The last couple of years haven’t been the most successful in the history of the legendary video games manufacturer Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) (TYO:7974). After their Wii helped revolutionize console gaming and the video games industry with its motion capture technology back in 2006, things looked rosy for the Japanese company. At first the Wii sold like hot cakes and attracted new consumers who had never bought a video games console before, and given the relatively straightforward technology associated with it, Nintendo was able to manufacture and sell the console at a profit, despite a much lower price point than either their main competitors Microsoft Corporation (NASDAQ:MSFT) or Sony Corporation (NYSE:SNE) (TYO:6758) were able to offer.
Nintendo's hardware manufacturing business to end?
Unfortunately, over time the machine began to look dated, and the core gaming audience which needs to be attracted to a console had long since ditched the Wii by the time it came to the end of its lifecycle. Overall it was still a success, shifting over 100 million units, and spawning two of the most successful video games of all-time in Wii Sports and Mario Kart Wii. But it was clear by the time that the Wii U console was announced and then later released that the device would be a make or break console for Nintendo, which could signal the end of its hardware manufacturing business should it be unsuccessful. This wouldn’t be the first time that a major console player had rapidly disappeared, after the spectacular rise and falls of both Atari and Sega in previous decades.
The malaise at Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) (TYO:7974) has been reflected in its share price which declined nearly 50% last year alone.
But which had fallen nearly 300% from the highs of 2009:
PS4 could outsell Wii U
Consequently, a lot was expected and hoped for from the Wii U, and Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) (TYO:7974) certainly attempted to innovate as usual, by including a unique tablet-like controller with the console. However, despite the fact that there were some impressive looking launch titles and that this was the first Nintendo console to run in full HD, initial sales were less than Nintendo bargained for, and their position as a major console manufacturer looked extremely perilous indeed. Analysts are already predicting that the recently released PS4 could outsell the Wii U worldwide by spring, despite having been released one year later.
Thus, the coming year is an extremely critical one for both Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) (TYO:7974) and its new console, as if the Wii U fails to gain some traction in the marketplace, it may be unfortunately doomed to failure along with the company. It seems certain that Nintendo would switch its intention to being a pure software developer, akin to Sega, rather than disappearing completely, but they still have hopes of retaining their position of being a major player in the console market. And many people would be extremely sorry to see them go, given their affection with which games such as Super Mario, Zelda and Mario Kart are held in by gamers.
So Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) (TYO:7974) needs some good news on the horizon, as the quality of games it produced in 2013 was very good, but it sales rather poor. However, the situation is far from hopeless for Nintendo with two crumbs of comfort for the Japanese corporation to cling to evident.
Firstly, sales of the Wii U have picked up around the Christmas period. It is clear that a couple of bundles that Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) (TYO:7974) have put together has caught the attention of consumers, and the sales figures for the Wii U over the festive season were the most encouraging that the console has acquired thus far. There has even been a rumor reported that the Wii U outsold the Xbox One in the week before Christmas, although this hasn’t been confirmed as of yet.
Secondly, there are some massive titles coming up for Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) (TYO:7974) in the New Year, and their line-up actually looks every bit as impressive as either that of Sony Corporation (NYSE:SNE) (TYO:6758) or Microsoft Corporation (NASDAQ:MSFT). The new and imminent Super Mario 3D World looks particularly incredible, and over the years the Mario games have helped shift an awful lot of consoles. I’m certainly considering picking one up in the New Year given the price point it’s currently at and the forthcoming games for the console, which include a new Super Mario Kart, Donkey Kong Country, Super Smash Brothers, Bayonetta and Hyrule Warriors. Additionally, information on Zelda will likely be appearing during E3 as well.
But third-party development for the console has, while not drying up completely, seriously declined, with the big boys evidently concentrating on the more powerful PS4 and Xbox One platforms. This is a major problem for Nintendo as while its own games are undoubtedly fantastic, every console is to a greater or lesser extent reliant on third-party titles from the likes of Electronic Arts Inc. (NASDAQ:EA). If Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) (TYO:7974) is to continue to attract third-party support then the Wii U must have a big 2014.
The key element to this is going to be delivering at least one title that offers something absolutely unique. We know with almost total certainty that Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) (TYO:7974)’s titles will be impressive, but it has been observed that the Wii U software has yet to truly take advantage of the unique controller system that Nintendo has put at the center of this console. It is a fact that both the PS4 and Xbox One are bigger, brasher and more powerful consoles, but Nintendo’s approach has always been to innovate and deliver affordable content, so they need to show that this quality is still intact within the first few months of 2014 if they are to have any hope of competing with Sony Corporation (NYSE:SNE) (TYO:6758) and Microsoft Corporation (NASDAQ:MSFT).