The Wii U Summer and Digital Business

While I think it's a step forward for Iwata to show that Nintendo has a messaging problem when it comes to the Wii U, I don't think Wii U owners -- or potential Wii U owners -- will be encouraged by his proposed solutions.

Iwata appears to be saying that Nintendo will reinvigorate the Wii U starting with Pikmin 3 in July and August of this year. That alone is cause for some concern, because Pikmin might be a fine game, but it isn't really a system-seller. And on top of that, what are consumers to do with their Wii U in the intervening three months?

According to the release schedule Nintendo has provided, just looking at the U.S., Nintendo itself will release Game & Wario in late June and it has three other titles penciled in for Summer 2013: The Wonderful 101, Wii Fit U, and Wii Party. From third parties, the Wii U can expect Fast & Furious Showdown, Resident Evil Revelations, Sniper Elite V2, and LEGO Batman 2. That's all that's scheduled before August of this year, and outside of the Nintendo games, none of these are exclusives.

Now, Iwata has repeatedly said that there are unannounced games still coming for the Wii U, but I really doubt that many (or any) of those are due out before this big push. So for at least the next couple of months, through what will be already a dry summer for the industry overall, the Wii U will be particularly weak, in a way that may make the PlayStation 3 in 2007 look healthy.

Beyond the summer, Nintendo can begin a very strong push with its own software and what will hopefully be a near-parity for many major ports. While Madden 25, Battlefield 4, FIFA 14, and Call of Duty remain unannounced for the Wii U at this time, I think that both EA and Activision will continue to support the platform with some version of these games.

Beyond the base of traditional games, Nintendo also hopes to boost its Wii U support through its Nintendo Web Framework, which provides an HTML5, CSS, and Javascript environment familiar to web developers, and Unity engine support for more independent game development.

While these are important areas to address, they are nontraditional areas for Nintendo. In fact, I would argue that the game development area Nintendo now says its going to court is one it previously criticized as potentially corrosive to the existing industry. Specifically, at his GDC 2011 keynote presentation, Iwata seemed to argue against the devaluation of video game software, criticizing platform holders like Apple and Google for whom the “value of video game software does not matter.” I believe he was saying, in a guarded way, that 99¢ games would threaten a game developer's “ability to make a living.”

Yet these very games -- web games, which are often free-to-play and survive on in-app purchases, and mobile games which use the Unity engine -- are now part of the broader swath of the industry that Nintendo hopes to attract to the Wii U.

More importantly, appealing to developers and publishers with new game technology is only half of the problem. In order to make any software like this successful for third parties, Nintendo needs to make it as painless as possible to find and buy software. On a mobile device, the user is always 30 seconds or less from downloading a new application. Consumers buy and try lots of applications on those platforms because it's fast and easy to do so.

Will the Wii U make it just as easy to get these new Web Framework and Unity applications? Unless that problem is also being solved, great software from a range of developers won't be nearly as effective as it could be.

Even if the company executes well on software, it remains to be seen whether Nintendo can reach its 9 million system goal before April 2014. In the five months that the system has been out, including its first holiday season, the company shipped 3.45 million units worldwide, down from the 5.5 million it originally expected to ship.

Keep in mind that the shipped figures are still not a true measure of the units sold to consumers. For example, in the U.S. Nintendo says it has shipped 1.52 million systems. However, through the end of March, it had sold just shy of 1.2 million systems in the U.S. Even if we count Canada, which accounts for probably another 150,000 systems at most, the company still has nearly 300,000 systems to sell through.

At its current rate, just in the U.S., that would take through August to clear. In other words, a major new shipment wouldn't be needed until after the first quarter of the fiscal year is over.

To get an idea of how the Wii U shipments so far compare to historical precedent, let me show you what Nintendo's console shipments have looked like at the launches for the GameCube and Wii. Those are pictured below.

Notice that during the past fiscal year, the year in which the Wii U launched, total console hardware shipments actually went down rather than up. In the previous two launches, total console hardware shipments went up during a launch year.