The trouble with the Nintendo Wii U
Things are looking more than a little bleak for Nintendo's home console, with the company cutting its 2013 sales forecast for the system by almost 70 percent. With shaky third-party support, a lack of software and concerns about raw power, the system has been plagued by issues from the start. Read on as we delve into the system's problems, its current situation and its likely fate.
There's little mystery in why the Wii U is currently failing. After a reasonably strong launch with a fairly robust line up of titles, the console began to falter. There were significant concerns about the system's raw power, and the virtues of the GamePad – the one thing that truly separated the Wii U from its counterparts – turned out to be a much harder sell than motion controls had been last generation.
However, the biggest problem that the Wii U faced during its first year on sale was an abysmal drought of quality titles. After the initial glut of launch window releases, a mere handful of must-have titles dropped in the first half of 2013.
An uphill struggle
Releasing its new console in November 2012, months before Sony and Microsoft started talking about their new systems and an entire year before they would hit the shelves, it was clear that Nintendo had a lot riding on 2013. The company had to convince consumers that the Wii U was a worthy successor to its hugely successful Wii console, and to extol its virtues over those of the inevitable “next-gen” systems that loomed on the horizon.
Though raw power is certainly not everything, convincing consumers to spend US$349 on a console that features specs comparable to six and seven year-old systems that they may already own, was no easy task. Add in the fact that rumors had long been circulating on the Xbox One and PS4, and the magnitude of Nintendo's task starts to come into focus.
Unfortunately for Nintendo, the company also managed to throw up a road block of its own. The biggest blunder and perhaps the most obvious, was the company's choice of name. It's no wonder that consumers were (and still are) confused by a branding that sounds more like an update of an old system rather than the title of an entirely new one.
This issue was made worse by Nintendo's strong focus on the GamePad when showing off its new system – something that led many consumers to believe that the Wii U was actually a new over-sized handheld system rather than a home console. Adding insult to injury, the company's advertising efforts, here in the UK at least, were lacking in volume, tone and quality.
A swing and a miss
Things started to look up for Wii U owners towards the end of 2013. After a series of announcements, the system's upcoming games line-up started to look a lot more healthy. Titles like Super Mario 3D World, Sonic Lost World, Donkey Kong Country: Tropical Freeze, Super Smash Bros. and Mario Kart 8 signaled a new start for the console.
Unfortunately, things haven't gone entirely to plan. A couple of titles have failed to impress, games have been delayed (most notably Donkey Kong) and release dates have failed to materialize. Average scoring games and release delays are not unusual, but when a system is relying so heavily on first-party releases, they can really slow its momentum. Additionally, a number of the system's biggest titles have hit far too close to the launch of the PS4 and Xbox One, stopping them from making a bigger impact on console sales.
In light of these issues, the news that Nintendo has cut its yearly sales forecast for the system from an ambitious nine million units, down to a more modest 2.8 million, is not surprising. With the system having sold less than six million units since launch, it's actually losing sales momentum as time goes on.
A nine-month report on the company's financials shows an 8.1 percent drop in revenue and a 30 percent drop in profit. Though this paints a rather bleak picture, when talking purely about Nintendo's financials, it's important to note that the company is in no significant trouble. Indeed, it has enough money in the bank that it could weather consistent losses for years to come, and still be in no real danger.
That said, the question of what to do about the Wii U is a troubling one for Nintendo, so much so that CEO Satoru Iwata is taking a 50 percent pay cut for the next five months, with the rest of the board taking cuts of between 20 and 30 percent.
What is becoming increasingly clear is that the Wii U will not experience the miraculous turnaround in sales that many had hoped for. Having sold fewer units in a year than its two competitors have shifted in just two months, it's fair to say that the console is becoming more of a niche system that relies almost entirely upon first- and second- (published by Nintendo) party software.
Though this is a step down from the company's undoubtedly lofty ambitions, it's not necessarily the worst fate for the system. The GameCube sold less than 22 million units, a figure dwarfed by the PlayStation 2's 150+ million units, but it provided its users with more than a handful of great and unique experiences, and is fondly remember by the gaming public and press.
In light of the Wii U's continued lack of success, myriad industry analysts have called for Nintendo to move out of the hardware business and go full time in the software space (or “do a Sega”). I believe that this would be a mistake.
Nintendo has more AAA franchises than Microsoft or Sony could dream of, and to put its first-party games on their systems would significantly weaken the brand. It would certainly lead to a short-term increase in profits, but would dilute what's special about the company.
The Wii U GamePad might not have enjoyed the same success that the Wii's motion controls did, but it's an ambitious idea that had (and still has) a lot of potential. Without the Wii, Microsoft's now ubiquitous Kinect sensor would likely never have existed, and it's unlikely that we would have the same SmartGlass integration and PS Vita off-screen play if we didn't have the Wii U GamePad.
Nintendo systems are about bringing something different to the table. Who knows what innovation the company is planning for its next hardware effort. It would certainly be a shame if we never found out. With Sony and Microsoft's systems offering a very similar gameplay experience and catalog of titles, there's definitely room for a company that offers something totally different.
A grand plan
It's likely that Nintendo is significantly rethinking its strategy with the Wii U. One thing that certainly isn't an option is to drop the console altogether. With millions of consumers already having taken the plunge on the system, Nintendo must support it with quality first-party software, and it must do so for some time.
That said, it can start looking to the future. In the pre-earnings release statement released by Satoru Iwata earlier this month, it was stated that the company has begun spending significantly more on research and development. While it's not clear exactly what that money is going towards, it's possible the company has already started work on its next home console effort.
Considering the Wii U's current issues, it's reasonable to assume that Nintendo may shorten the system's intended lifespan. If the company were able to put out a new system in three to four years time, one that exceeds the capabilities of its current rivals, it would no longer be in such direct competition with them.
Based on the life cycles of the last generation of home consoles, a new Nintendo system in late 2016 or 2017 would beat the successors to the PS4 and Xbox One to market by at least two years. This is a long enough period that consumers will not have the other systems in their minds and, crucially, will not feel the need to wait and see what they offer. This might just give Nintendo the space it needs to put itself back on top.