Nintendo's Future Looks Bleak in Light of Wii U Failure

Nintendo's (NASDAQOTH: NTDOY  ) current living room console, the Wii U, has been an abysmal failure. Since its release last November, Nintendo has shipped fewer than 4 million units, a far cry from the 5 million the company had originally expected to sell by the end of March. The situation is unlikely to improve -- soon, Nintendo's Wii U will face competition from both the PlayStation 4 and the Xbox One.

Thankfully, Nintendo's handheld, the 3DS, continues to sell well, somewhat offsetting the Wii U's failure. That trend should accelerate next quarter, when sales of the company's latest Pokemon titles are factored into earnings. Still, as Nintendo becomes more reliant on its handheld, the company becomes ever more vulnerable to smartphone and tablet-based gaming, especially as Samsung (NASDAQOTH: SSNLF  ) and Apple (NASDAQ: AAPL  ) look to more aggressively target the space.

Nintendo is now a handheld gaming company
Nintendo's dominance of handheld gaming stretches back some 20 years. First with its Game Boy, and then with the DS, Nintendo's handheld consoles have consistently outsold rival machines from companies such as Sega and Sony. That trend continues with the 3DS; in fact, Nintendo's 3DS was the best-selling video-game console in the U.S. from May through September.

It will probably also be the best-selling console in October. Pokemon X and Pokemon Y were released Oct. 12 and sold 4 million copies in just the first 48 hours, becoming the fastest-selling 3DS games ever. Alongside Pokemon, Nintendo also released the 2DS, a stripped-down version of the 3DS that costs $40 less.

Worldwide, Nintendo has now sold 35 million 3DS consoles, giving it a significant platform from which to sell software. In the six months ended in September, Nintendo sold more than 27 million 3DS games. Yet despite the success of the 3DS, it wasn't enough to overcome the failure of the Wii U: Last quarter, Nintendo recorded an operating loss of $187 million, the byproduct of taking a loss on Wii U hardware.

Samsung looks to gaming to set itself apart
But as Nintendo becomes reliant on handheld gaming, it makes the company particularly vulnerable to competition from smartphones and tablets. Although mobile gaming has exploded in popularity, its growth has not affected the core gaming market -- but that could change.

Samsung has begun to aggressively move into gaming as a way to differentiate its hardware from its Android rivals. At its developers conference last week, Samsung unveiled a software development kit that allows games to be beamed from Samsung tablets and smartphones to compatible smart TVs. This technology, paired with Samsung's proprietary controller, will allow Samsung's Galaxy tablets and smartphones to act as mobile consoles.

If it takes off, it could be incredibly popular. While Nintendo's 3DS sells well, Samsung's Galaxies absolutely dwarf it in total sales. Samsung's flagship Galaxy S4 alone sold 40 million units in its first 6 months on the market. Add in sales of its Galaxy Note phablets and its tablets, and Samsung's Galaxy platform is several times larger than Nintendo's.

Apple finally caves
Still, Apple's iPhone is a far larger threat to Nintendo than Samsung's Galaxies. The mobile-game developers I've spoken with tell me that Android's fragmentation and piracy make it a less attractive platform to work with. Apple's more locked-down iOS is more likely to sustain a large gaming scene.

Indeed, the iPhone is already a huge platform for gaming. According to Distimo (via Forbes), games bring in 79% of the all the revenue to Apple's app store. With Apple now paying developers $25 million per day, iOS has become a force in the video-game economy.

Still, most of the high-grossing games are simplistic titles such as Angry Birds and Candy Crush. They simply don't compare to the more engrossing titles available on Nintendo's platform. Not for long, though. Because the iPhone lacks buttons, developers are limited in the sorts of gaming experience they can offer -- but not for much longer.

Apple's most recent update to iOS, iOS 7, includes support for third-party controllers. Images of Logitech's upcoming controller, the Powershell, leaked online last week. An iPhone (or iPod Touch), paired with Logitech's controller, could be a potent alternative to Nintendo's handheld.

Can Nintendo survive?
Almost 40% of children under age 2 now use tablets or smartphones. That presents a serious challenge to Nintendo, as its inept Wii U console has made the 3DS the sole source of income at the company.

Samsung and Apple, the two largest mobile hardware producers, are moving aggressively into gaming. Major developers, including Activison Blizzard, Electronic Arts, and Square Enix, have begun to offer their titles on mobile platforms. If more complex mobile games appear, it will be nearly impossible for Nintendo to maintain its current business model.

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Comments from our Foolish Readers

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  • Report this Comment On November 03, 2013, at 8:25 AM, virgilcole wrote:

    It's all about the games. Make the games, and the consoles will sell.

    When Super Smash Bros. and a couple others come out for the Wii U, more consoles will sell.

    The PS4 has had a few games that were intended for launch with the console pushed back until next year, leading to some folks to cancel their pre orders.

    No one buys a console just because it looks nice.

    The Nintendo 3DS is gaming's best selling console only because quality games are made for it on a consistent basis.

  • Report this Comment On November 03, 2013, at 8:37 AM, MattLWCap wrote:

    How about Nintendo's IP? Its difficult to put a value on stuff like that, but what would a buyer like Disney pay for the right to own Mario Bros, Zelda, Donkey Kong etc etc that could be turned into movies, tv shows, theme parks, etc? Again, difficult to put a value on stuff like that, but if you take NTDOY, and net out the cash, i'd argue that you get the IP for a very low price... whether or not they can monetize it is of course another question, but it is worth thinking about.

  • Report this Comment On November 03, 2013, at 8:55 AM, angrypotato1 wrote:

    I hate it when websites say that competition from mobile platforms is a real thing. It will be a very long time before an iPhone can compete with any console. In addition, Mario or Zelda will never be on mobile platforms, as Nintendo clearly stated.

    Also, you cannot call the Wii U an "abysmal failure". It hasn't even been a year since it launched. To be honest, I believe this a bad article. You exaggerate to get people like me to read this and get angry. Well, it worked.

  • Report this Comment On November 03, 2013, at 9:16 AM, mlancaster wrote:

    40% r kids under age of 2 i mean we r talkin goo goo gaa gaa hear how much do they pay yall thats right i said yall to right such junk

  • Report this Comment On November 03, 2013, at 9:21 AM, Altyrell wrote:

    In my opinion, Nintendo should get with Konami and work with them to make a kickass new Yu-Gi-Oh! Game in which we could possibly use the cameras on the 3DS to bring our real life cards into the Game. Also, an Action Replay for the 3DS that works with 3DS Games would also be nice.

    Another thing, that might be fun or could help (in my opinion) is if they made a Digimon, or a Pokemon, or Yu-Gi-Oh! or some game, that incorporates the real world more so then they do currently.

    Cause like with Pokemon, imagine if they made a feature in which you could activate the 3DS's camera and as you, yourself, go for a walk and happen to walk through some woods, you could use the 3DS's cameras and spot some Pokemon that would typically appear in the woods in-game.

    This could be a sequel to Pokemon Snap or even taking pictures of said Pokemon could essentially be the equivalent to capturing it in-game, perhaps even giving said "Captured Pokemon" a brand new type of Pokeball. This would even include taking the Pokemon Game & 3DS to like the Beach and using the Camera Feature to see Water Pokemon out in the water while Beach Pokemon walking on the Beach or hiding on the Beach.

    Heck, imagine going fishing in real life with your family, then while waiting for the fish to bite you pull out your 3DS and play the Pokemon Game and use the Camera Feature to capture goldeen's, magikarps, etc or even going on a family vacation and seeing farmlands then pully out the 3DS & using the Camera Feature and seeing Tauros, Miltank, Skiddo, Gogoats, etc. Taking the commercials for Pokemon X & Y to a whole new level.

  • Report this Comment On November 03, 2013, at 9:40 AM, ron2cu wrote:

    I would have bought a Wii just to play Zelda or Metroid WITH a controller, not a wand. Nintendo missed the mark when they made games not able to be played with a regular handheld controller and lost a whole customer base by doing that.

  • Report this Comment On November 03, 2013, at 9:54 AM, HubbaHubba wrote:

    Make more games geared towards teens and adults instead of all the little kiddie games, the little kiddie games aren't bad but the lack of the more adult themed games is a killer

  • Report this Comment On November 03, 2013, at 10:03 AM, bmprsvz777 wrote:

    Your website likes to publish doomsday articles about Nintendo, it was the same story when 3DS started... It is so easy to be critical about work of other people, what did you actually achieve, what is your purpose in life except making bad news and spoiling others people joy? According to you Wii U is Failure, OK, my children have very different opinion, they love it, and I can not imagine how on earth they could play games like Pikmin or Lego on iPhone. The fact that Nintendo sold 4.000.000 units means that their product made some people happy, maybe not everyone, but still Nintendo brought some fun to many peoples lives.

  • Report this Comment On November 03, 2013, at 10:10 AM, GuitarJim wrote:

    "Images of Logitech's upcoming controller, the Powershell, leaked online last week."

    The Powershell is nothing more than a frame for an iPhone with a D-pad on one side and four buttons on the other. Lack of a traditional game controller is not why phones have stuck to simple 2D games. How about lack of 3D graphics hardware processing pipeline? How about the fact that a deeply immersive game will be several gigabytes in size (minimum), which nobody will want to download even with 4G, and the iPhone has limited internal memory to hold these massive games and no support for plug-in storage?

    The future of gaming on mobile devices is in the cloud. Those massive worlds will be kept on the servers. The mobile devices will only stream the video and audio that was rendered on the server. At that point, it won't matter which OS the user has. The only thing he or she will need to carry is a web browser with a fast data connection.

  • Report this Comment On November 03, 2013, at 11:38 AM, normgarry wrote:

    Kids aren't all stupid. They want smartphones and tablets instead of handheld games and will spend 3 times as much on a PS4 or XBOX1 than a Nintendo product.

    Nintendo's lack of support of Wii is what's killing WiiU. I've been with gaming since 1985. It's always the same with Nintendo- but now, EVERYONE SEES IT.

  • Report this Comment On November 03, 2013, at 11:41 AM, normgarry wrote:

    Nintendo's model for Wii: U doesn't even make sense. You can't use 4 Gamepads simultaneously.

    The Gamepad itself would make more sense as a portable internet-based gaming console, but our cellular connections aren't good enough yet.

  • Report this Comment On November 03, 2013, at 11:48 AM, Stealth2k wrote:

    "Samsung and Apple, the two largest mobile hardware producers, are moving aggressively into gaming. Major developers, including Activison Blizzard, Electronic Arts, and Square Enix, have begun to offer their titles on mobile platforms. If more complex mobile games appear, it will be nearly impossible for Nintendo to maintain its current business model."

    WHAT?????? and the same devs have 3ds games. So what????

  • Report this Comment On November 03, 2013, at 11:51 AM, Stealth2k wrote:

    Nintendo made 6 mil in profit last quarter more than Sony or MS

  • Report this Comment On November 03, 2013, at 11:59 AM, Stealth2k wrote:

    Future is incredibly bright actually. Year 1 Wii u was slow but it will continue to get better.

    3ds has no threats at all. If mobile was going to do something, it would have already,.

  • Report this Comment On November 03, 2013, at 11:59 AM, Stealth2k wrote:

    This site is selling ipads. You can see how bias it is.

  • Report this Comment On November 03, 2013, at 1:03 PM, blains2000 wrote:

    @Stealth2k I guess you missed last week's news where Microsoft announced that they had a first-quarter profit of $5.24 billion. That's with a B. Not the little m of Nintendo's $6 million profit.

  • Report this Comment On November 03, 2013, at 1:56 PM, CoreGamer5583 wrote:

    @trevelyan8, the only people who don't believe that the Wii U is dead, are the diehard fans who actually bought one! The rest of the gaming community has already made their decision, next gen hits in 2-3 weeks, and the Wii U is done. Why is that so hard to see?

  • Report this Comment On November 03, 2013, at 3:11 PM, trevelyan8 wrote:

    @CoreGamer5583 Because I'm a gamer that likes good games. Not just shiny new boxes. I don't necessarily have to buy the next big box just because someone tells me to. Nintendo has always made great games and continue to do so. Why do you think the PS4 is going to be so stupendous when Sony completely butchered the PS3? Why should I buy a PS4 when Sony's last attempt was an abysmal failure? There's a great '14 line up for the Wii U. Nothing overly stupendous on any of the "next gen" consoles.,,whatever "next gen" is.

    You guy ahead and buy what they tell you to. I'm going to buy great games. I don't care what box they come on.

  • Report this Comment On November 03, 2013, at 3:12 PM, TreSelor wrote:

    Again another attempt to bash a company (Nintendo). They show stock tickers but refuse to post stock tickers from Japan (where Nintendo is based) showing their stock at Y11,060 (About $110)

  • Report this Comment On November 03, 2013, at 3:27 PM, Stealth2k wrote:

    The system is not a failure. The ps3 and 360 sold around the same year one. Are those failures?

    no

    @blains2000 The game division showed no profit.

  • Report this Comment On November 03, 2013, at 3:28 PM, Stealth2k wrote:

    The fact is this site is hypocritical and ridiculous when talking about Nintendo

    The 3ds is selling well BUT its not selling as well as ds? backhanded compliments like that when Sony's vita is a flop, the ps3 is a flop.

  • Report this Comment On November 03, 2013, at 3:38 PM, Stealth2k wrote:

    2ds was to the top selling system in Europe and USA over the last few weeks not even including 3ds. Yeah mobile is the future LOL

  • Report this Comment On November 03, 2013, at 4:54 PM, typicalguy wrote:

    As soon as I saw the title of the article, I knew the comments would be spammed by angry Nintendo fans.

    The Wii U is selling worse than the 360 or the PS3 did at this point in the last generation. Also, the PS3 sold TWICE as much as the Wii U per month when it sold at it's absolute worst, had no games, and was $600.

    Most important, the fastest way to convince a consumer not to buy a product is to tell them that the product may be discontinued. Anyone with common sense would wait 3 months to hear if the Wii U will stay on the market or be in the clearance bins for $100. It's already an undesirable product from the consumer standpoint and this is simply Nintendo's management hammering the last nail into the coffin themselves.

    http://mynintendonews.com/2013/10/30/iwata-is-naturally-unha...

  • Report this Comment On November 03, 2013, at 5:11 PM, Stealth2k wrote:

    ^ Actually the wii u is on target with 360 and ps3 first year. But even if it sells less and it goes on to sell 50 mil is it a failure? no not really. Its a fun system and a lot of people are having one of the best first year lobraries.

    " the PS3 sold TWICE as much as the Wii U per month when it sold at it's absolute worst, had no games, and was $600."

    The ps3 was outsold by ps2 for 3 years.

  • Report this Comment On November 03, 2013, at 5:12 PM, Stealth2k wrote:

    You last 2 trolls are really funny. Yes, you posted the article with the financials.

    Better financials than sony or MS game divisions, and that does not even include the big windfall this holiday.

    Nintendo has sold the most software and hardware the last 10 holidays straight.

    But I asked some people, real journalists in this business. This site is a joke

  • Report this Comment On November 03, 2013, at 5:16 PM, Stealth2k wrote:

    The bottom line is Nintendo has the number 1 selling device in every region right now. They are fine.

    The Wii U will continue to get better in year 2 much like every other system in history.

    Those who doom stuff after 1 year, are really foolish

  • Report this Comment On November 03, 2013, at 5:18 PM, Stealth2k wrote:

    @CoreGamer5583

    "There goes Stealth2k again, running damage control for a failed console."

    Its called perspective for a year 1 system. Try it.

    "Wii U is a poorly designed"

    Backwards compatible, only new system that allows external drives, ect

    "feature-lacking:

    More features than the ps3 and 360 had at launch

    "gimmicky console"

    The best controller ever made

    "Nintendo thought they could just cobble another gimmick into underpowered hardware (like they did with the Wii), and have it "print money" for them. "

    Ps2 was underpowered, Hell ps4 is underpowered, its a mid level pc

  • Report this Comment On November 03, 2013, at 6:38 PM, Stealth2k wrote:

    Your one of the same people probably who doomed the 3ds after the first year with the vita coming.

    To you a system cant grow, cant be fun unless its selling at first place.

    Wii u has about twice as many featyres. It does have an internal HDD, jeez you dont even know what your talking about.

    And ps4 doesnt have mp3 support. Who cares.

    awww poor baby racing games arent as great? thanks to the touch screen puzzle games, VNs, and many other genres are better

    Keep trying though

    The ps4 is a mid level pc at best, and I still want one. Its about the games dude.

    Stop being a hardware whore

    Even the ps2 was mid level

  • Report this Comment On November 03, 2013, at 6:41 PM, Stealth2k wrote:

    Hell to you the N64 was probably a failure despite it having a wonderful library but sold less than the PS1.

    Stop focusing on sales and start having fun like a lot of us are with wii u in a year 1 when that isnt the norm

  • Report this Comment On November 03, 2013, at 6:42 PM, Stealth2k wrote:

    Grim future of wii u?

    how do you know, do you have a time machine?

    This same site did an article 3 years ago on the grim future of the 3ds?

    The site is generally known as a joke but I had to see for myself.

  • Report this Comment On November 03, 2013, at 6:53 PM, CoreGamer5583 wrote:

    @Stealth2k

    Give it up dude. You're not going to change the course of gaming history. If Nintendo had skipped the gimmicks and focused on a solid console, they wouldn't be in the place they are today. I used to be a huge Nintendo fan, still have all the old consoles (NES, SNES, N64, and GBA SP) and hundreds of games for those; but Nintendo's products since that time have been garbage. They need to stop with the lame gimmicks and just put out good hardware and good games, something they seem to have forgotten how to do!

  • Report this Comment On November 03, 2013, at 7:00 PM, Stealth2k wrote:

    I really should give up. Your not listening, your repeating yourself. Your speaking in generalized lies and half truths, like the site, you fit right in here.

    The 3ds and ds are garbage? ok dude.

    You do realize that since the GBA Nintendo has the most developed games over 80 on metacritic and game rankings than any other dev right?

    Including Mario galaxy 1 and 2 the highest rated games ever made?

    come on pal. Get with it.

  • Report this Comment On November 03, 2013, at 7:01 PM, CoreGamer5583 wrote:

    Also the Wii U does NOT have an internal HDD, wake up dude! It has a measly 8 or 32gb of internal FLASH MEMORY, not a hard drive! And the lack of analog triggers MATTERS for racing fans, Nintendo just basically thumbed their noses at ALL fans of racing games! And all you drones who claim the PS4/XB1 are just "weak PCs" have no clue what you are talking about! If that's the case, throw that POS Wii U in the trash can, because it is far, far below the PS4 and XB1!!! Wake up and see reality!!

  • Report this Comment On November 03, 2013, at 7:03 PM, Stealth2k wrote:

    Flash Memory is faster and more reliable than HDD, its actually better.

    Then Nintendo is doing what Sony and MS refuse to do and allow external cheaper harddrives for choice.

    LOL.

    Racing fans? seriously? The games still play. The touch screen adds more than it subtracts.

    I actually have a PC I built 2 years ago that is stronger than the PS4, thats how weak it is.

    I am not sure if your joking but speks have 0% to do with a platforms success.

  • Report this Comment On November 03, 2013, at 7:06 PM, Stealth2k wrote:

    I see you just created your account today to make trouble or fool around, I guess I should not take your posts seriously. huh?

  • Report this Comment On November 03, 2013, at 8:44 PM, joujou77 wrote:

    I think these Nintendo doomsday articles will only help Nintendo sell consoles. Not to mention Smash Bros. and Mario Kart will be released next year. And late this month a Mario 3D game will be out.

    The wii U launch reminds me a lot of the gamecube launch where they had a system but only a few games worth buying it for. My biggest issue with the wii u was the fact that they have you reuse your old wii motes. And they are still trying to push motion gaming as the main way to play their games. But the gamepad seems like a cool concept.

    And another thought about Nintendo not having what MS and Sony have on their consoles. They don't have a nintendo music service. But both MS and Sony have one. But itunes kills both of them in popularity.

    Both MS and Sony have movies or video service yet there are plenty of those out there and all you need is your tv and a cable box or a blu ray player or smart tv to use those services. I really believe these are the things people don't buy consoles for but use the services out of convenience rather than preference.

    I'm buying a wii u because I've bought every Nintendo console that has ever been released. And only one of them ever broke. And that was my NES. The one area where Nintendo excels is in their quality of product.

    I also have a ps4 on pre order and I know at some point in the next few years I will replace my 360 with an xboxone. And I'm sure there are plenty of people who end up buying all three gaming consoles at some point within the consoles lifetime.

    So when you buy one you aren't necessarily choosing one over the other. But I don't expect the wii u to outsell either xboxone or ps4. But that doesn't mean it can't be fun to play. If I had that attitude I never would have bought a gamecube or N64. And would have missed out on some awesome classic games.

  • Report this Comment On November 03, 2013, at 9:16 PM, CoreGamer5583 wrote:

    You guys are all right, Nintendo is in big trouble with the Wii U. If they don't see a huge increase over this holiday, they may just pull the plug on the whole system! See this article on mynintendonews.com:

    http://mynintendonews.com/2013/10/30/iwata-is-naturally-unha...

    "Iwata says that if things don’t turn around this Christmas then Nintendo executives would review the situation to decide what to do about the failing console."

  • Report this Comment On November 03, 2013, at 9:21 PM, Stealth2k wrote:

    @joujou77

    That is a very mature post. Surpised to see it.

    I have all the consoles too and am having fun.

  • Report this Comment On November 04, 2013, at 11:32 AM, prginww wrote:

    If motley fool were unbiased why would they write a Nintendo is doomed article every 2 days?

    Core u brought that article Out of context, thats not what iwata ment but Microsofts spin doctors surely love to post that crap

  • Report this Comment On November 11, 2013, at 4:17 AM, Legacy95 wrote:

    This article looks bleak, please delete it, burn it, and get a proper life. I hate fanboys. I'm not really a fanboy, I grew up with Nintendo. Everybody thinks Nintendo is 'kiddie', but not really. They just WANT to create awesome games, not dark, dirty, foul, disgusting and gritty games with extremely bad graphics.

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