When do you sound the alarm for a system's viability on the market? I remember the painful slog through the summer and fall of 2007, when the PlayStation 3 hit a miserably low 20,000 systems per week and finally began its crawl to respectability with a price reduction to $400 in November of that year. The Nintendo 3DS had a very rough start in 2011, but Nintendo moved public sentiment substantially with a severe price cut for new buyers and free games to assuage any bitter early adopters.
Sony's PlayStation Vita fizzled quickly after launch, and barely crossed 1.3 million systems by its first anniversary. Sony appears to think it will still be useful as an expensive accessory for the PlayStation 4, but that strategy seems dubious to me.
Today the Wii U appears to be in crisis, and each month's U.S. retail sales figures show little improvement. According to a GamesIndustry.biz report, Nintendo's newest console sold a mere 66,000 units in February 2013. On a per-week basis, that shows that sales grew 45 percent, which in any other circumstance might seem to show that the scalper return theory I discussed a couple of weeks back was right.
But sales typically increase from January to February, and month-to-month growth of 45 percent for the Wii U looks paltry compared to the over 60 percent increase that both the PS3 or Nintendo 3DS experienced. I still believe my sources on this issue of excessive returns, but I cannot deny that the evidence is anything but crystal clear.
But this isn't just about hardware. As I wrote back in January, Nintendo has not followed through on its promise to avoid gaps in a system's release schedule. At that time, I expected two more games to have released by now, and one of them didn't make it: Ubisoft's Rayman Legends, which is now a cross-platform release scheduled for later this year. That's not just a disappointment for Wii U fans (my own children love the demo) but a coldly calculated bit of business, an assessment that releasing the game on the Wii U alone wouldn't be as profitable as releasing it on several platforms later.
And, I should add, this isn't just about the United States. In the UK, the Wii U continues to struggle to move software. According to reports by retail trade periodical MCV UK, citing retail tracking firm Chart-Track, the Wii U accounted for only 1.4 percent of all software units sold in February 2013, down from 1.8 percent in January.
To put that in rough numbers, that means that approximately 60,000 units of Wii U software have been sold in the UK during the first two months of 2013. During the same period, nearly 80,000 units of PlayStation Vita software have been sold and over 300,000 units of software for the original Wii.
And the UK data gives us one more angle on what's going on with Wii U software: the average selling price (ASP) for Wii U software dropped from over £36 (US$54) to just over £31 (US$47). Are retailers reacting to waning consumer interest by cutting prices or are consumers unhappy with the slim offerings and only buying lower-priced software? Perhaps there's another explanation, but I don't believe price-erosion like that is healthy for a new system.
The data we have is grim, and it is quite unlike anything we've seen before. But allow me to point out that there is still hope, just as there was for the PlayStation 3 and the 3DS.
Play to Your Strengths, Develop New Ones
The first bit of hope that I'd point to is that Nintendo still has a strong presence in American homes. In particular, I asked NPD Group analyst Liam Callahan about the history of Just Dance in the U.S. and found that the Wii is still holding a commanding share of that franchise's unit sales. As the figure below shows, not only is the Wii accounting for 73 percent of Just Dance 4 sales since the title launched, but the Wii U version has sold comparably to the PlayStation 3 version despite the Wii U having a 1 million system install base compared to the nearly 24 million system base for the PlayStation 3. In fact, if we combine the Wii and Wii U shares we see that Nintendo's share of this perennial top seller has dropped from 78 percent to 76 percent between Just Dance 3 and Just Dance 4.
This is one of Nintendo's strengths, and it shows that there is still a large base of active Wii users. They need to evangelize to those users as soon as possible that the Wii U is a natural upgrade path for them.
Not only will they be able to carry over many Wii titles, but there is a strong probability that these users own or have owned Mario Kart Wii or the Wii iteration of New Super Mario Bros. With a sequel to the latter already out and a Mario Kart destined to appear eventually on the Wii U, now is the time to sell them on a Wii U.
The second very interesting data point that came out of February's sales was Nintendo's comment that its Nintendo 3DS title Fire Emblem Awakening, which was reportedly undersupplied to retailers, sold 63,000 units digitally. That's better than one digital copy for every two physical copies, an astounding result especially for a company like Nintendo which has been reluctant to enter the purely digital market.
That suggests to me that Nintendo could be much more aggressive with its digital sales than it has been so far. Were it to push the Wii U as a digital-first platform, I think it could show improved sales to third-parties, especially those who may have felt burned by their early efforts on the platform. At this point, 10,000 or even 20,000 digital units of their Wii U software might mean the difference between profit and loss on a port.
Unfortunately, running a digital shop is not Nintendo's strength, but it needs to become one and soon. They've not got Activision titles on their eShop, for example, which means that traditionally successful Wii titles like Wipeout 3 can't be purchased digitally for the Wii U yet.
And I do wonder what might have happened with Rayman Legends if Nintendo had offered more pleasing profit sharing terms with Ubisoft. Priced right online and tightly tied in with its acclaimed demo, a strong digital release might have been just the solution to avoid the embarrassing delay announcement.
These are just my ideas, based on what data is available to me. Nintendo has a tremendous amount of data about its Wii U business, and in just over a month it will release its fiscal year results. At that time, I hope they'll have come up with some plan for the Wii U that builds on the company's many strengths but also presents a believable strategy for how they're going to adapt to the new market realities.
If Iwata's message in a month is just more of the same, well, you can begin to put me more in the Wii U alarmist column than I was previously.
"And, I should add, this isn't just about the United States. In the UK, the Wii U continues to struggle to move software."
Does it make sense to talk about the Wii U performance in the UK without mentioning the horrible state the whole UK video games industry is in right now? Besides, I would have loved to read an article analysing the performance of the 98% of the US market, that are not Wii U, instead of reading another Wii U sales article.
But it seems, nobody wants to talk about the fact, that despite the release of 4(!) AAA core gamer titles, software sales were down 36% YOY in February.
How many Wii U articles had Gama in the last 3 months and how many on the state of the retail industry in general? Looking at the market share, I would argue, the performance of the Wii U hardware/software is not nearly as important as the performance of the PS3/360 hardware/software.
Only talking about the Wii U sales = hits to the site. Each article written about Wii U sales being "Abysmal" and "Dismal" has garnished upwards of 50 to 100 comments alone. We obviously want this conversation. Talking about the overall state of the industry as a whole is boring and unproductive sadly. No one want to talk about that except Youtube gamer communities.
Sales data for Wii U is readily available, and is important for us to follow closely as we head into a new generation of consoles. This is all data here, and Matt's articles always have pretty clear takeaways -- to refer to this kind of in-depth analysis as some kind of linkbait is pretty insulting not only to Gamasutra, but also to Matt, a full-time university-level math teacher who happens to have deep interest and understanding of the game industry.
And here are some articles from Matt that cover the broader industry.
"And here are some articles from Matt that cover the broader industry."
And here are this years Wii U sales articles (including this one)
http://www.gamasutra.com/view/news/188675/Wii_U_sales_are_flagging _but_theres_st ill_hope_for_Nintendo.php#comment193138
http://www.gamasutra.com/view/news/188567/Wii_U_still_struggles_in _February_sale s_charts.php
http://www.gamasutra.com/view/news/187605/A_theory_behind_Januarys _weak_Wii_U_sa les.php
http://www.gamasutra.com/view/news/186741/At_57K_sold_Wii_Us_Janua ry_performance _is_historically_abysmal.php
http://www.gamasutra.com/view/news/186368/Nintendos_hard_path_to_t hirdparty_supp ort_in_2013.php
http://www.gamasutra.com/view/news/185024/Breaking_down_Wii_Us_pos tlaunch_softwa re_lull.php
Note that I didn't include the news articles about Nintendo cutting sales projections, as I think these are something different.
It's hard not to note, that last year, Gamasutra had an awful lot of articles claiming that the crash in revenues is due to the small number of new releases in the first months of the year, the death of the middle market, the strong 2011 holiday line up, etc. 12 months later, the crash still goes on, the drops are even worse then before and the shelfs are filled with plenty of new AAA releases each month, but surprisingly, nobody is talking about how obviously wrong last years analysis was.
Most of the number you talk about is made up for by digital downloads. Its more indicative of the slow death of this console generation with the benefit going to higher end PC's. Actual licences sold is pretty stable, even in he UK.
I think I've commented on this before, but I strongly believe from what I'm seeing from both inside and outside the industry that this is just a bad period of time to be pushing new systems to market. It isn't like console developers aren't aware that times are hard, hence their attempt to shoot for modest pricing via modestly spec'ed systems.
Such a move may be seen as clever, but I believe it only convolutes the matter. It isn't the giant leap forward customers are used to, which begs the question, "should I invest in a seemingly 'interm' product that I'd have a hard time to afford, or should I just wait for the real deal a few years from now?" *cough*Windows 8*cough*
I'm no all knowing marketing guru, so feel free to troll me all you want, but its my belief that we'll see a dismal performance in sales for all next-gen systems for a few years at the very least. There are enough cheaper alternatives such as tablets, phones, and even existing console marketplaces filled with cheap entertainment to keep the gamers happy till they have the bucks to pay for something that really blows them away.
Even then, I still don't believe it has as much to do with console/system specs as it has to do with economic climate and market dilution. Maybe I'm wrong, wouldn't be the first time, but there's my two sense.
Christian - The retail weakness is just not as exciting to talk about as the Wii U and Vita sales numbers. I have no plans to buy a Wii U, but when I saw Target is offering a $50 gift card with a Wii U purchase then it made me at least think twice about it. I think this shows that a price cut will bring out the buyers sitting on the fence. Here are the three things I think are going on with retail overall:
1. Lots more people are buying games online versus at retail (this should only worry the retailers and not developers)
2. People with PS+ have such a huge backlog of games that there is little reason to buy new games (this is the camp I am in)
3. People are waiting for the new consoles and there is nothing the industry can do about this except to wait until this Fall.
Add to this that digital sales seem to be stronger on new platforms. Apparently (based on Sony comments) digital is stronger on Vita than PS3, despite having less than one-tenth the install base. Given that platform early-adopters are more likely, all else being equal, to be tech-savvy, and the broader trend to digital, only looking at the retail market for games is only telling a portion of the story that is continually changing. Indeed, many of these analysis articles may actually be analysing a change in composition, rather than an absolute decline. Obviously that's only in terms of software - you can't download hardware yet ;).
Nintendo hasn't created a need for the system yet, be it through games for consumers, online features or great developer environment (indie or AAA).
I don't think the pricepoint is an issue for early adopters, there just nothing to play yet. It's more and more evident that this thing launched before it was ready.
@ Alan Rimkeit - A Metroid game would definitely be ideal for the Wii U if done right. After playing Nintendoland and Batman: Arkham City Armored Edition, I can think of couple ideas and functions for a Metroid game on the Wii U, especially use the controller to swap weapons without needing to change to a menu screen.
It looks as if Nintendo expected the 2 game screen gimmick to get people a lot more excited than it has, and that's a big problem for them and this consoles prospects. But even if people did get excited about the 2 screens, everything is being done in the shadow of something people really are excited about and that's new consoles from Sony and MS. A better solution as was hinted at above would of been to at least hold off on launching this until it had some big name games behind it, and to launch it for a lower price. But at it's current price most people are probably choosing to hold on to their money for the new consoles.
I think the core issue is that the main gimmick of the Wii U is nowhere near as 'human' as that of the Wii. Motion control was revolutionary and excited the non-hardcore, who could easily conceptualise how the control would work if they owned the system. With my 'non-hardcore' hat on, the dual-screen seems confusing and expensive, and with my 'hardcore' hat, it's just unnecessary.
Also, part of the fun of gaming is the total immersion in the environment, and having to look away from the screen to your controller is not an immersive experience!
i agree that the WiiU magic isn't as 'human'. but i also think they lost the non-hardcore (softcore?) to the ease and charm of cheap mobile games.
I can see a lot of ways to spin the second screen that emphasize how it is unique and impossible on other systems. but they don't seem to be doing this. (yet?). which is weird.
I dimly remember several of their American marketing people leaving at the height of the Wii. Maybe this is an explanation for muddled marketing ? here is a link: http://www.prweekus.com/more-moves-at-nintendo/article/153529/
They always promise to not have any big gaps in release dates, but it never happens. Why? Well, they also say games are released when they are ready. And not when a date rolls around on the calendar.
"A delayed game is eventually good while a rushed game is forever bad." That it is their strategy. They also are very fiscally conservative especially with hardware so they don't lose their shirt if it isn't a lead-off home run.
You MUST cancel production of a current console to force purchase of a next gen console. MS, and Nintendo did this with the GC and Xbox. Not right away, but they did it. Sony did not with the PS3 and it helped kill their sales for the first 2 years. I've seen too many parents look at the Wii U price and buy the Wii. This is exactly what happened with the PS3!
@ Jonathan Murphy - That's the one thing I have to agree with you on! While I can understand why Nintendo hasn't stopped production of the Wii just yet, the Wii U can play Wii games and use most Wii accessories, so if Nintendo wants for people to buy the Wii U, then it has to stop producing the Wii and has to let people know that the Wii U can play Wii games. Nintendo can still produce the Wii games that have been released in the last couple years, but in case of the Wii itself, it would be more strategic to stop producing the system, because even if the Wii U gets a price drop, some people will not know the difference between the Wii and the Wii U and will end up buying the Wii due to having a lower price.
Around the PS3 launched the company I worked for gambled on the PS3 being a success. I don't need to tell you the outcome. The Wii U looks a lot like a mini PS3 launch.
I don't think Nintendo cares right now. My assumption is they're holding back to see what Sony and Microsoft have planned before they drop the hammer.
My guess is Nintendo's secret weapon is going to be a string of new Touch Generation games for the WiiU leading up to the launch of the PS4 and next Xbox. With a new 3D Mario or Zelda game being released on the same month as the new competitor's consoles to try and steal as much thunder as possible.
But that's only a guess, and Nintendo is far from being predictable.
I really do think new Touch Generation games are coming though. They're system sellers and the WiiU has none so far. Nintendo turned the DS around with a price drop, a redesign, and a lot of Touch Generation games like Brain Age, Flash Forward, Cross WorDS, etc. I'm also very surprised they haven't released more of these games for the 3DS too...not sure why... They're (relatively) cheap and quick to make and sell really well.
But that goes back to Nintendo being any thing but predictable.
As at this post, WiiU still has yet to release Lego City and Monster Hunter 3, two games sure to bolster sales major time. I live in Australia, we get everything last. WiiU is starting slow, though vs Sony and Microsoft one point of view is that you could say it's already 3 million ahead, and with another 6 months to grow it's lead.
The argument of PS3 n 360 games sales still soaring over WiiU doesn't necessarily mean good things for the competition either. With so many ppl dishing all their wealth out on Sony n M'softs current platforms they will take eons to lash out and move onto PS4/720, if at least for no other reason no one will afford them. Sony n M'soft can't live off the current platform, they have to sell their next gens as well, they're major cost investments. Financially, Sony and M'soft don't do as well as Nintendo in the profits department either if I'm not mistaken
WiiU is in a slow position because it's dealing with the realities of launch while Sony n M'soft get to soak up the praises of their hype. Come PS4/720 launch, WiiU will be far cheaper, have far more games in general and more high profile games, millions of an install base lead. While Sony n M'soft have to convince public their powerhouses will justify the costs, and manage their own launch hurdles. Failing units, games droubt, low install base making many titles less viable for them etc..
I have a long-shot theory about the slow release of WiiU games, or part the reason anyways, Nintendo is deliberately delaying their major releases (and just use extra optimisation time) until closer to PS4/720 launces to thwart the competition
Does it make sense to talk about the Wii U performance in the UK without mentioning the horrible state the whole UK video games industry is in right now? Besides, I would have loved to read an article analysing the performance of the 98% of the US market, that are not Wii U, instead of reading another Wii U sales article.
But it seems, nobody wants to talk about the fact, that despite the release of 4(!) AAA core gamer titles, software sales were down 36% YOY in February.
How many Wii U articles had Gama in the last 3 months and how many on the state of the retail industry in general? Looking at the market share, I would argue, the performance of the Wii U hardware/software is not nearly as important as the performance of the PS3/360 hardware/software.
Sales data for Wii U is readily available, and is important for us to follow closely as we head into a new generation of consoles. This is all data here, and Matt's articles always have pretty clear takeaways -- to refer to this kind of in-depth analysis as some kind of linkbait is pretty insulting not only to Gamasutra, but also to Matt, a full-time university-level math teacher who happens to have deep interest and understanding of the game industry.
And here are some articles from Matt that cover the broader industry.
http://www.gamasutra.com/view/news/187226/Big_hits_vs_big_hits_A_c rossgeneration
al_software_sales_analysis.php
http://www.gamasutra.com/view/news/184899/US_retail_software_in_20 12_What_you_ne
ed_to_know.php
http://www.gamasutra.com/view/news/184714/US_video_game_hardware_i n_2012_Winners
_losers_and_retirees.php
http://www.gamasutra.com/view/news/184510/How_retail_figures_may_p oint_to_a_comi
ng_disruption.php
And here are this years Wii U sales articles (including this one)
http://www.gamasutra.com/view/news/188675/Wii_U_sales_are_flagging _but_theres_st
ill_hope_for_Nintendo.php#comment193138
http://www.gamasutra.com/view/news/188567/Wii_U_still_struggles_in _February_sale
s_charts.php
http://www.gamasutra.com/view/news/187605/A_theory_behind_Januarys _weak_Wii_U_sa
les.php
http://www.gamasutra.com/view/news/186741/At_57K_sold_Wii_Us_Janua ry_performance
_is_historically_abysmal.php
http://www.gamasutra.com/view/news/186368/Nintendos_hard_path_to_t hirdparty_supp
ort_in_2013.php
http://www.gamasutra.com/view/news/185024/Breaking_down_Wii_Us_pos tlaunch_softwa
re_lull.php
Note that I didn't include the news articles about Nintendo cutting sales projections, as I think these are something different.
It's hard not to note, that last year, Gamasutra had an awful lot of articles claiming that the crash in revenues is due to the small number of new releases in the first months of the year, the death of the middle market, the strong 2011 holiday line up, etc. 12 months later, the crash still goes on, the drops are even worse then before and the shelfs are filled with plenty of new AAA releases each month, but surprisingly, nobody is talking about how obviously wrong last years analysis was.
Such a move may be seen as clever, but I believe it only convolutes the matter. It isn't the giant leap forward customers are used to, which begs the question, "should I invest in a seemingly 'interm' product that I'd have a hard time to afford, or should I just wait for the real deal a few years from now?" *cough*Windows 8*cough*
I'm no all knowing marketing guru, so feel free to troll me all you want, but its my belief that we'll see a dismal performance in sales for all next-gen systems for a few years at the very least. There are enough cheaper alternatives such as tablets, phones, and even existing console marketplaces filled with cheap entertainment to keep the gamers happy till they have the bucks to pay for something that really blows them away.
Even then, I still don't believe it has as much to do with console/system specs as it has to do with economic climate and market dilution. Maybe I'm wrong, wouldn't be the first time, but there's my two sense.
1. Lots more people are buying games online versus at retail (this should only worry the retailers and not developers)
2. People with PS+ have such a huge backlog of games that there is little reason to buy new games (this is the camp I am in)
3. People are waiting for the new consoles and there is nothing the industry can do about this except to wait until this Fall.
I don't think the pricepoint is an issue for early adopters, there just nothing to play yet. It's more and more evident that this thing launched before it was ready.
Also, part of the fun of gaming is the total immersion in the environment, and having to look away from the screen to your controller is not an immersive experience!
Most of demonstrations of the tech in NintendoLand do not have you looking back and forth between screens.
I can see a lot of ways to spin the second screen that emphasize how it is unique and impossible on other systems. but they don't seem to be doing this. (yet?). which is weird.
I dimly remember several of their American marketing people leaving at the height of the Wii. Maybe this is an explanation for muddled marketing ? here is a link: http://www.prweekus.com/more-moves-at-nintendo/article/153529/
They always promise to not have any big gaps in release dates, but it never happens. Why? Well, they also say games are released when they are ready. And not when a date rolls around on the calendar.
"A delayed game is eventually good while a rushed game is forever bad." That it is their strategy. They also are very fiscally conservative especially with hardware so they don't lose their shirt if it isn't a lead-off home run.
So in your mind:
Supermarkets should stop selling ground beef to sell more steak filets.
Car dealers should stop selling honda civics so they can sell more bmw's.
Coke should stop selling 20oz bottles so they can sell more 2 liters.
Good lord.
My guess is Nintendo's secret weapon is going to be a string of new Touch Generation games for the WiiU leading up to the launch of the PS4 and next Xbox. With a new 3D Mario or Zelda game being released on the same month as the new competitor's consoles to try and steal as much thunder as possible.
But that's only a guess, and Nintendo is far from being predictable.
I really do think new Touch Generation games are coming though. They're system sellers and the WiiU has none so far. Nintendo turned the DS around with a price drop, a redesign, and a lot of Touch Generation games like Brain Age, Flash Forward, Cross WorDS, etc. I'm also very surprised they haven't released more of these games for the 3DS too...not sure why... They're (relatively) cheap and quick to make and sell really well.
But that goes back to Nintendo being any thing but predictable.
The argument of PS3 n 360 games sales still soaring over WiiU doesn't necessarily mean good things for the competition either. With so many ppl dishing all their wealth out on Sony n M'softs current platforms they will take eons to lash out and move onto PS4/720, if at least for no other reason no one will afford them. Sony n M'soft can't live off the current platform, they have to sell their next gens as well, they're major cost investments. Financially, Sony and M'soft don't do as well as Nintendo in the profits department either if I'm not mistaken
WiiU is in a slow position because it's dealing with the realities of launch while Sony n M'soft get to soak up the praises of their hype. Come PS4/720 launch, WiiU will be far cheaper, have far more games in general and more high profile games, millions of an install base lead. While Sony n M'soft have to convince public their powerhouses will justify the costs, and manage their own launch hurdles. Failing units, games droubt, low install base making many titles less viable for them etc..
I have a long-shot theory about the slow release of WiiU games, or part the reason anyways, Nintendo is deliberately delaying their major releases (and just use extra optimisation time) until closer to PS4/720 launces to thwart the competition