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Wii U sales are flagging, but there's still hope for Nintendo Exclusive
Wii U sales are flagging, but there's still hope for Nintendo
March 18, 2013 | By Matt Matthews

March 18, 2013 | By Matt Matthews
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    18 comments
More: Console/PC, Business/Marketing, Exclusive



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.


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Comments


Kevin Clough
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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.

Dave Long
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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 ;).

Sean Kiley
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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
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Metroid. They will have a sale with me right there. I will buy the game and the console day of release.

Phil Maxey
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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.

Jack Mackenzie
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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!

Bob Johnson
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Might want to get a Wii U before you tell us what 2nd screen gaming is all about.

Most of demonstrations of the tech in NintendoLand do not have you looking back and forth between screens.

warren blyth
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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/

Bob Johnson
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They are doing what they always do.

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.


Rajasingha Wadana
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Some quality first-party fare is all it needs to get things rolling in the right direction.

Jonathan Murphy
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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
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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.

Bob Johnson
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Well the PS2 outsold the 360 too for a good 18 months as well.

Ian Fisch
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Wow ok this is one of the silliest suggestions I've heard yet.

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.

William Johnson
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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.

Ray Beez
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*schooled*

Kris Graft
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http://www.merriam-webster.com/dictionary/flagging

Colin Marks
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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


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