Game on for Nintendo: the new Wii U has a smart act to follow
The success of the Wii U is critical for Nintendo. The company is determined to return to profit after reporting its first loss. The sales of its 3DS handheld console, released in February last year, failed to live up to expectations, forcing Nintendo to cut its price by about a third in August.
The Wii U has been a long time coming. Nintendo was the first of the major console makers to jump in with the next generation of games consoles, announcing it at the E3 exhibition in 2011.
But despite fears that momentum behind the new release would slide, the initial sales in the US have been positive. The console has been on sale there for almost two weeks, as the company tried to take advantage of the shopping season that kicks off around Thanksgiving . In its first week, it notched up 400,000 in sales, and sold out in many retail outlets.
The Japanese launch will come on December 8th.
Still, the successor to the Wii has a tough road ahead of it. Although analysts have predicted a successful launch, keeping that momentum going will be a challenge.
Ahead of its launch, research firm IHS predicted the Wii U would outperform the sales of its predecessor in the opening months as fans of Nintendo, starved of new hardware, rush get their hands on the new console for Christmas.
A research note from IHS’s senior principal analyst, head of games Piers Harding-Rolls, predicts sales of 3.5 million worldwide for the console by the end of December . Looking back at Wii sales, the console notched up 3.1 million in the same period shortly after its launch in 2006.
That could mean shortages over the Christmas period.
“As a result of the tight inventory control Nintendo employs to manage its supply chain and strong consumer demand in these opening weeks of launch, we believe it’s highly likely that retailers will experience some Wii U shortages in the run-up to Christmas. Stock will be replenished in ongoing fashion, but some unlucky shoppers may well miss out,” says Harding-Rolls.
But that momentum may not hold, he warns. According to IHS forecasts, sales of the Wii U over the first four years of the console’s life will reach only 70 per cent of the Wii. And when you look at the original Wii’s sales in its first week, the Wii U is already slightly behind. In 2006, the Wii sold 600,000 units in its first seven days on sale.
Wedbush Securities analyst Michael Pachter says Nintendo could sell about 10 million units a year after the initial launch.
With Nintendo making its move into the next generation of consoles, the pressure is now on Microsoft and Sony to unveil their plans for the games of the future.
Videogame sales have declined in recent months, partly due to the upcoming release of the Wii U and the ageing of existing platforms, and also to the rise in popularity of mobile gaming.
It’s a tough market for all the major games makers, and the success of new platforms will be tested in the coming years.
“The Wii U won’t be as popular as the Wii,” says Takashi Oka, a Tokyo-based analyst at TIW. “Nintendo won’t be able to return to the same level as before.”