Games Industry International has gathered together a group of industry analysts to find out whether Nintendo is making the right call by not participating in a press conference at this year’s E3 event in June. Industry analyst Brendan Sinclair says that the company isn’t having a press event this year simply because it knows it can’t compete against the next Xbox from Microsoft and the PlayStation 4 from Sony. Here’s Sinclair’s thoughts.
“Yes, Nintendo bailing on the Big Three press conferences is an admission that the company doesn’t have faith in its ability to go toe-to-toe with Sony and Microsoft’s new system unveilings. But that’s just being realistic at a time when Nintendo can ill-afford to blow money for the sake of keeping up appearances. But I think the more interesting thing this move tells us is not how Nintendo feels about its own efforts, but how it feels about the relevance of the gaming media in general, and E3 in specific.
“By putting its announcements into a series of Nintendo Direct videos, Nintendo has realized that its fans want big, eventful news, but they don’t actually need a big event to deliver it. All they need is a pre-recorded streaming video of announcements and a countdown clock. If Nintendo can provide that, gamers will show up in droves, because it delivers on the things they value (excitement, immediacy, and actual news, in that order) while eliminating things they don’t value (an expensive venue, the uncertainty of a live event, and the media’s function as a filter of information).
“As for E3, it’s clear the show doesn’t work for everyone; it’s just too big, too busy, and too expensive. The industry tried adapting to those realities in 2007 when it had a radically downsized E3 in Santa Monica. The show received a mixed reaction from attendees and publishers alike, and was returned to the cavernous Los Angeles Convention Center the following year. But the gaming industry was still growing in 2007, just a year ahead of its all-time peak. If the Santa Monica experiment were held this year, it’s hard to picture the same support for moving the show back to essentially the format that everybody complained about in the first place. It’s doubly unlikely once you consider the products E3 was designed to promote–packaged retail games–are no longer the focus of the industry. Times are tough, and companies are increasingly pragmatic when it comes to expenses of any kind.
“Nintendo’s move is simply an acknowledgement of this, and an attempt to optimize its limited resources, putting them where they will do the most good for business, not image. It’s an approach you can expect plenty of other companies to follow, which should be more concerning for the gaming media and E3 as a whole than it is for Nintendo.”
Games Industry International has gathered together a group of analysts to discus Nintendo’s recent fiscal report and the company’s move to appoint Satoru Iwata as CEO of the North American division. David Cole of DFC Intelligence described Nintendo of America’s marketing as being a “disaster on every single level.” Cole then went on to say that “they forgot Marketing 101 for the Wii U” and that “a change in execution was long overdue.”
“Nintendo of America’s performance the past couple years has been a disaster on almost every level. Much of this was due to lack of execution on basic stuff like product marketing. They forgot Marketing 101 for the Wii U and no product could have done well without basic marketing support. Clearly a change in execution was long overdue. The damage done is enormous but there is the possibility of a turnaround. The fact is that the general public is not really aware the Wii U even exists so it is an opportunity to almost start from scratch.”
Famed Wedbush Morgan analyst Michael Pachter has attacked the handheld market in the latest edition of his show, Pach-Attack. Pachter admits that Nintendo owns the handheld market and that’s one of the reasons why Microsoft hasn’t released a handheld gaming device. Pachter also says that while the PlayStation Vita is a great piece of hardware he believes that the device is a bit of a joke as third-party developers just aren’t supporting the system.
“The reason is that the handheld market sucks, and to the extend there is a handheld market and Nintendo owns it.”
“The Vita is a joke. It’s a wonderful, wonderful, wonderful piece of hardware and nobody owns one. The reason nobody owns one is It’s too good, It does too much. Developers aren’t making games for it because the market is too small.”
“You’re not going to get a big install base with the Vita at this price, and even though It’s a really slick device, if there is not a lot of people who own it, you’re not going to get a lot of sotfware. And It’s a vicious cycle, if you don’t have software, you’re not going to buy the Vita. If you don’t have Vitas, you’re not going to get software. So, the Vita sucks, Sony has no prayer of making money on the Vita.”
“The handheld market is not as big as It used to be. With the 3DS I think Nintendo is probably going to continue to do ok, 15 million a year, that’s a nice market for handhelds. With the Vita on the market, they (Sony) are going to make 5 million a year, why do we need a third (handheld)? All that would happened is that demand of 20 million handhelds will get split three ways instead of two. Nobody makes money selling five millions units a year.”
Wedbush Securities analyst Michael Pachter delivered a presentation during this year’s South by Southwest (SXSW), which is taking place right now and ends March 17th. During his presentation, partly because he thinks Nintendo’s latest console is ‘too similar’ to current-generation consoles, including the aged Xbox 360 and PlayStation 3, Pacther said that the Wii U is likely to sell a measly 30 to 50 million units in its lifetime. Also, during the same presentation, Pachter said he thinks the PlayStation 4 and the next Xbox will have sold a healthy 85 to 95 million units each, at the end of their courses of being on the market.
Baird Equity Research analyst Colin Sebastian believes that the Wii U genuinely lacks broad appeal beyond the core Nintendo fan base. Sebastian listed this as an issue in the latest note to investors from Baird Equity Research. He went on to say that Nintendo really need to market their major franchises and also retain third-party developer support in order for the console to flourish.
“We remain concerned that Nintendo’s innovative Wii-U console will lack broad appeal beyond the core Nintendo fan base.”
“Following a somewhat lackluster launch and holiday selling season, Nintendo will need to bring to market major first-party releases (Zelda) and retain the support of key third-party developers to reduce market share losses. In a negative scenario, Nintendo will be forced to prematurely lower the Wii-U price, and over the course of this cycle, we expect consideration will be given to extending first party franchises to other platforms.”
Cowen & Company analyst Doug Creutz has said in a research note that Wii U video game sales are far behind launch levels for both the Gamecube and Wii. The low Wii U game sales were apparently masked by the Nintendo of America press release which concentrated on Wii U hardware revenue sales. In the United Kingdom, no exclusive Wii U game has entered the top 40 all format chart for the past three weeks. Here’s what Creutz had to say on Wii U game sales.
“Software sales for the Wii U remained well behind launch levels for the original Wii and GameCube in December.”
“Totals for the November-December period were -43% lower than software sales for the Wii and -50% lower than those for the GameCube.”
Sterne Agee analyst Arvind Bhatia believes that Wii U hardware and software sales at US retailer GameStop are far below the company’s initial expectations for the holiday season. Bhatia says there were an abundance of Wii U consoles sitting in back rooms in GameStop throughout the country. Arvind said that the Deluxe model was selling far better than the basic console, due to it being better value for money. Bhatia concludes that the Wii U launch has been slightly disappointing.
EEDAR analyst Jesse Divnich thinks that Nintendo would do best to distance itself from both Sony and Microsoft and focus on its own identity for the Wii U. Divnich says that there is already two systems that satisfy the core experience, so Nintendo really needs to differentiate itself from the pack.
“It really comes down to messaging, and I feel like the Wii U is in an awkward place with its identity.”
“On one side of the coin, Nintendo has done an excellent job at messaging to the casual and mainstream audience. They’ve done enough to convince the mainstream that the Wii U is a worthy upgrade to the Wii.”
“Don’t get me wrong, all the core launch titles play beautifully; however, the problem is that gamers don’t want a core experience on the Wii U. There is already two systems that satisfy the core experience.”
“Nintendo has always operated at their own pace. It has worked well for them and I don’t think the Wii U is a scenario where Nintendo was rushing to market. There will be issues, however, if Nintendo attempts to compete with Sony and Microsoft at their own game (again, delivering core experiences, superior online services, etc.).”
UK analyst group IHS Screen Digest is convinced that Wii U will outsell the original Wii during the first three months of the hardware going on sale. The firm then expects it will sell more than 50 million units in the next four years. IHS Screen Digest says that the innovation regularly shown by Nintendo, as well as strong first party software, won’t be enough the propel the console above sales of the Wii.
“Pent-up demand from Nintendo evangelists, many of which were introduced to the console market through the success of the Wii, is predicted to drive an explosive start for the Wii U.”
“There is no doubt the Wii U underlines Nintendo’s credentials as an innovator, introducing the first dedicated and fully integrated second-screen game experience to the market. Yet the fragmented landscape for games consumption and the proliferation of always-on, connected devices, means that product innovation alone is not enough to stay relevant to today’s mainstream consumer.”
“This time around, Wii U’s pure innovation, coupled with a limited volume of high-quality Nintendo software, will not be enough to drive the ongoing sales momentum we witnessed with the Wii console, especially at a higher price point.”
“Nintendo is still some way short of delivering a comprehensive engagement-led value proposition at the launch of the Wii U.”
- IHS senior principal analyst Piers Harding-Rolls
Colin Sebastian of R.W. Baird is under the impression that Nintendo likes to create the perception that their system is under demand by managing their distribution channel. Sebastian says that the problem Nintendo faces is under-supplying the market so that Christmas shoppers decide to purchase an Xbox 360, or PlayStation 3, instead of Wii U.
“Nintendo tends to manage the distribution channel to generate some sort of perception that its [system] is in demand. I think seeing these sellouts on some of the websites is not a negative indication. It’s either neutral or slightly positive, but it’s not conclusive. What’s most important for Nintendo is what happens at launch. You want a combination of as many units as possible, that are also perceived to be in short supply, but you don’t want to under supply the market so people go out and by something else”