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Analyst: Core Games Best Investment For Publishers As Wii 'Bubble' Deflates
Analyst: Core Games Best Investment For Publishers As Wii 'Bubble' Deflates
November 24, 2009 | By Leigh Alexander

November 24, 2009 | By Leigh Alexander
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Despite broadening audiences and casual platforms, core games remain the best investment for video game publishers, says Cowen Group analyst Doug Creutz -- who says "the Wii bubble could be deflating."

Revealing the results of a broad fall-holiday survey, Creutz says Wii owners are buying fewer games now than they did a year ago -- while Xbox 360 and PlayStation 3 plan to buy more.

This is partially a function of the economic climate -- core gamers are the group least likely to trim entertainment spending when budgets get tight. Consumers who own only a Wii, however, are least-likely among all current-generation platforms to increase their software purchases this holiday, he says.

Over half of Wii owners also own an Xbox 360 or a PlayStation 3, Creutz says -- but of those who own more than one console, only 23 percent consider Wii their main platform, which means bigger holiday wish lists among core gamers are more likely to benefit core market games rather than Wii titles.

"While core gamers who own a Wii own more Wii games on average than casual gamer Wii-owners, the average title ownership spread between the two categories of gamers is much lower than it is for owners of Xbox 360 and PS3 consoles," says the analyst.

Creutz concludes that core gamers who own multiple consoles are primarily buying Wiis to play Nintendo titles, and not games by other publishers.

"We believe that the optics of this hardware cycle have been significantly distorted by the explosive growth of the Wii console," says Creutz.

The Impact On Publishers

Wii was the primary driver of industry growth in 2007 and 2008, and remains the top-selling console in America. But according to the analyst, "its success did not correlate with strong performances by the U.S. software publishers as a group."

And with Wii hardware and software sales declining, investors have become much more cautious about the games business -- meaning further negative impact for U.S. publishers.

"While we believe the Wii is likely to be a drag on overall software sales through the holiday, the impact should be limited to those publishers which have invested significantly in Wii development, with the biggest negative impact likely to be felt by Electronic Arts, which (unwisely in our view) heavily invested in Wii development for [calendar 2009]," says Creutz.

Sony's PS3 Strategy To Bear Fruit At Last?

On the other hand, Creutz says, the PlayStation 3 looks poised for a strong holiday -- 21 percent of survey respondents who don't currently own one plan to buy one this season.

That's slightly below the Wii's 26 percent intent figure, but nearly double the Xbox 360's 12 percent purchase intent, according to Cowen's survey. And Sony's long-held faith in brand loyalty may finally bear fruit: the data also shows that 32 percent of PlayStation 2 owners who haven't yet bought a current generation plan to buy a PS3, versus 19 percent for the Wii and just 9 percent for the Xbox 360.

The uptick in intent is largely credited to the new $299 price point, says Creutz -- and the Blu-ray player may finally be helping the console too, as consumers showed a willingness to pay slightly higher prices for a console with one versus without.

"With the frontline Xbox 360 console (the Elite) also retailing for $299, we believe Sony now has, for the first time, a significant price advantage at retail, particularly in the minds of serious gamers who are more likely to be considering the PS3 vs. the Xbox 360 Elite rather than the $199 Xbox 360 Arcade version," the analyst concludes.


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Comments


Jay Lee
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I guess we shall see if this theory pans out come November NPD eh. As of now I doubt it and I also doubt for those families that are price conscious will go with the higher price model either. I would surely like to see what a “significant price advantage at retail” actually means as well this holiday season because again I seriously doubt it. If that is the case it should be more than evident in fact.

Ken Masters
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More "Wii is doomed" speech. It's really never-ending. This guy Creutz is passing off guesswork as legitimate data - as Christian pointed out.



I don't understand how this type of stuff even gets reported.



He says that Wii software will be a drag throughout the holiday season, yet Matt Matthews's analysis showed that Wii software, despite slowing from last year, is still above 360 and PS3 software sales.



All of this is based on a survey of what people PLAN to buy, not what they actually bought. With that said, this really isn't worth reading.

Fiore Iantosca
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The Wii games are gross.

Mike Siciliano
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Another year, another "Wii bubble is deflating" assertion. Even though hardware sales are increasing since July's low point.



Creutz is specious and redundant. He's implying that third-party software won't perform well this holiday season. Well, that's both a likely and unoriginal prediction.



" Analyst: Core Games Best Investment For Publishers As Wii 'Bubble' Deflates

by Leigh Alexander

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November 24, 2009



Analyst: Core Games Best Investment For Publishers As Wii 'Bubble' Deflates

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Despite broadening audiences and casual platforms, core games remain the best investment for video game publishers, says Cowen Group analyst Doug Creutz -- who says "the Wii bubble could be deflating."



Revealing the results of a broad fall-holiday survey, Creutz says Wii owners are buying fewer games now than they did a year ago -- while Xbox 360 and PlayStation 3 plan to buy more.



This is partially a function of the economic climate -- core gamers are the group least likely to trim entertainment spending when budgets get tight. Consumers who own only a Wii, however, are least-likely among all current-generation platforms to increase their software purchases this holiday, he says.



Over half of Wii owners also own an Xbox 360 or a PlayStation 3, Creutz says -- but of those who own more than one console, only 23 percent consider Wii their main platform, which means bigger holiday wish lists among core gamers are more likely to benefit core market games rather than Wii titles.



"While core gamers who own a Wii own more Wii games on average than casual gamer Wii-owners, the average title ownership spread between the two categories of gamers is much lower than it is for owners of Xbox 360 and PS3 consoles," says the analyst.



Creutz concludes that core gamers who own multiple consoles are primarily buying Wiis to play Nintendo titles, and not games by other publishers.



"'We believe that the optics of this hardware cycle have been significantly distorted by the explosive growth of the Wii console,' says Creutz."



Translation: analysts continue to ignore disruption and refuse to investigate it, thus they continue to have trouble accurately predicting the future.

Adam Flutie
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Hum, there seems to always be the fear that the Wii will be a 'fad' soon enough, yet it never seems to materialize... however this analysis might just be fallout from the fact even Iwata finds the Wii's struggles of late of major concern.



@Derek - All of those are 1st party titles... the analysis was that 3rd parties are the ones having their bubble burst.

Amir Sharar
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Mike Siciliano says, "Creutz is specious and redundant. He's implying that third-party software won't perform well this holiday season. Well, that's both a likely and unoriginal prediction."



But then also says, "Translation: analysts continue to ignore disruption and refuse to investigate it, thus they continue to have trouble accurately predicting the future."



In one sentence you claim his prediction is likely and then in another you claim he has troubles accurately predicting the future.



Which is it?



The article states:

"And Sony's long-held faith in brand loyalty may finally bear fruit: the data also shows that 32 percent of PlayStation 2 owners who haven't yet bought a current generation plan to buy a PS3, versus 19 percent for the Wii and just 9 percent for the Xbox 360."



I know I've made this known for a while here in the comments section, but it was entirely based on my personal experiences. Nice to see some numbers back it up.



The PS3 definitely does have a large price advantage at this point. As Christian mentions the 360 is being offered with some pack in games but the value of those games differ drastically among consumers. Although I think MS has been too conservative in it's 360 price drops ever since launch, and by doing this they have sacrificed their marketshare (and to some extent, the appeal of their console)...I cannot deny that they have retained profitability and in comparison to Sony are sitting in a better position financially.

John Giordano
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3rd party publishers need to figure out how to create the right games for the Wii.



No more shovelware. No more ports. Instead, create something new that actually appeals to the audience that is on the Wii using quality developers and better marketing.



Nintendo is still proving with their own software that the "bubble" is, in fact, actually a bowling ball.

brandon brown
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Honestly, i do believe that the wii is in trouble, especially for 3rd parties. There has been so much shovelware and crap on the system that people are afraid to touch new games. Aside from that games on the wii are often underwhelming, compared to thier 360 and ps3 counterparts.



Personally the only 2 games i own (for the wii) are zelda and wii sports resort, aside from that i have not found too many games on the wii that have been worth more then a rent. I'm not saying thier arent good games on the wii because there are some, but when its all said and done most of them are either too casual/easy or lack online and thus i would never purchase them.



Furthermore, i think when the 360's and ps3's motion controls are released, nintendo will loose alot of its "serious" gamers who own both a wii and 360 or ps3. Although nintendo has such a large handle on the casual market i dont think they will mind.



Nintendos not doomed, thier just going to loose thier number 1 spot. It's just a matter of time really.

Sterling Reames
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I think this has been said every single year since the Wii released......

Ken Masters
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@ Brandon Brown -



I think you need to do that math over again. Because it's pretty much impossible for Nintendo to be overtaken by either Sony or Microsoft. Looking at the numbers, I think it's pretty delusional to even entertain the thought really.



If the Wii stopped selling today, it'd still take many, many years for either of the two competitors to catch up. The PS3 hasn't even sold half of what the Wii has sold worldwide and the Wii - slow down and all - will eventually have double the installed base of the 360 in maybe over a year's time.



It's not happenin' dude.

Darryl Nevels
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Here we go because of the wii not having good games you put the wii down now when it comes to longer life I have to give it to the wii because I had an Xbox 360 the red ring of death took it away from me and I playing the wii some of their games are worth playing while some are not but if they made the good games for the wii it would be great but they don't and when they try the game be not that greatest but they made it and it don't sell very well. Wii has they power but not the games because of their controllers and they should have put football skills into the wii resort that would have sold more units.....

Dv8thwonder GunplayNotoy
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Creutz has it wrong as usual. I see more 3rd parties flocking to the Wii, maybe not the big guys but enough that even they will be forced to do so. There is no way that the 'hardcore' only business model of the HD twins can last for long.

Mike Siciliano
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"Mike Siciliano says, "Creutz is specious and redundant. He's implying that third-party software won't perform well this holiday season. Well, that's both a likely and unoriginal prediction."



But then also says, "Translation: analysts continue to ignore disruption and refuse to investigate it, thus they continue to have trouble accurately predicting the future."



In one sentence you claim his prediction is likely and then in another you claim he has troubles accurately predicting the future.



Which is it?"



Allow me to clear this up since you didn't read my statements correctly. I first stated third-party sales wouldn't be that great this holiday season. Big deal. Real shocker there.



I next stated that analysts still can't seem to make any accurate predictions about DISRUPTION. Disruption does not mean third-party games. When Creutz says that, in general, the "Wii bubble" is going to deflate, burst, or whatever, he's making a bad prediction about the SYSTEM because he doesn't understand disruption.



When he says third-party games won't sell well, it's a different issue. And when Creutz says "We believe that the optics of this hardware cycle have been significantly distorted by the explosive growth of the Wii console," he's admitting that Nintendo's business strategy is confusing analysts because it has turned the industry upside down. These are not my words, these are Creutz's words.

Lewis Pulsipher
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Why do Wii owners buy fewer games than 360 and PS3 owners? Perhaps it's because Wii games, at least the ones that are designed to be played by several people in the same room, do not "wear out", they continue to please, so the Wii owners don't need to buy more games. Whereas the hard core games, which are more like interactive puzzles than like multi-sided games, tend to "wear out" because the puzzles have been solved, so the players must buy more games in order to renew their enjoyment.



Or to put it another way, Wii games, insofar as they are multi-sided games, have much higher replay value than solitaire interactive puzzles.

M M
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Face it - Wii is a dolled up game cube. Apart from the controllers, it's old tech. Most people these days have LCD/Plasma widescreens, and when you stick a Wii on one of those it looks absolutely terrible. Then they go to their friends house and see the Xbox or PS3 in action and go "Wow, the Wii looks **** on my TV, might get myself and Xbox/PS3".



I have all three. The Wii NEVER gets used because it's always so disappointing to look at.

And yes casual players do notice and care about this... my friends have proven this to me. Two were Wii owners have now turned to PS3.



Maybe they should retail the Wii games for A LOT less than the 360/PS3 versions? You are getting a lot less for your money after all.

Yannick Boucher
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STOP saying "look at Nintendo". What are the big sellers right now? Mario (Mario Kart, NSMB Wii), and Wii Sports (Resort, Wii Fit, Wii Fit Plus). It's been like that for almost 2 years (save Wii Play). Where's even Punch Out and Metroid Trilogy, for example? 2 excellent, 85+, well-known franchises from Nintendo themselves. They're in the same pit as all the good 3rd party efforts.



Fact of the matter is, @Jay: we don't need to wait for November NPD figures to see this trend, as it's been very clear in the full NPD reports for the last few months (not the "summarized" ones) that the Wii is in freefall. and no, the sales are not rising. At all. Certainly not for 3rd parties. And it's not because they don't make good games.



So please cut the crap. I'm sick and tired of hearing "

3rd party publishers need to figure out how to create the right games for the Wii." (@John). That statement is 2 years late.





3rd parties have tried everything, none of it was all that worth it. At least not compared to returns on similar investments on 360 and PS3. Heck, even IWATA himself admitted that Nintendo has not successfully "upsold" enough Wii buyers.



If you're making more from your dollar on 360 and PS3 as a 3rd party, _why would you keep going on the Wii ?_ To make Nintendo happy ? To prove a point that potentially doesn't even exist? That's the only question worth asking.

brandon brown
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I beg to differ ken, sure nintendo has a huge head start, but what gave them that head start. Innovation.

Now this is all speculation, but i'm pretty sure, microsoft will get the same kind of response with natal that the wii got (Huge sales numbers). Furthermore, when sony competes with thier motion controller, it will put nintendo and sony on an even playing field (atleast in the eyes of the consumer). Sure the playstation may be behind now, but when you have two console that do similar things it then becomes a competition of games and features.



So that leaves us at my previous statement of its only a matter of time :P, it might take a year or two, but the chance of natal pushing microsoft into the number 1 position is defintly a possibly.



However, leaving all doom and gloom aside, i wonder what nintendos future plans are. It will be interesting to see how nintendo combats the current situation.

Yannick Boucher
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I can guarantee you that 3rd parties are shifting resources away from the Wii. And what the NPD analysis there doesn't do, is separate the Nintendo titles (and to some extent just the Mario + Wii Fit combo) from 3rd parties. This is an overall view.



If you break it down into Nintendo vs 3rd parties, it's extremely clear that there is no more space for the latter. But that isn't in the summarized or public analyses, like I said. It really looks like Nintendo is headed to be alone in their corner again, like they ended up with the GC, like they ended up with the N64.



And I say that with the utmost respect to them, mind you.

Yannick Boucher
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@Jerry :



"^^^ Yeah dewd, like every company that made games for the PS3 and 360 has made back their investment. Suuure they did. No company and dev ever went bankrupt making games for those systems (pffft! yeah I'm being sarcastic). As far as I know, no company has gone bankrupt because they made 1 Wii game (unlike what happened to several devs making 1 PS3 or 360 game *cough*Factor 5*cough*)Ascaron Entertainment*COUGH!!) ."



So what ? Up to them to know how high they can punch and have a proper risk analysis before they jump into a project. If you're bankrupt after making 1 NG game, I'm sorry, but that says a lot about how you basically completely went over that step, which is absolutely crucial. So that argument is virtually worthless.



Yes, the risks are higher on PS3 and Xbox 360, but the chances for return are higher too. Whereas on Wii, you don't spend much, but you're almost guaranteed to lose that money anyways, so which one do you prefer? A guaranteed loss, or a chance of a loss ?



As for your link, okay, what are you trying to prove there? We're not talking about hardware installed base, because it's already been clearly proven that there's no correlation (remember i said IWATA HIMSELF said Nintendo didn't manage to upsell their own Wii owners).

Fábio Bernardon
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What people fail to see is that Nintendo opened space for 3rd parties to publish their titles on the Wii without Nintendo's competition. Why do you think there have been less than stellar releases for the Wii up to now this year? Yet very few AAA 3rd party games have been released. So what Iwata said is basically, we can not count on them. We have to deliver the games ourselves. We let the Wii several months in their hands and they did nothing, now the Wii image looks bad. So we have to do it ourselves, again.



3rd parties still do not take Wii's audience seriously. On-rails shooters are not what people want. They want fresh, new and high-quality experiences. And Nintendo delivers it.



Also, Mario games sell better than other titles because 1) it has a strong brand behind it; 2) it has universal appeal; 3) undoubtedly high-quality (some people may not like it, but it has high quality). This results in extremely successful sales numbers for them.

Yannick Boucher
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@Christian: Ubisoft lost LOTS of money on the Wii this year. Check their financial results posted just today if you want the proof, it's all black on white. EA is shuttering it's Wii development in Montreal. MARIO & SONIC at the Winter Olympics is a gigantic flop compared to the previous one, despite equivalent quality... (so you can't use the "no strong brand" argument there). And don't make me bring up The Conduit and MadWorld again. So that leaves...



EA Sports Active... a Wii Fit alternative. THAT'S what sold. Is that really a good measure? Does that show a healthy (no pun intended) market? Are we all gonna come out with our own Wii Sports and Wii Fits because that's all that sells?



$5 million spent on marketing a great 360/PS3 game is almost certainly a better ROI than $5 million spent on developing a Wii game at this point. So I have this $5 million here. I'm trying to maximize it in a recession. What do you think I'm gonna do?



I dare you guys to check any big publisher to see what they're doing with the Wii for the next year. Expect a -sharp- drop of 3rd party support. Then come back after a few months and we'll talk some more.



I'm telling you to go fetch the Metroid Prime and Punch Out sales because I'm trying to prove the point that even Nintendo's own quality games don't sell all that well on the system.



It is working out better on 360 and PS3 for 3rd parties. So accept the reality. If Nintendo is successful alone in their corner on the Wii (like they were on GC, and N64, I repeat, so that'll be 3 generations of Nintendo more or less going at it alone, while 3rd parties are perfectly successful on other platforms, and you certainly can't blame "3rd parties not having taken advantage of innovation" on the GC), let them be, and good for them. 3rd parties will be over on the 360 and PS3, with hits like MW2 or AC2. (anybody wants to argue there's no quality there?)



Anyways, I'm done here. I'm looking at current numbers, I'm looking at current analyses from this guy and a whole lot of others, including Iwata and my own, and it's all pointing in the same direction. If you wanna just rehash the same "blame the 3rd parties for not making an effort" argument we had 2 years ago, I'll leave you to it. If you wanna try and come out with a good Wii game next year to prove us all wrong, then by all means, be my guest.

A W
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The reason 3rd Parties fail on the Wii is because they can't deliver the experience in game players want with the Wii-mote. Too many of them still look at the shiny aspect of how games look over the motion aspects of how games control. If 3rd parties want better returns on the Wii, they have to develop for the controller rather than the look. Nintendo faces a uphill battle with 3rd parties because of this. If motion control as an a pack in with multi-millions of consoles sold results in fad, then imagine what motion control as an add on with a few million consoles sold will look like. The analyst should find a way to give advice for solutions to the motion controller problem rather than resulting in the same old rhetoric year after year concerning Nintendo. It would seem that rather talking "Doom and Gloom Theory" they would talk directions 3rd parties need to go in to survive in the motion control era. This is because after the release of the motion solution to combat the Nintendo disruption are in consumers' hands, motion control will define all three systems and no longer just one.


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