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Can Nintendo turn Wii U around?

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Wii U has been a huge disappointment for Nintendo. And although the company's boss Satoru Iwata has been talking up post-Mario Kart 8 sales, it continues to lag behind expectations.

Nintendo is the most venerable name in gaming and yet Wii U has not sold nearly as many units as the company hoped, planned and budgeted. It points to percentage increases in sales for the April-September period,  but the actual hard numbers of consoles sold remains sluggish. As a result, Nintendo's future in the console business looks murky.

Of course, those of us who care about this company, who admire its achievements, who like its arrogance and bravado, can take some consolation in the fact that Nintendo has been written off as a force in years gone by, only to come back in spectacular fashion. But rarely has the situation looked as dire as it does right now.

The question has to be asked. Can Nintendo get through this rough patch, and emerge once more as a formidable power in gaming?

Wii U is falling behind

Wii U is the slowest selling console in Nintendo's history, failing to even match the previous low point set by GameCube. In comparison to Wii, its shining predecessor, Wii U sales are catastrophic.

Almost two years into its life, Wii U has so far sold only 7.3 million units into retail. After two years on sale (including holiday sales), Wii had sold 44 million. It went on to sell over 100 million.

If you look at the history of Nintendo consoles, without Wii, there is an awful trend at work. In the 1980s NES sold 60 million units. Each subsequent console has sold between 10 million and 20 million fewer units (excepting Wii and handhelds).

So we have SNES (50M), Nintendo 64 (30M) and GameCube (20M). Extrapolating the console's sales forward, Wii U will likely sell more than 10 million units, but even 20 million must be counted as a tough target. After two financial years, GameCube had sold about 9 million units. Its second year was its strongest in the console's lifespan. (The two periods do not overlap exactly, as one is based on fiscal year time-frames, but the comparison is instructive.)

At this point, it's difficult to see what might turn the machine's sales curve towards a more impressive result, though there are some options (discussed later in this article).

To be clear, great software does sell hardware, but I don't see even the biggest games scheduled for release on Wii U adding the sort of numbers that are going to get  the console to serious mass-market numbers.

Despite a price advantage, the Wii brand name and a full year head-start, Wii U is now behind PlayStation 4 and about on parity with Xbox One in sales. This must be especially galling for Nintendo, when you consider what a hash Microsoft made of its launch.

Back in the summer, Sony said it had shipped 10 million units. Xbox was at 5 million in the spring, and has since enjoyed a significant boost in sales from aggressive price cuts. These consoles have had less time on the market than Wii U, and are more expensive.

Nintendo has repeatedly been forced to lower its own forecasts for hardware sales, only to then miss ever more modest targets. Game publishers have long since ceased to provide anything more than the most basic support. Despite Iwata's talk of increased sales with the coming of Super Smash Bros. it does not seem probable that third-party support is going to pile back into Wii U.

It's Not all Doom and Gloom

Nintendo can take some comfort from the continued success of 3DS, which has sold 45 million units, but the handheld games console market is also in decline, squeezed by smartphones and tablets. 3DS sales slowed in the last six month period, down from 2.5 million last year to 1.3 million this year.

There is good news in the number of games being sold for Wii U. Each owner has bought around six Wii U games; over 40 million in total. This is a way higher ratio than rival consoles, which were being pegged in the two-to-three range earlier this year. More significantly, a large proportion of those games are likely to be first party titles from Nintendo.

Undoubtedly, Nintendo still knows how to appeal to games players of all stripes. There is magic in its touch. But while the likes of Mario Kart 8 and the forthcoming Super Smash Bros. move the needle, they are unable to overcome consumer resistance to the hardware. Even in a best case scenario, it's hard to see this holiday's line-up turning Wii U into the sort of blazing success story Nintendo requires.

It's true that sales of Wii U in the last six months, at 600,000 units, doubled the same period in 2013, and that makes for a nice graph. Nevertheless, these are not the sort of numbers that a company of Nintendo's pedigree can hang its future upon. While the six monthly fiscals announced this week were broadly positive, the company is still operating at a marginal operating loss, on the back of repeated and significant losses stretching back to the beginning of the decade.

wii u

There is little sign that Nintendo is a company that has anything like a vision for the future. Its big strategic play for the holidays is Amiibo, a belated decision to get into the Skylanders-style model market.

A lack of Wii-like innovation is the main problem with Wii U. Its significant selling point as a piece of hardware is the GamePad; itself a reaction to the growth of touchscreen devices encroaching on Nintendo's traditional family couch-play heartland. Nintendo is a company that seems to spend its time looking over its shoulder.

Consider also its best and brightest Wii U games; Mario, Mario Kart, Zelda, Pikmin, Super Smash Bros. All great games. All old franchises.

So, what's next?

Of course, nay-sayers are forever writing Nintendo off as a spent force in the hardware business. During the GameCube years, it was not uncommon to hear analysts and investors making the argument that Nintendo should get out of hardware and focus on making games for other companies. When 3DS struggled at launch, there were calls for the company to fall in with Apple and Google, and make games for those platforms.

Back in 2011, I wrote that Nintendo will "never surrender." But a lot of money has flowed out of its coffers since then and still we await a sign that this is a company with a long term plan.

The company has stubbornly fought back each time it's looked licked, by offering up innovations to sit alongside its array of great franchises, its knack for making brilliant games and its loyal fanbase.

But none of those things look powerful enough to rescue Wii U, nor to turn the tide on the smartphone revolution, to face the stiff competition posed by Sony, Microsoft and myriad other entertainment options. So what happens next? Let's look at some of the options ...

Nintendo could shock everyone by making its games available on non-Nintendo platforms, quietly distancing itself from the Wii U. From a cultural point of view, this seems unlikely.

It could also write off Wii U as a bad job and try to take another swing at launching new hardware, though this would be expensive and would test the fan-base's patience. The company would also need to come up with something pretty spectacular.

nintendo fans

It could muddle through, place its hopes in games like Super Smash Bros. It could seek to grow its share by offering more great games, and by plundering its own vast heritage and making a big digital play. A price cut looks likely, and there may be a significant bump to be had there.

Or it could reconfigure the Wii U at a way lower cost and seek to win on price, though this would also be expensive and runs the risk of creating a user-base that is unwilling to spend much on games.

There's also the option of taking a sharp turn, as the firm did with Wii;  re-imagining gaming, possibly with an eye on the virtual reality market. But VR, with its head-in-the-machine dynamic, seems very unlike family-friendly, social Nintendo. Also, while interface innovation has always been a strength, Nintendo has never really been much of a technology leader.

Possibly, Nintendo could go in another direction, focusing its efforts on a boutique-market of highly active fans playing a small number of games. The diminishing role of retail in consumer electronics makes this theoretically feasible, though for a company grounded in mass-market toys, it looks like a weird fit.

None of these choices seem that attractive to a company that has always been most comfortable controlling its own destiny, keeping third-parties at arm's length and playing smart with retail and marketing, over technology and hype.

A games console market without Nintendo as a significant factor is a pretty grim prospect for anyone who cares about games. And yet, with consoles becoming entertainment hubs, and Nintendo placing bad bets on the Wii U's adoption rates, radical change looks like the only option available.

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