3 Reasons Nintendo's Wii U Failed

Last week, Nintendo (NASDAQOTH: NTDOY  ) made the unsurprising announcement that its Wii U had flopped and its 3DS sales were on the ropes.

Nintendo slashed its original full-year Wii U sales forecast by nearly 70% to 2.8 million units, and also reduced its full-year forecast for the handheld 3DS by 25% to 13.5 million units.

The Wii U has sold 5.3 million units since its launch in November 2012, compared to the 4.4 million Sony (NYSE: SNE  ) PS4s and 3.1 million Microsoft (NASDAQ: MSFT  ) Xbox Ones that have been sold since November 2013.

These sales declines are expected to cause Nintendo to incur an operating loss of 35 billion yen ($340 million) and cause it to miss its prior forecast for a 100 billion yen ($960 million) profit. This will also mark Nintendo's third consecutive annual operating loss.

Source: Fanpop.com

Following that bleak announcement, Nintendo's Japanese shares plunged 11% while its U.S.-traded ADRs fell 17%. Despite the year's disastrous results, Nintendo President and CEO Satoru Iwata still intends to remain at the helm of the troubled gaming giant.

While it's too early to tell what Nintendo's next move will be, we should take a closer look at three major reasons that the Wii U failed, and if Nintendo still has a chance to bounce back from these mistakes.

1. The naming and marketing of the Wii U

The biggest mistake was the simplest one -- Nintendo completely dropped the ball when it named and introduced the Wii U.

The original Wii, which sold 101 million units, blew away Sony's PS3 (82 million units) and Microsoft's Xbox 360 (81 million units) because it drew sales from the previously untapped market of casual gamers. This was due to the simplicity of the Wii's motion controls and the universal appeal of titles such as Wii Sports, the best-selling game in history.

But therein lies the problem -- many Wii owners are not hardcore gamers who keep up with the latest gaming headlines. Therefore, when the Wii U was launched in November 2012, retailers and customers were baffled as to what the console actually was.

Wii U (L) compared to the Wii (R) caused plenty of confusion for retailers and customers.

Sears (NASDAQ: SHLD  ) , for example, mislabeled Wii U titles as original Wii games and grouped Wii and Wii U hardware into the same category. That kind of confusion, which occurred in other retailers as well, trickled down to customers, who thought that the Wii U was just another upgrade of the original Wii, similar to the Wii Balance Board and Wii Motion Plus in 2009.

To make matters worse, Nintendo discontinued the original Wii last October in Japan, which led to worldwide headlines proclaiming "the end of the Wii." Yet that wasn't the case -- Nintendo continued selling the original Wii in the United States, and even introduced a smaller version, the Wii Mini (which further confused customers) in November.

Last November, Nintendo finally released a commercial explaining the differences between the two consoles.

Yet many people still can't properly explain the difference between a Wii, Wii Mini, and Wii U. All of that drama could have been avoided if Nintendo gave the console a clearer name, such as the "Wii 2", and gave it a loud and dramatic launch like Sony and Microsoft.

2. Form factor and misunderstanding Japanese sensibilities

A second major problem with the Wii U was its form factor.

The design philosophy behind the original Wii was simple -- its motion controls could help gamers stay fit, the console would be compact to fit smaller Japanese homes, and raw horsepower wouldn't be a top priority, since its games would be geared toward casual gamers.

While not everyone agreed with Nintendo's original Wii strategy, it worked.

By comparison, the design philosophy behind the Wii U was chaotic. The Wii U's main controller, the Wii U GamePad, has an embedded touchscreen that can either be used as a secondary display for the main TV or as the main screen when the TV is turned off or in use. However, the player has to keep the Wii U console on and stay within 26 feet to remain connected.

The Wii U's second screen was often mistaken for an add-on tablet peripheral for the original Wii. (Source: Cnet.com)

This kind of setup would be ideal in cramped conditions, such as two roommates with a single TV in a small dorm room, but it didn't make any sense for smaller Japanese homes, which have an average of 2.3 televisions per household. The United States, by comparison, has three televisions per household.

The Wii U is also compatible with previous hardware (the Wii remote, nunchuk, balance board, classic controller) as well as software for the original Wii, which made it look more like an upgrade to the original Wii than a completely new system.

Therefore, gamers only had two real reasons to purchase a Wii U -- for second screen gaming and exclusive Wii U titles. If those two conditions weren't met, then the original Wii was a better option.

3. Lack of compelling first-party titles

Ever since many of Nintendo's third-party allies abandoned the gaming giant for Sony during the N64 era, Nintendo's first-party franchises -- Mario, Zelda, Metroid, Donkey Kong, Star Fox, and others -- have taken center stage.

Ever since the Wii era, however, Nintendo's output of first-party solo titles (featuring an individual character's franchise) has declined. Although nine out of the 10 top-selling Wii titles were published by Nintendo, only two of them -- New Super Mario Bros. Wii and Super Mario Galaxy -- are considered solo titles.

The rest of Nintendo's lauded "first-party" titles are mostly all-star racing games (Mario Kart), fighting games (Smash Bros.), or party games (Mario Party), which feature many of Nintendo's most popular characters in rehashed versions of older titles that debuted during the N64 era.

Nintendo is still pumping out Mario titles, most notably Super Mario 3D World, but its upkeep of other major franchises has faltered. During the Wii era, Nintendo released two full Zelda titles -- Twilight Princess and Skyward Sword -- although the former was a shared title with the sixth-generation GameCube.

More than a year after the Wii U's launch, a next-generation Zelda title still hasn't arrived yet. Nintendo is trying to remedy the problem with the Dynasty Warriors crossover Hyrule Warriors, but it's hardly a satisfying new chapter for true Zelda fans.

Hyrule Warriors. (Source: Gengame.net)

Meanwhile, Samus' latest home console adventure was Other M (Wii, 2010), Donkey Kong last appeared in Donkey Kong Country Returns (Wii, 2010), and Star Fox hasn't seen the light of day since Star Fox Assault (Gamecube, 2006).

The list doesn't stop there -- Nintendo's other core franchises have stalled out after the Wii era, in favor of remade classics (Ocarina of Time, Wind Waker) and all-star party games.

Nintendo is clearly spreading out its franchises too thin -- its 3DS, with 42.4 million units sold worldwide, has taken total priority over the Wii U. Therefore, 3DS gamers are getting better first-party titles, such as The Legend of Zelda: A Link Between Two Worlds, while Wii U gamers are getting left out in the cold.

The future looks bleak

If Nintendo can't fix these three mistakes by 2014, the Wii U might be discontinued altogether so the company can focus on the 3DS, which remains the top selling console of the current generation.

What do you think, dear readers? Can the Wii U still bounce back after falling on its face every step of the way? Let me know in the comments section below!

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Read/Post Comments (25) | Recommend This Article (3)

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 January 20, 2014, at 10:47 AM, circu wrote:

    You said

    "Last week, Nintendo (NASDAQOTH: NTDOY ) made the unsurprising announcement that its Wii U had flopped and its 3DS sales were on the ropes."

    Than you said

    "If Nintendo can't fix these three mistakes by 2014, the Wii U might be discontinued altogether so the company can focus on the 3DS, which remains the top selling console of the current generation"

    How can you claim the 3DS is on the ropes and then write it is currently the top selling console?Also why is it a problem that nintendo's top selling games use characters from multiple games(smash bros,mario kart,etc...).Most of your valid points are cut and paste from other articles. There is a clear unfounded biased on your part.

  • Report this Comment On January 20, 2014, at 10:51 AM, circu wrote:

    If the 3DS is as you say "on the ropes" why did you make this recent article?

    http://www.fool.com/investing/general/2014/01/14/is-the-3ds-...

  • Report this Comment On January 20, 2014, at 11:15 AM, TMFSunLion wrote:

    Did you read my prior article? I stated that sales of 3DS games were up a lot, but that doesn't necessarily mean that sales of 3DS consoles are doing just as well.

  • Report this Comment On January 20, 2014, at 11:37 AM, sypoth wrote:

    How about 1.) Everyone one knows it's a seventh generation console but Nintendo keeps saying it's tan eight. 2.) Large percentage of shovelware 3.) People are tired of being screwed by Nintendo who lures them in with Gimmicks and promises then leaves them high and dry. 4.) Controller design is stupid. 5.) Nintendo's proprietary nonsense has driven away hardware makers leaving no accessories for the system or cheaper alternatives to the overly expensive hardware. 6.) Overpriced for what you get. 7.) Failure to listen to their customers and give them what they want. All of these reasons are valid and all of them point to an undeserved arrogance by Nintendo. The ONLY consoles they made a net profit on were the NES SNES and Wii and the ONLY reason the Wii was profitable is because they overhyped the system and pushed the gimmicky controller leadingpeople to believe it was popular and couldn't stay on the shelves for it's first year when part of that reason was a court injunction from a patent lawsuit that kept them off the shelves for 3 months shortly after it's release. Either way their finances were severely depleted when they released the Wii and it was only popular for the first half of it's life and the second half plus the Wii U and royalties ate up what little they made from that.

  • Report this Comment On January 20, 2014, at 12:08 PM, Iseeclearly wrote:

    Well its the 8th generation, because it comes after the 7th. Why would you want non Nintendo hardware?

  • Report this Comment On January 20, 2014, at 12:56 PM, Jarky wrote:

    Do you guys, like, support yourselves writing for this site?

  • Report this Comment On January 20, 2014, at 2:04 PM, circu wrote:

    @TMFSunLion-you said yourself the 3DS is the top selling current console and it is crushing its competition in the psvita. Lets keep it factual and not "foolish".

  • Report this Comment On January 20, 2014, at 2:05 PM, GrooveMachine wrote:

    This is the first Motley Fool Nintendo article I happen to almost agree with.

    Their decisions have been head scratching to say the least. As much as I think Mr.Iwata is a funny, nice guy, his decisions have left me wondering why he's still in charge.

    1) Marketing and name - Totally agree with that. They've had zero marketing, and whoever decided to call it Wii U should go back to college and pick a different major. Even Wii2 would've been better, or at least something to separate it from its last console. Whoever Nintendo has hired to do its ad campaigns should be fired immediately and a new approach is needed. All I saw on tv during the holidays were MS/Sony ads and not a single Nintendo ad. Its almost as if they don't want to try.

    2) Drip drip software releases - Nintendo's back catalog is the best in the industry, you can't argue that fact. The Wii U can handle all of their old titles and they should be exploiting this as much as possible. You could create an entire ad campaign for older, retro gamers who grew up on the NES/SNES/N64 and all of those games. All of their past 1st party titles should be available for digital download, from the NES on up, including Wii games. I love playing retro games, and will gladly pay for the licensed software instead of some emulator. Instead, we get Urban Champion and then weeks without anything. Europe has had Link to the Past for almost 2 months now. That title is still not available in North America. Its almost as if they don't want consumers money.

    3) Ignoring consumer trends/wants/needs, living in their own little world, and never acknowledging the bad press - Speaks for itself. Its no secret that Nintendo didn't treat its 3rd party devs very well for literally decades. Mr.Iwata should've taken it upon himself to right the wrongs of the past and go out of his way to gain support from software designers. Listening to consumers outside of Japan hasn't happened either. Show some passion, be angry that the press hasn't liked the direction Nintendo has gone and respond accordingly to it. Show that quality, inspiration and innovation that was a Nintendo strong point for so long hasn't been left in some basement in Kyoto.

    You may hate Nintendo or like them, but I don't think anybody wants to imagine a gaming world without them.

  • Report this Comment On January 20, 2014, at 2:35 PM, evilgrinz wrote:

    First, the 3DS is doing quite well.

    Second, the Wii U is a huge flop. It won't ever recover, there are just way too many problems with it. I own one, but got it used for half price. As a company, they are way too conservative, and just don't have a good direction going forward. They thought they could recreate the success of the Wii, when they should have realized how lucky they were with it. Not even close to enough software, horrible name, should be the most third party friendly while actually be the least third party friendly. Greed and ego.

  • Report this Comment On January 20, 2014, at 2:45 PM, TMFSunLion wrote:

    @circu: Yes, the 3DS is the highest selling console at the moment. I stated that plainly in this article as well. And yes, it is killing the PS Vita easily.

    However, the current numbers from Nintendo show that 3DS sales can't go up forever.

  • Report this Comment On January 20, 2014, at 4:22 PM, Jarky wrote:

    Nothing can go up forever.

  • Report this Comment On January 20, 2014, at 4:39 PM, sokratesagogo wrote:

    My 5 yr son and I have been enjoying "nextgen: gaming on our WiiU for over a year now. As a connoisseur of video games for the last 30 years it's been a great pleasure to spend the last 12 months playing the likes of Mario 3d land, pikmin 3, Rayman, Lego City, the Zelda Windwaker remake, Wonderful 101. Glad I didn't wait for the XBox one/PS4...

    now let's see, what should I buy on the Xbox one/ps4 that I can play with my son? Ummmm

    Rock-on Nintendo!

  • Report this Comment On January 20, 2014, at 5:10 PM, nico07 wrote:

    Sensationalism or yellow journalism at it's best. The facts are so skewed in this article I don't even know where to begin. Hyrule Warriors for the Wii U is a stop gap Zelda release to hold fans over until a full featured game is ready for release. It was never intended to be "the next Zelda" entry. I understand that the Gamepad is unnecessary for a lot of gaming on the Wii U, but at the same time it is completely necessary. Have you tried playing a Lego game with your son or daughter on Wii U? Being able to have each have his or her own screen is amazing. Having on screen inventories and maps is a huge asset. Seeing the game logo in some games is just poor development in my opinion. But really the Wii U is far from dead, I mean DKC next month, Mario Kart after that, Smash most likely this summer, X, Zelda. There are some great system selling games on the way. Do I think Wii U will sell 10 million this year? It would be nice, but most likely won't happen. Does that mean the Wii U is doomed, hardly.

  • Report this Comment On January 20, 2014, at 5:11 PM, nico07 wrote:

    Sensationalism or yellow journalism at it's best. The facts are so skewed in this article I don't even know where to begin. Hyrule Warriors for the Wii U is a stop gap Zelda release to hold fans over until a full featured game is ready for release. It was never intended to be "the next Zelda" entry. I understand that the Gamepad is unnecessary for a lot of gaming on the Wii U, but at the same time it is completely necessary. Have you tried playing a Lego game with your son or daughter on Wii U? Being able to have each have his or her own screen is amazing. Having on screen inventories and maps is a huge asset. Seeing the game logo in some games is just poor development in my opinion. But really the Wii U is far from dead, I mean DKC next month, Mario Kart after that, Smash most likely this summer, X, Zelda. There are some great system selling games on the way. Do I think Wii U will sell 10 million this year? It would be nice, but most likely won't happen. Does that mean the Wii U is doomed, hardly.

  • Report this Comment On January 20, 2014, at 5:27 PM, marmiepa wrote:

    as far as i am concerned i ditched the playstation and xbox 360 and i am loving the wii u

  • Report this Comment On January 20, 2014, at 5:36 PM, nico07 wrote:

    To the credit of the author he does recognize several issues with Nintendo such as the length of the development process, the fact that the Wii had two Zelda titles and the Wii U has one (great) re-release and one off the beaten path in development. The problem of lack of advertising also caught up with Nintendo as many still are unaware what it is or that it is a whole new system. The appeal of the Wii U over the PS3 and 360 was apparent mainly by exclusives while third party support largely around launch are largely ports unworthy of purchasing a new console. The PS4 and One will have similar uphill battles with new games and release dates being pushed back as games are perfected. So I think for the next six months or so third party offerings on Wii U might be sparce. But Wii U owners I think had hoped to receive all of the third party content other console owners received. And while we are not receiving this content it's sad that it's not because the Wii U is hugely underpowered and incapable of playing these games but rather through missteps Nintendo has admitted and third party have committed that we are at the point we are at now. In a way being a Nintendo console owner you almost expect to miss out on some third party content but it's not that disappointing because the first party content is so good and sells itself. From an investment point of view now isn't the best time to invest in Nintendo for the short term, in the long term they will continue to ride out the storms as they always do. It would be foolish to think that Nintendo could have the same success with Wii U as they did with the Wii, but it would be foolish to discredit the Wii U or that Nintendo will be that successful again.

  • Report this Comment On January 20, 2014, at 6:09 PM, hudkina wrote:

    The Wii U may not be selling well now, but the 3DS started out slow and later became a massive success. That's not to say that the Wii U will see the same level of success as the Wii (or the PS4/XB1), but eventually it will pick up steam as more and more quality exclusive titles emerge.

    There are some games for the other systems that I like to play, but many of them are also available on the PC. I don't have to pay $600 to play a game when I already can play said game on my PC.

    With Nintendo on the other hand, their games are only available on their system. So if I want to play a Mario or Zelda game, then I have to purchase a Nintendo system.

    The Wii U will never be accepted by the hardcore gamers who prefer violent shooting games, so Nintendo really doesn't need to go after them. They are right to stick closer to the "family" audience. And while the "family" audience will take much longer to upgrade to the new system, I think it will happen over time.

    There are already plenty of great games available for the Wii U and more on the horizon. If you aren't satisfied with being able to play Super Mario 3D World, Pikmin 3, New Super Mario Bros. U, Zelda Windwaker, Wonderful 101, Rayman Legends, Lego Marvel, Lego City, Arkham City, Monster Hunter 3, etc. then maybe you are expecting too much. And with Donkey Kong, Smash Bros., and Mario Kart on the horizon, you can't possibly say there's a software drought on the system.

    Nintendo doesn't need major third party support. I don't care that EA won't develop for the system, because EA doesn't make games that interest me anyway. Nintendo could easily live on first party titles alone.

  • Report this Comment On January 20, 2014, at 10:23 PM, jimenzo wrote:

    Nintendo still has time turn it around here's what they should do

    1.change the name from Wii U to Wii2 for now

    2. a better CD Drive that plays Blu-Rays & DVDs

    3. get rid of the tablet controller

    4. get rid of the 8GB 32GB models & replace them with a 500GB version

    5. come out with new Zelda titles new exclusives titles & new original titles as well

    6. better marketing

    7. better online.multiplayer & eshop

    8. drop the Wii backwards compatible

    9. keep it at $299 or $199

  • Report this Comment On January 20, 2014, at 11:22 PM, hisradness wrote:

    @jimenzo,

    1. your 6 should take car of your 1. Changing the name now would do more damage than good.

    2. Not a bad idea, but it would jack up the price. No go.

    3. Probably not possible with the games already produced and the ones in development, though it would definitely drop the price by $100. But that ain't gonna happen.

    4. Once again, jacks up the price. But not a terrible concept.

    5. They are doing that.

    6. This the main reason Nintendo's in this situation.

    7. They definitely need better online services.

    8. Backwards compatibility is one of its selling points, neither the PS4 or XBox One offer this, dropping it is senseless.

    9. If they made the changes you suggest, it would be impossible(even dropping the GamePad) to drop the price further. Keeping the price at $299 would be rough. Besides, the changes you suggest would take at least a year or two.

    Long story short, improved marketing and online services are the only realistic changes Nintendo can make at this time. Changes to the console are foolish at this time and would cost them more than they could gain from them.

  • Report this Comment On January 21, 2014, at 7:53 AM, RubenCamacho78 wrote:

    These articles are pure garbage. Gonzo Journalism at its finest.

  • Report this Comment On January 21, 2014, at 10:50 AM, rondorondorondo wrote:

    The 3DS started slow for the same reasons the Wii U has. Price and software.

    Once the 3DS did that price drop from the staggering $250 to $170, that charged its sales onward and the software kept the momentum going.

    The Wii U needs such a price drop as well. $250 is the top end it needs to be to get the system really moving but I believe it is the cost of the tablet device that is forcing them to keep it higher.

    Get it to $250 before a string of solid releases and the system will get going.

  • Report this Comment On January 21, 2014, at 1:31 PM, TMFSunLion wrote:

    @RubenCamacho78 -- I'm not sure you know what Gonzo Journalism is.

    If what you mean is that I, as a lifelong video game player, am writing in a first person perspective based on my own observations and preferences, then I suppose I am one.

    @rondorondorondo -- I agree, a price cut is inevitable, and could at least help boost sales a little bit.

    However, a big issue is that Nintendo is focusing on the 3DS, giving it better games before the Wii U.

  • Report this Comment On January 21, 2014, at 9:42 PM, wraiththirteen wrote:

    I think these sites are short selling nintendo. Heck I have seen more articles on the failure of nintendo this week than articles on obomacare in the last 6 months.

  • Report this Comment On January 21, 2014, at 11:50 PM, laethyn wrote:

    What?! Another "zomg the WiiU has failed!!1" article? Pssh, I know I must be seeing things.

    I'm not saying the WiiU is doing as well as it could be doing, obviously, however to say it has failed? I disagree.

    It got a bump in sales with the launch of 3dWorld. It'll get another bump when Mario Kart is launched, and another with Super Smash Bros Brawl. And yet another if/when they launch a new Zelda.

    People complain about the "gimicky" controller, forgetting that the Wii controller was the same, and quickly copied by Sony.

    The system is a solid one. It plays Call of Duty just fine, as well as AC4: Black Flag. And Watch Dogs, I'm certain, will play just fine as well.

    Are the graphics as high end as the PS4/XBO? Nope, of course not. But then, if all you are looking for in a game is pretty pictures, I don't know what to tell you.

    It's a good system, with some of the most polished titles, and a good line up of third party titles as well (Mass Effect 3, AC4, Watch Dogs, CoD, Walking Dead, DarkSiders2, etc).

    Add to all that, it has been absolutely awesome to be able to swap gameplay between the television and gamepad in a family household.

    As for comments saying drop the Wii backwards compatibility, lol that's ridiculous.

    The WiiU is, in my opinion, a far better machine for a full family-of-gamers-household than any other.

  • Report this Comment On January 22, 2014, at 2:20 AM, Thegreat13 wrote:

    I hope Nintendo has to publish their games for other consoles. That way I can play solid Nintendo titles with a real controller. Not that gimmicky motion control garbage.

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