Another day, another impending doom warning for Nintendo, this time from glorified online forum ‘Motley Fool’ whose contributor is warning investors that Nintendo might have to discontinue Wii U next year due to an “abysmal” first year.
The article is, of course, standard alarmist link bait masquerading as helpful advice, so I thought this week I would show the same arguments raised by the piece but in a slightly different light. Could a batch of arbitrary numbers be manipulated to spell success for Nintendo? Perhaps, but let’s start with the first point raised by the author.
The Wii U Has Been a Total Failure
How does one define a “total failure”? The author of the Motley Fool article claims that Nintendo expected to sell 5 million Wii U consoles by March last year and “only” sold 4 million by the end of September.
This point here is intriguing because it takes Nintendo’s own expectations and uses them against the company. Nintendo has every right to be optimistic about their latest products. It’s not going to come out at an investor’s briefing and say “hey guys, this console is pretty crappy. We’ll probably only sell a million units”.
I also wonder in what universe that 4 million units of anything is not considered significant? Sure, Wii sold a lot more in a lot less time, but we saw a similar trend with Nintendo 3DS. That console was also considered a “flop” in its first year on sale, now it’s the world’s fastest selling console and is actually on track to be the best selling console of all time.
The Fool article claims that Nintendo’s goal of 9 million Wii U sales by March 2014 is “utterly insane”. I tend to disagree here, though. Obviously, the year end sales is always huge and this year there’ll be two new consoles on shelves, not to mention two new iPads, two new iPhones and about 9.8 million new Android tablets. But Nintendo are bringing something to the table the others aren’t: originality.
I use that term in the broad sense – Wii Fit U, Wii Party U and Super Mario 3D World are hardly new franchises but they are the complete opposite of what the competition is doing. PlayStation 4 has Killzone, Xbox One has Dead Rising 3. Wii U has Wii Sports Club (not to mention a year of pretty good titles, such as The Legend of Zelda: The Wind Waker HD).
This is a huge advantage for Nintendo. There are a lot of younger players out there but more importantly, there are a lot of gamers out there who don’t buy their own games and consoles. Parents will be looking for the cheapest and the easiest console to buy their kids and Wii U with it’s white box, cute characters and fun mini-games is obviously going to be a major drawcard, not to mention the $200 lower price tag.
But there’s one other thing going for Wii U this holiday: it won’t be sold out.
PlayStation 4 is already buckling under its own popularity. Is that good? Who knows. For all we know, Sony have only shipped 500,000 units worldwide. Yes, that’s unlikely but simply selling out of pre-orders doesn’t automatically indicate they’ve burned through 9 million sales.
Xbox One is also facing stock shortages internationally. Again, this is most likely a good thing for Microsoft but when parents venture out into stores to buy their kids a shiny new console, they’re simply not going to be able to buy a PlayStation 4 or Xbox One, possibly until January or even beyond. Older gamers have seen to that as they quickly snap up pre-order allocations.
Wii U will be bountiful in supply. There are new, cheaper bundles with great games that represent great value. The price has been lowered to something much more attractive, especially compared with the others.
Besides 9 million lifetime units by March 2014 isn’t so farfetched for Nintendo — the total worldwide sales have already eclipsed 6 million units, they need only sell another 3 million over Christmas. Wii U was the second highest selling console last week in Japan (Nintendo 3DS was number 1) on the back of Wii Party U and Wii Fit U, and I can only imagine the holiday sales season will boost the numbers even more.
Microsoft will steal Nintendo’s core market
The next point by Motley Fool states Microsoft is about to seal Nintendo’s “core” market with Xbox One’s Kinect sensor, doing what the company attempted with the original Kinect for Xbox 360.
I’m not so sure. There’s no doubt that Kinect 2 on Xbox One is a lot more intuitive and more fun than the original Kinect, but arm waggling with Kinect so far has shown us that the control style is popular with only one demography: the very young.
Preschoolers will love the idea of dancing with Elmo and gang, but anyone older than 5 are simply not interested. Waving an arm to change the TV channel, or to navigate the Xbox One menu is fine, but not a system selling feature for older players. And despite Nintendo copping a lot of flack for their “kiddy” image, few seem to realise the publisher doesn’t really cater for very young players.
So Kinect might grab preschoolers, but Nintendo aren’t really doing that anyway. Realistically, the youngest Nintendo seems to go is 10 years old. Games like Pokémon and Animal Crossing require a decent grasp on reading skills, while many of the puzzles in games like Super Mario may be too difficult for anyone younger to enjoy.
So the question isn’t “will Microsoft steal Nintendo’s core market”, but can they?.
So far I’m not seeing it. I don’t see Microsoft making any majorly popular game aimed at 10 year olds. There is no Microsoft answer to Pokémon. In fact, for every Mario game that comes out these days, Microsoft releases Halo. And while games like Halo or PlayStation’s Killzone can indeed be enjoyed by young kids, their age rating and realistic themes often prove a high barrier of entry. These games never set the world on fire because they’re targeted to people who have jobs, who can afford all the DLC that come with them. They’re not games for kids.
Can Kinect change that? It’s a hard question to answer. But if history is anything to go off, it’s going to be a tough sell to anyone older than 6 years old.
Unlike Sony, Nintendo can’t afford to support a failing console
This is probably the most ridiculous argument the Motley Fool article makes, for several reasons.
The first point worth mentioning here is that every console in Nintendo’s history — except for Wii — was sold at a loss, at least initially. Nintendo has never gone out of business, and there have been worse selling consoles in Nintendo’s past. So Wii U being sold at a negative profit is nothing new, but that’s why Nintendo has accountants and people who make budgets. That’s why Nintendo charge full price for games online. That’s why Nintendo, like all publishers, price games at the AU$100 end of the scale. And it’s exactly why Nintendo is a public company in the first place: investors give Nintendo money in case customers don’t.
But wait a minute — is this author suggesting that Sony is some kind of wealthy business that could do no wrong?
Sony might have its fingers in a whole lot of pies, but that doesn’t automatically mean they’re extremely wealthy and can afford to throw money all over the place. Sony was worth $100 billion in 2000 but has since fallen dramatically, slashing over 10,000 jobs and selling their American head quarters. Compared to its heyday, Sony is in as much financial pain as Nintendo.
Both companies however have a secret weapon: huge cash hordes. Sony is sitting on $9.6 billion in cash, while Nintendo has about $10.5 billion. Nintendo has no debt and they can post a loss of $257 Million every single year for the next 60 years before they will have to go out of business.
Now obviously this doesn’t automatically mean they’re sustaining an income. They have savings in the bank but if their products fail to sell, they won’t be able to grow as a company. And since all Nintendo’s eggs are all in the video game basket, it’s more important that their consoles sell well. Sony could after all make their profits from manufacturing AA batteries if PlayStation 4 flops.
One thing’s for sure though — both of these companies can splash their money around, but neither should. Nintendo has beefed up their spending in Research and Development this year, meaning new consoles are already in the works for future releases. Sony are spending more money in advertising this year than ever before. Both companies are suffering financial issues, mainly due to currency conversion costs.
If anything, the two companies are more comparable than Motley Fool implies.
This holiday season will be crucial for Nintendo
I’ve already explained how Wii U is likely to sell pretty well over this holiday season but even if it doesn’t, I highly doubt Nintendo will simply give up on it altogether.
There’s little doubt in my mind that Nintendo have already signed off on what their next generation console should be like. It probably wouldn’t take them very long to whip up something to compete on a power level of PlayStation 4, along with some kind of transfer middleware for easily porting in-development Wii U games to the new machine. It’s just highly unlikely they would abandon Wii U so soon.
And it is soon. The console is only starting to get the must have games that Nintendo are famous for. Next year there’ll be Donkey Kong, Mario Kart and Super Smash Bros. Then there’ll be Zelda, probably Starfox and a whole host of other titles to fill in the gaps.
Abandoning Wii U now would be like the movie industry giving up on BluRay in its first year. After all, how long did it take BluRay to become mainstream? Even now a trip to the local JB HiFi underlines how slow customers are making the move to the new format, as the BluRay aisle slowly takes over the DVD. Consoles are only as good as their game library and Nintendo knows this and is preparing plenty of reasons to buy Wii U.
This holiday season is important for Nintendo, but it’s more important for Wii U. If Wii U doesn’t sell well at the end of this year, I don’t think it’s going to be a huge disaster for the company. They can simply try again next year with a more robust game library. Either way, the most unlikely conclusion to be made here is that Wii U will be discontinued. 6 million owners is significant enough to continue some level of support, and it’s a big enough user base to nurture, one that has the ability to grow purely on word of mouth.
Wii U won’t be discontinued next year. We can only hope, however, that these doom and gloom articles are.
After writing this article, it seems the original Motley Fool article has been
copy/pasted ‘syndicated’ onto AOL-owned website, Daily Finance.