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Analysts chime in on Wii U's mid-term forecast

What happens when Santa returns to the North Pole and the first wave of consumer fanaticism for the Wii U has started to calm down? That's when Nintendo's new system will really be put to the test.

Chris Morris, Blogger

November 16, 2012

4 Min Read

The Wii U is going to be a big seller this holiday season. That's about as bold a prediction as saying Black Ops II will top the November NPD charts. But what happens when Santa returns to the North Pole and the first wave of consumer fanaticism has started to calm down? That's when Nintendo's new system will really be put to the test. "Scarcity during the holidays of 2012 will stoke pent up demand all the way though spring time of 2013," says John Taylor of Arcadia. "Where it's going to get to be a little more challenging is around the May time frame or when warm weather shows up again. I think Nintendo is going to really need to demonstrate what is truly amazing about this by that time." "Naturally there are enough curious gamers and Nintendo fans that will want to try it out - and that will eat up the initial supply," agrees Colin Sebastian of R. W. Baird. "The real issue comes in about six months. You'll know more positively at that point how the console is viewed by consumers." Pretty much every analyst who covers the video game industry is wary of spring 2013 for the Wii U. But none is more vocal about it than Wedbush's Michael Pachter. "The Wii U will quickly lose positive momentum from its launch due primarily to pricing," he said to investors in a recent note. "We believe there are already a number of cheaper, comparable alternatives." Pachter's got some executive heft behind his pricing complaints. Ubisoft CEO Yves Guillemot, one of the Wii U's most ardent supporters in the third-party publishing community, has also expressed concerns with the system's price. Ubisoft, in fact, is about the only publisher so far that has shown a willingness to go "all in" with the system. And that lack of excitement from other third parties is only stoking analyst concerns about the system's long-term software potential. "I think there's room for Nintendo this year, but it's very much their audience," says Eric Handler of MKM Partners. "Can they expand beyond that audience? All of the third-party publishers are being very cautious with the Wii U. We're not seeing many Wii U specific titles. They're ports. No one is really pouring a lot of money into it right now. … Third-party publishers recognize that Nintendo garners the lion's share of the software market for its own platforms. And it's very tough to change that." Further complicating things is the lack of a real non-gaming appeal for users. While console owners – both mass market and hardcore – are using their game systems for other entertainment choices more frequently these days, the Wii U doesn't really offer much to differentiate itself from current offerings. That could discourage sales to casual gamers – and it's a problem that could dampen sales of the next Xbox and PlayStation down the road, too. "Half the time people are using their consoles to do things other than play games," says Taylor. "And all of the existing platforms do that just fine. … The thing that made the PS2 this amazing addition to someone's living room was that it doubled as a DVD player, which few people had at the time. So a lot of people bought that for secondary purpose. In the case of the new platforms, everybody's already got streaming access to Netflix through their existing box." Despite the hurdles, though, no one is counting Nintendo out. The company's base audience hasn't wavered – and there are fewer things in this industry that are more certain than the success of a Mario title. But is that enough? With investors spoiled after the unprecedented success of the Wii, any step backward will be viewed as a failure – and luring a mass market audience that has become used to $5 games back to a system that charges $60 per title will be a challenge. "There's still a core market for Nintendo," he says. "It just remains to see how big that core audience is. … The Wii U really needs to find a market beyond the Mario crowd." At the same time, the company has to demonstrate to those potential buyers why the Wii U is a must-have system. "One thing that could keep demand strong well into the summer is a new game we don't know about –and anything's possible," he says. "The other is if Nintendo is successful in explaining to people why the asynchronous play and the tablet are really, really fun. Nintendo needs to demonstrate that the tablet, dropped into a 3D world, enables the user to see things and do things that are otherwise not possible on any other system right now. If they ramp that into a fun factor of 10X and communicate that, I think they can sustain the momentum."

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