Nintendo Could Be Forced to Discontinue the Wii U Next Year

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Discontinuing video-game consoles is far from unprecedented. Sega released, and then rapidly abandoned, four consoles between 1992 and 1999, before ultimately exiting the hardware business entirely. Nintendo (NASDAQOTH: NTDOY  ) has had its own failure -- it gave up on the Virtual Boy after just seven months.

Is the Wii U next? The console's first year on the market has been abysmal -- Nintendo has shipped just 4 million Wii U units, far short of its own expectations. After cutting the price, Nintendo is now selling the Wii U at a loss, and sales are unlikely to improve in the face of rising competition from Microsoft (NASDAQ: MSFT  ) and Sony (NYSE: SNE  ) .

The Wii U has been a total failure
The failure of the Wii U is no secret. Originally, Nintendo had expected to sell 5 million consoles by last March -- but by the end of September, Nintendo had shipped fewer than 4 million units. In an effort to juice sales, Nintendo cut the Wii U's price by $50 in late August, leading to a 200% sales jump in September. But when the base number is so low, large percentage increases look better than they really are. Even with the spike in sales, Nintendo sold just 300,000 consoles from July through September.

Nintendo's management still believes that it can sell 9 million Wii U consoles by the end of March. That seems utterly insane in light of the increased competition Nintendo's console will face in the next few weeks.

Microsoft will steal Nintendo's core market
In less than two weeks, Microsoft's Xbox One will go on sale. At $500, it's far more expensive than the Wii U's $300, but for the money, Microsoft's machine provides far more value. In addition to serving as a true next-generation video-game console, the Xbox One is packed with entertainment features that could appeal strongly to Nintendo's core market.

The original Wii was massively successful in large part because it appealed to casual gamers. Although the Wii had its fair share of core Nintendo franchises, its best-selling games were titles such as Wii Sports Resort, Wii Play, and Wii Fit. Rather than rely on buttons, these games used simple motion controls, making them accessible to non-gamers.

Microsoft's Xbox One should tap into this market. Unlike the first Kinect, an optional add-on for the Xbox 360, Microsoft's second-generation Kinect is included with all consoles, which should lead to more developer support. Similar to the Wii, Kinect-based games use body movement instead of button-mashing, making them far easier to play.

Certainly, for those who bought Wii Fit, the Xbox One should be enticing. Microsoft has partnered with a number of famous trainers for Xbox Fitness -- interactive workout videos that rely on the Kinect's technical capabilities.

Unlike Sony, Nintendo can't afford to support a failing console
Losing the casual gamer would hurt, but the bigger threat to the survival of the Wii U as a platform is Nintendo itself. Nintendo is unique in the sense that it's the only console maker that's strictly a video-game company -- it can not afford to subsidy losing hardware for very long.

In contrast, Sony, as an enormous conglomerate, can. The PlayStation 3 sold poorly at launch, and Sony lost money on the console, but it was able to stick by its machine for the long-haul. Indeed, by taking a loss on the PlayStation 3, Sony was able to support another part of its business -- its Blu-ray technology beat out the rival HD DVD, as early PlayStation 3s doubled as cheap Blu-ray players.

Sony will sell its PlayStation 4 at a loss as well, though the company expects to recoup the loss on games and PS+ subscriptions. At any rate, Sony's PlayStation 4 is even more competition for Nintendo's Wii U. Like the Xbox One, it will go on sale later this month, but unlike the Xbox One, it's only $100 more expensive than the Wii U.

This holiday season will be crucial for Nintendo
On Nintendo's last earnings call, the company's president, Satoru Iwata, characterized the upcoming holiday shopping season as crucial, remarking that Nintendo would evaluate what it needs to do, "over the long term, about its platform" once the holiday results were in.

That could mean discontinuing the Wii U. Given that Nintendo's console will have to compete with two new machines from both Sony and Microsoft, the Wii U's holiday sales aren't likely to be good.

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Read/Post Comments (24) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 10, 2013, at 5:07 PM, TransformerRobot wrote:

    This won't stop them from making another console in the ninth generation. With all that money they made with the original Wii it seems likely.

  • Report this Comment On November 10, 2013, at 5:13 PM, juniorimac wrote:

    Wow. Lol. This guy is a total idiot. Nintendo has 10billion dollars! That's right with a b. 5 billion in cash another 5 in investments. And they can't afford it? Plus just this week the wii u sales when up 1500% in japan. With so many big time titles coming out in the next year wii u will expose guys like this for what they are. A ignorant group of band wagon writers that need to find something else to do with there life.

  • Report this Comment On November 10, 2013, at 5:14 PM, Grendel wrote:

    "That could mean discontinuing the Wii U."

    What a bunch of hogwash. This is purely speculation of Fool's part. There has been absolutely no indication from any source claiming that discontinuing the platform was a possibility.

    Also, Nintendo has been selling the Wii U at a loss ever since it launched in Nov 2012, not since it dropped the price by $50. Nintendo has so much money in the bank that it isn't as risky as it sounds, being purely a video game company without any other products in outside markets.

    Nintendo is simply repeating it's cyclic pattern over the course of time. This has happened before with it's previous console generations and it will happen again.

  • Report this Comment On November 10, 2013, at 5:22 PM, ReallySite wrote:

    Ugh, you guys are utterly clueless. No Microsoft will not see increased dev support for Kinect. Sadly you guys wouldn't know that because your fools. You've paid attention to Micro$oft and Sony for so long that you've failed to see history happen. Wiimotes, especially Wii Motion Plus, were not utilized to their fullest potential except by Nintendo. Same thing is happening so far with the GamePad. Most devs use the GamePad to move the HUD off the main screen and then do nothing more with it. Also your logic with Xbox One made me laugh. The people who bought the Wii and games like Wii Fit, Wii Sports, etc. probably saw Wii as being priced greatly. Xbox One for a few games at $500, ROFLMAO! We're talking about extremely fickle people here.

    Bring up Sony and the PS3 as well. You guys do realize how much money they blew on PS3 right? Try everything that they made from their previous gens. Sony might be huge but that wouldn't stop investors from wanting to sell off or shutdown Sony's money bleeding game division. In fact their two biggest and only money making divisions have been their music and movies divisions.

  • Report this Comment On November 10, 2013, at 5:42 PM, Stealth2k wrote:

    hahaha this site is such a joke. Absolute nonsense, with no fact.

  • Report this Comment On November 10, 2013, at 5:43 PM, Stealth2k wrote:

    The Wii U has been a total failure

    Its the top selling console in Japan in less than a year, this site is a total failure

  • Report this Comment On November 10, 2013, at 6:47 PM, targeyone wrote:

    As long as amateur investment sites continue to predict Nintendo's failure, there's no reason to worry.

    The true sign of Nintendo's failure would be when predicting their doom fails to be an effective tactic that blog authors use to generate hits.

  • Report this Comment On November 10, 2013, at 8:48 PM, Manaphy2007 wrote:

    is that a fact that nintendo will discontinue the wii u, what about the ps vita? if nintendo did do that the all the games coming out will be for nothing. who ever wrote this article just went full retard. this is not a fact or opinion, just plain retardation

  • Report this Comment On November 10, 2013, at 11:02 PM, duqueduke wrote:

    Ok , you better get your data straight. This is the site I get advices to buy my stocks. Anybody who reads the news knows that Nintnedo is a mega company with ton of cash in the bank, and if there is somebody who is losing money in this business is Microsoft and Sony (they also have cash, but for different reason). It is scary to read this article and to think: what if this site is also clueless when it comes to the other articles that recommend specific stocks and companies. This is irresponsible, the credibility of this website is in peril.

  • Report this Comment On November 11, 2013, at 12:22 AM, joecorbett wrote:

    Stick to writing about Wall St. or at least attempt to do dome research before you start writing.

  • Report this Comment On November 11, 2013, at 1:52 AM, bmprsvz777 wrote:

    This article is just pure speculation, an alarmist misinformation by biased person who was perhaps bribed to write it. Will you ever apologize if your predictions will not become true? Of course not.

  • Report this Comment On November 11, 2013, at 3:02 AM, Tycalibre wrote:

    Ok, I'm done, unsubscribing today and not coming back. This is clickbait not news.

  • Report this Comment On November 11, 2013, at 4:27 AM, Nateisawesomeo wrote:

    I'm a very big playstation, ps3 kind of guy. I will defend to anyone the Playstation brand. As for Nintendo, it's always been something I shy away from. Believe me when I tell you, I'm not a nintendo fanboy. That being said; I have to agree with strong opinions above.

    This article is just irresponsible. I found it as the title caught my eye. I thought that Nintendo found themselves in a giant lawsuit or something and they would have to end their console my court order. Instead, it's just over the top speculations. You're lucky you didn't say much about Sony's credit woes or else I would have said more.

    Just in the future, when it comes to a genre out of your field, let the gaming experts write it instead. It just seems you're not that kind of writer.

  • Report this Comment On November 11, 2013, at 6:33 AM, Kyloctopus wrote:

    It seems strange that you never considered the price of a console so seriously.

    Nintendo's biggest successes were because they were cheaper than the competition, and that idea came in since the 80s.

    If a casual gamer were to buy a console I don't think they'd go for the $500 console over the $300 console.

  • Report this Comment On November 11, 2013, at 9:38 AM, jocknerd wrote:

    To the author: Nintendo has billions in the bank. It can afford to fail two or three more consoles in a row before having to call it quits.

  • Report this Comment On November 11, 2013, at 10:02 AM, TruDawgX wrote:

    Sam needs to study up on Sega and how they exited the hardware business and take notes before writing something this foolish (pun intended). They were in a totally different situation compared to Nintendo. For one Sega had multiple different hardware systems out at the same time (7 at least) which was stretching them financially to a breaking point. Its most recent console at the time, the Sega Saturn, was failing. On the handheld front they were doing horrible against the power of the Gameboy brand. They were losing a lot of money at this point. The Dreamcast was there final last ditch effor to reemerge in the hardware market. Nintendo is coming out of a successful console (Wii) and then there's the 3DS which is dominating the dedicated handheld market. Also Nintendo is supporting only three game systems at once (Wii, Wii U, and 3DS/2DS) Yes the Wii U is struggling but its not out of the fight yet and will likely keep fighting for a long time.

  • Report this Comment On November 11, 2013, at 10:56 AM, captAhab02 wrote:

    First of all does one remember the Nintendos other failure??

    everyone said the 3ds was a failure, but no console ever in history had generated so good software sales in japan as the 3ds did. You can actually read it in the link the other fool member gave.

    Second the Virtual boy has only sold 770 k units and the person responsible for it got fired and died in a car accident 20 years ago

    Even with only 5 million members nintendo can still make profit on the titles it makes for the console. But it easily rises above that. In Japan, Europe and US the Wii U sales have risen already.

    Nintendo isnt Sega, Nintendo also isnt Microsoft.

    Nintendo really really cares for their image. They care for the public perception so they wont discontinue the wii u next year. I guess Microsoft likes people to believe that so people buy an xbox but that is bull.

    Nintendos weakest market for the wii u was Japan, but in japan they wii u now sells really good, thats why the shareprice rose 11% last week.

    Not to mention the american jobless rate really dropped big time, the Dollar is strengthening. That means Nintendo even earns more money. Not only on current sales but also the us dollar holdings are raising in value.

  • Report this Comment On November 11, 2013, at 12:20 PM, nico07 wrote:

    What's next for an article, "Microsoft could sell out to gaming division to Sony"? I mean there are so many possibilities in the world but the title of this article and the one I suggest are absurd. Sure Nintendo is only a gaming company, but of the three they are the most lucrative with the most capital. Nintendo's issues with the Wii U are NOT with the hardware, but with lack of games and lack of advertising. Both of which are being remedied. Mario 3D World releases in less than two weeks, which is a system selling game. Since the data used in this article was published, Nintendo has released widely popular Wii Party U, Wii Fit, Wii Sports Club all titles very popular on the previous Wii console as well as Zelda Wind Waker other bundles at the new lower price that are already seeing strong sales.

  • Report this Comment On November 11, 2013, at 12:44 PM, gameboyhippo wrote:

    I'm trying to figure out what part of the XBox One could possibly appeal to Nintendo's core. Is it the fans of games like Mario, Zelda, and Pikmin? I think not. These aren't cash in games with valuable IPs. These are well crafted games with well deserved valuable IPs. Without Nintendo's IP, no company can appeal to Nintendo's core to the point where they choose that product over Nintendo's.

    Predicting Nintendo's demise at the hands of Microsoft and Sony is like predicting that Studio Ghibli will fail to Dreamworks. After all Studio Ghibli still does hand drawn animation instead of 3D.

    The fact of the matter is this. Nintendo is a premium game manufacturer. There's a reason they can outsell their competition on weaker hardware. Each game is a work of art that takes years to make. Games are delayed until they are done. Contrast that with other studios who care more about deadlines than quality.

  • Report this Comment On November 11, 2013, at 12:45 PM, hintswhispers wrote:

    Your link bait worked on me. I didn't like the article, though. I'm blocking your site from my search results.

  • Report this Comment On November 11, 2013, at 1:41 PM, Anangrypotato wrote:

    This is just a click bait article with almost zero factual evidence. I own a Wii U and I love it. Stop riding Microsoft and Sony's dicks and try making news on something you know about which probably is very little.

  • Report this Comment On November 11, 2013, at 10:02 PM, DatPSVita wrote:

    The writer of this article is another one of those haters you see on the net that begs Nintendo's demise.

    "Given that Nintendo's console will have to compete with two new machines from both Sony and Microsoft, the Wii U's holiday sales aren't likely to be good."

    If the Playstation 4 and Xbox One is suppose to completely destroy the Wii U, then it doesn't makes sense how the Wii U is still selling 80,000 units a week right now. It should've stagnated down to 20,000 for two weeks by now.

    "Microsoft will steal Nintendo's core market".

    Then that might explain why the Wii outsold the 360, one of the most family friendly devices on the market last generation. The Xbox One isn't even that family friendly. It's priced up the ass for any family, and privacy issues don't help either.

    "Nintendo could be forced to discontinue the Wii U next year."

    When Bayonetta 2, Donkey Kong: Tropical Freeze, Super Smash Brothers, Mario Kart 8, and possibly Zelda Wii U are going to be released next year? Yeah, I don't think so.

  • Report this Comment On November 12, 2013, at 10:16 PM, gamedude wrote:

    this article fails to mention how popular wiiU is in japan hence the reason the quit production on the original wii. Nintendo is one of the few gaming companies actually turning a profit. Nintendo is on track to sell just as many wiiU;s as they did n64 and gamecube, and they didn't give up then,

    writers on motley are amateur @ best

  • Report this Comment On December 02, 2013, at 6:47 PM, rockynate wrote:

    Do NOT take this article seriously. In fact, consider the opposite to be the truth.

    The evidence given by previous commenters should be enough, but if you need more, examine the author's page for amusement:

    Anyone that writes four articles a day and has less than a 50% accuracy in stock picks obviously hasn't a clue. (randomly choosing a stock will bring better results)

    Pure Link Bait. Sometimes barfing content onto the web to attract google visitors has unintended consequences: an erosion of trust. I no longer trust any content on Nice.

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