Is Nintendo's Wii U Mounting a Comeback in Japan?

Nintendo's troubled console has posted surprisingly solid December sales in the region. What does this mean for the system's future and the viability of consoles from Sony and Microsoft?

Jan 4, 2014 at 7:00AM

The Wii U console from Nintendo (NASDAQOTH:NTDOY) threatens to be one of the company's greatest all-time failures. The system's first year on the market has returned mostly disastrous results, with Nintendo's statements and software output indicating that the company was having greater than expected difficulty with HD development. The company took significant action to improve the Wii U's value proposition by implementing price cuts and introducing a variety of bundles for the primary territories.

This strategy appeared to return largely disappointing results, as the arrival of new consoles from Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT) and dismal Wii U sales in Europe and America suggested that Nintendo's system was nestling into its deathbed. Recent sales reporting out of Japan offers what is by contrast a stark glimmer of hope. Can the Wii U find some manner of success in its motherland? What, if anything, does the system's recent bump mean for rivals Sony and Microsoft?

Here's looking at Wii U
Without a doubt, the biggest short-term issue facing Nintendo is the possibility that the company's home console hardware is fundamentally undesirable regardless of how it is priced or what the package includes. Prior to the release of two new bundles, weekly Japanese sales of the system dipped beneath 3,000 units, a dreadful figure.

The introduction of the new SKUs caused an initial uptick in sales that dropped off steeply in subsequent weeks. Coupled with disappointing sales for system-flagship Super Mario 3D World, the soft demand for the new bundles portended near certain doom. For those that decry the "Nintendo is Doomed" drum being too frequently beat, December's tracking provided a welcome respite.

For the first three weeks of the month, the Wii U has been the second-best-selling hardware in Japan, trailing only the company's own 3DS handheld. While the 3DS has been the standout winner in the region, outselling all other platforms' December numbers combined, the Wii U's relatively strong performance is still impressive given the track that it has been on.

While Sony's PS VITA handheld has outperformed the Wii U for most of the year, Nintendo's console outsold the VITA at a 2:1 clip in December. Posting approximately 49,000 units, 73,000 units, and 119,000 units in Famitsu's first three weekly tracking periods, respectively, the system has already eclipsed the 220,000 units that it sold in North America during the month of November. Given the difference in population, it would appear that the Wii U is resonating most strongly in Japan.

Feeling the holiday spirit
That Nintendo's systems have experienced a December sales surge is hardly without precedent. The company has traditionally enjoyed bigger-than-average upswings leading into Japanese holidays, largely due to its games and systems being bought as gifts for young fans. Still, sales during the Wii U's second Japanese December are tracking above what the GameCube managed in the same time frame. That's not to say that the GameCube is a desirable point of comparison, but its sales have otherwise been tracking ahead of the Wii U.

Sony's heartfelt concern
Nintendo might not be the only company looking at December sales for the Wii U as a positive indicator. One of the big questions facing Sony is whether or not Japanese gamers still have an interest in consoles. While the initial PlayStation 4 shipments are sure to sell out upon gracing Japanese shores in February, the system's long-term prospects in the region remain much shakier.

Japanese third-party publishers have shied away from console development, shifting their efforts to handhelds and mobile and leaving fewer triple-A titles to drive the adoption of new, dedicated gaming hardware. When Sony's President of Worldwide Studios Shuhei Yoshida said that his company needed Nintendo to be successful, this is exactly the type of scenario he meant.

Microsoft de-emphasizes Japan
While Sony appears to still have a good deal vested in success in Japan, Microsoft seems to have written off the region almost entirely. After failing to establish an audience with its Xbox and Xbox 360 consoles, this is probably the right strategy. Microsoft invested substantially to secure exclusive, Japanese-developed content for the 360 and had little to show for it at the end of the generation. Outside brands can be notoriously tough sells in Japan, and the Xbox One's software lineup and feature set suggest that Microsoft has realized that its efforts in Japan are largely in vain.

The long, hard road ahead
Wii U's better-than-expected December sales in Japan are a rare bit of good news in a year that has otherwise been dominated by the crumbling of Nintendo's console ambitions. The system faces a sparse release schedule in 2014 regardless of territory, a crippling factor that is symptomatic of poor third-party support. Decent holiday sales in one of three major territories will not shift its fate. Nintendo will still need to implement drastic measures in order to propel the Wii U past the GameCube's meager numbers. 

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Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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