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.
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.