Are Microsoft's Xbox One and Nintendo's Wii U in the Same Sinking Boat?

Source: nintendo.com

The explosive debut of the PlayStation 4 from Sony (NYSE: SNE  ) has established the system as the favorite to win this generation of the console wars. What exactly winning means remains largely debatable, but the system appears to be on track to outsell the Microsoft (NASDAQ: MSFT  ) Xbox One and the Nintendo (NASDAQOTH: NTDOY  ) Wii U by a substantial margin. The PlayStation 4 and the Wii U have both sold somewhere in the neighborhood of 6 million units as of the beginning of March. The difference, of course, is that Nintendo's latest console has been on the market for a year longer than Sony's. Meanwhile, sales of the Xbox One are believed to have been around the 4 million unit mark approximately three months after the system's launch.

The Wii U and the Xbox One both posted solid launches and then suffered from a large momentum drop-off. Are the two consoles seeing comparable sales performance? Is it fair to lump the Xbox One in with the Wii U?

Is it now a race for second place?
The Xbox One's disappointing post-holiday sales have been well documented. January saw the system being outsold by the PlayStation 4 at a nearly 2:1 clip in North America, and there's little reason to believe that February will return different results. European sales and the recent launch of PlayStation 4 in Japan paint a global sales picture that is even more worrying for Microsoft's console ambitions. These trends have led some analysts to group the Xbox One and the Wii U together as losers of the console race.

The Wii U sold approximately 3.06 million from its November 2012 launch to the beginning of 2013. A Microsoft press release shows that the Xbox One had sold over 3 million units from its November 2013 launch to the year's close. These numbers are strikingly similar and certainly do little to dispel comparisons.

Checking boxes
Both consoles have issues stemming from value perceptions. Both consoles are bundled with an expensive peripheral that is doing little to entice potential customers to take the plunge. And again, both consoles' respective futures are largely dependent on the success of exclusive games. Bearing all of that in mind, suggesting that the Xbox One is in the same boat as the Wii U is ridiculous.

Comparing apples and grocery stores
Microsoft and Nintendo have fundamentally different approaches to the gaming market. The success of the Xbox platform is closely tied to the Live online ecosystem. Nintendo's online offering is archaic by comparison and offers little in the way of the revenue-generating opportunities that abound on Xbox Live. The fact that Nintendo does not charge for its online services may be good news for a select batch of gamers, but it's clearly not winning the system any points with the broader market.

Source: xbox.com

Microsoft's Xbox platforms have always been introduced as loss-leaders designed to bring users into a broader ecosystem. The Wii U stands as a rare foray into loss-leading for Nintendo, but software sales on the device have been so dismal that there is virtually no chance Nintendo will see profits from the home console side of its business. The Xbox One may wind up a net loss for Microsoft, but the company's future is not dependent on success in the gaming industry. The same can't be said for Nintendo.

Which system are third parties sticking with?
The difference in third party support between platforms should make it very clear that one of the devices has a future and the other does not. Electronic Arts  (NASDAQ: EA  ) famously dropped support for the Wii U very early into the system's sure to be short life. On the other hand, Microsoft and EA look to be quite cozy.The publisher's recently released Titanfall is almost guaranteed to do big numbers and is being bundled with the Xbox One at no additional cost.

Source: xbox.com

Not all bundles are created equal
The argument could be made that both systems were forced into early price cuts and bundles due to market pressures and lagging consumer interest. There's truth to this. To be sure, Microsoft would have preferred not to include the premier game for its new system at no extra charge and it likely paid EA a good deal for the privilege of doing so. But again, Microsoft's model is not wholly dependent on software sales and royalties, and therein lies the hidden brilliance of the bundle.

Staying alive?
As an online-only title, everyone who wants to play Titanfall on a console will have to be in the Xbox Live ecosystem. Microsoft will have to eat losses up front, but if it can keep users engaged in its online platform, the deal will wind up working out. Microsoft's newest console will likely trail the PlayStation 4 throughout the generation, but the Xbox One and the Wii U have vastly different outlooks.

Foolish takeaway
Structuring investments around any of the platform holder's gaming businesses remains a questionable proposition. Sony is off to a good start but there are serious problems with its development studios. Nintendo might be a good short sell, but the fact that its share price has been in the neighborhood of its 10-year lows could be reason to hesitate. Meanwhile, gaming is a small part of Microsoft's busines.

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Read/Post Comments (15) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On March 22, 2014, at 8:55 AM, Swaqqboi456 wrote:

    Fanboy alert

  • Report this Comment On March 22, 2014, at 6:10 PM, NonCasualGamer wrote:

    PS4 is extremely overrated and has zero games.

    Xbox One has slightly better games, and has a terrible reputation.

    Wii U is gaming machine with good games, it has the most games by far, retro games, backwards compatibility, the greatest control styles available, and it's by far the cheapest.

    Gee, which one do I choose.

  • Report this Comment On March 22, 2014, at 8:29 PM, thisistheslam wrote:

    Nobody has ever said that the PS4 is the favorite to win this console generation. Xbox One was the favorite as it has the bigger platform for media and games over the next several years. Sony played it safe and tine will tell if that was the wrong choice or not. Microsoft has an ecosystem of hardware and software along with media center appeal to people that aren't interested in games as much as they are TV, music, etc. To say the console would be in a sinking ship is foolish and likely fanboy related. Its sales are on a huge uptick and will likely catch Sony with console sales by summer if they keep trending that way. Add in a larger market launch by September where XB1 will be available in markets that only the PS4 is available in and you'll see it likely step ahead. Except for Infamous, I can't think of any potentially killer apps for PS4 in 2014. Microsoft have a slew of exclusives coming over the next 9-12 months and that means more interest in the platform from gamers. Xb1 may even come in cheaper by years end in retail or bundle a few games to drive the value. Wouldn't be the first time. At any rate, the PS4 has won nothing, especially as its appeal was weak in its home market - an indicator that they don't have content worth picking up so the console will slow down in sales as a result.

  • Report this Comment On March 23, 2014, at 1:09 AM, igamez wrote:

    "Wii U is gaming machine with good games, it has the most games by far, retro games, backwards compatibility, the greatest control styles available, and it's by far the cheapest."

    You get what you pay for. The Wii U is certainly the cheapest at the moment and has more games but it lacks many features available on the other consoles like bluray/dvd playback as well as sharing game footage which is available on ps4. It's also vastly underpowered when compared to the other consoles and the backwards compatibility with the wii only supports the notion that it has inferior hardware and processing architecture. The PS4 also has plenty of games on PSN so this idea that the Wii U is the "retro" gaming device is somewhat misleading.

    The XBONE isn't very appealing right now but it can still turn itself around and also has the superior online experience.

    The Wii U on the other hand is almost entirely at the mercy of its ip's. Unless Nintendo delivers stellar games and experiences, even games like Zelda won't do much this time around.

  • Report this Comment On March 23, 2014, at 2:58 AM, NipperySlipple wrote:

    The PC will likely always be the best bet for gaming considering the power a computer can have, the access to the incredible amount of games, and the fact that it has more versatility in its uses compared to the consoles make investing in a computer a wise choice.

    The reason for buying a console should first and foremost be the exclusive games it has and every other feature not related to playing the games should take a backseat.

    The Wii U may be weaker than its competition but it has been out longer and because of that has a variety of games that are pretty good. Donkey Kong Country:TF, Lego City Undercover, the NSMBU games, Pikmin 3, 3D world, The Wonderful 101 as well as the ports of MH3U, Tekken Tag Tournament 2, and Rayman Legends which are all worth playing. It also has disc based backwards compatibility. It won't have much in terms of third party support though, for most multiplatform games I would recommend a PC or maybe a PS4 instead.

    The PS4 and Xbox One have only been out since November and the amount of games they have worth playing is relatively limited.

    The PS4 currently has Resogun which is a pretty solid side-scrolling schmup. Aside from that it also has Infamous:SS which is pretty decent and Killzone:SF which is only average. It's supposed to see more digital backwards compatibility but I'm waiting to see how it pans out since Sony has been making big promises but doesn't have much to offer now. You have to pay for online now which is probably one of the things that weakens the PS4'S position the most but it is cheaper than the Xbox One is many places.

    The Xbox One currently has Killer Instinct and Dead Rising 3 which are both alright. Like the PS4 it has no disc based backwards compatibility and seems limited in digital backwards compatibility as of now.

    If a person has a gaming PC I would recommend the Wii U as a companion console. I would also recommend it to parents as well as people who like hardcore games, TW101 was challenging and Bayonetta 2 will most likely be as well considering its being made by the same developers who made Bayo 1 and TW101.

    For people who don't have a PC I would suggest in paying for the parts to make one or just buying a PS4 when the price goes down. It doesn't have enough good games yet to warrant a purchase in my opinion but it should in the future.

    I have difficulty recommending the Xbox One at all since it has few games that are either entirely exclusive or of exceeding quality. Like the PS4 I would recommend in waiting until the price goes down or 5 amazing and must have games comes out before then.

  • Report this Comment On March 23, 2014, at 3:35 AM, KevinSchneider wrote:

    My goodness. NipperySlipple has by far and away made the most sense in the comments section thus far. While I do tend to think that the PS4 will outsell the Xbox One in the long run, I believe that it's simply too early in the race to call it as the winner. In my opinion, a wait-and-see approach will perhaps serve best at this junction in time. One of the comments states that the PS4 is overrated and has zero games. While I don't care if someone thinks the PS4 is overrated, I will state that it has more than zero games. Semantics on my part there, but it was kind-of bothering me just for the sheer inanity of the thought.

    As for the Wii U, unfortunately, it is doing quite poorly, but not without merit. Of course it has by far the most games for it at this point. It was released a whole calendar year earlier than the PS4 & Xbox One. It does indeed have some good games, but they don't make me want to go out and buy it right now. I find it incredibly curious as to why controller styles matters with respect to why one should pick up a Wii U over the Xbox One or PS4 though. Backwards compatibility is something that is very nice for the Wii U, but only for those that have games that they would like to play from the Wii. Even if the Wii U is cheaper than the Xbox One and PS4, I am confounded as to why one would see it as the superior console by virtue by price and its other aforementioned advantages.

    I think the Wii U is swimming with concrete blocks tied to its legs because the core-gamer demographic will certainly choose, PC, Xbox One, or PS4. I also think that the casual-gamer demographic has moved further into tablets and phones. Mobile gaming is cheaper and more accessible. Besides that, the clunky controller packaged with it is completely off-putting for a lot of people. I wish the Wii U would do better, but it's hard to maintain an optimistic outlook for it when the sales statistics are pointing to a very dismal outcome.

    That said, I highly agree with NipperySlipple that those that are more into games should at least consider going to PC. More customization, better graphics, updates, patches etc. It is easily the most versatile gaming platform and most likely will be due to its inherent nature of not being more static in nature as consoles are. I really don't care what anybody buys or what console anybody chooses. Choose what makes you happiest. For those with a family and kids, or casual gamers, then I would suggest looking into purchasing a Wii U. Otherwise, if you don't want to use a PC, then choose an Xbox One or a PS4; I don't care which.

    Also, it has been stated that the Xbox One provides the superior online experience. I don't see how. No specific examples were mentioned as to why this is. That honor easily goes to the PC. But I think the comment was made in comparison the PSN, Sony's online network. In my experience, PSN is fairly comparable to Xbox Live. Someone please tell me the point I'm missing here. Also, it's not surprise to me that the PS4 isn't exactly running riot in its home market. Japan is a curious market, and its citizens seem to indulge in mobile gaming more than any other developed nation on a per-capita basis. Being that space is at a premium over there, maybe that affects console sales? Regardless, the Japanese have a penchant for handheld gaming.

    Lastly, it should be flat out obvious that the Xbox One and PS4 are limited on games worth playing at the moment. They've been out for just over 3 months. So for those trying to detract from the Xbox One and PS4 because they don't have any good games compared to the Wii U, umm, okay. Great job. But whatever. Just buy whatever the hell you want and what best suits your tastes. Buy a Virtual Boy or a Philips CD-I for all I care. I've heard nothing but great things about the Zelda games for CD-I. (Not true)

    Note: please don't play the Zelda games for Philips CD-I. It's for your sanity. Again, please don't do it. You can buy the CD-I if you wish however.

  • Report this Comment On March 23, 2014, at 8:46 AM, tylatz wrote:

    The author made the same mistake most people do when talking about the console industry. The current "console war" is only between Microsoft and Sony. Nintendo chose not to compete directly when it released the Wii and reiterated that stance with the Wii U. Nintendo has made similar public statements in the past and the creation of games on the idea of local co-op play confirms their stance. Meanwhile Sony and Microsoft are showing off singularly immersive games with heavy focuses on online play. It can also be argued that Nintendo is the only one selling a console instead of a gaming rig given an Apple-esque treatment.

    Nintendo's attempt is to find a place in the household along side offerings from Microsoft and Sony. The plan is risky and will only work by offering experiences that gamers cannot find anywhere else. No, cell phones aren't competition either.

    Sorry for any blatant errors. I'm typing on my phone.

  • Report this Comment On March 23, 2014, at 9:11 AM, NonCasualGamer wrote:

    How many people think ps4 and xbox one will have as many good games as the Wii u has a year and a half after release?

    Not me. So saying the Wii u only has good games because of the early release date doesn't make sense.

    It's pretty obvious the xbox one and especially the ps4 were forced into the market by nintendo. Neither were prepared for launch.

  • Report this Comment On March 23, 2014, at 5:08 PM, elle33 wrote:

    Wow! So many gamers are certain

    tht this generation might be the end of gaming

    as we know it:

    http://opi.cc/5PpeaeW9y5hm63V2

  • Report this Comment On March 23, 2014, at 5:34 PM, David120166 wrote:

    Why does every one always try to compare these three systems? All have different approaches to marketing their consoles. Other than sales figures they are totally unalike. Sony supports hardcore gamers, Xbox is all about online gaming and Nintendo is about casual and kid's games. All this fanboy talk is nonsense.

  • Report this Comment On March 24, 2014, at 2:36 AM, KevinSchneider wrote:

    Well, I'm not sure how many people will think the PS4 and Xbox One will have as many good games as the Wii U given once they reach the year and a half mark that they've been out. It's impossible for me to say. I never stated that the Wii U only has good games simply because it has been out on the market earlier than the PS4 and Xbox One. That would be ludicrous. I only think it to be quite common that consoles generally have a dearth of good quality games until some time has passed for developers to fully realize the technology and capabilities that the systems have to offer. In my opinion, console launches offer up some pretty lackluster software, but I'm not saying that there aren't any games worth playing when a new console launches.

    I don't believe it's obvious at all that Xbox One and PS4 were "forced" into market by Nintendo. How much longer should they have waited to release their new consoles? It's not like we were in the dark and Microsoft and Sony just sprung them out of thin air in order to combat Nintendo's Wii U. I don't see how they weren't prepared for launch either. Their launches this time around went smoother than last as far as I'm concerned.

    It is a bit strange to compare all three of these systems as noted by David120166. All 3 are unique in their own ways and offer up their own pros and cons. Which one or ones appeal to any individual is solely up to their own preferences in what they'd like to get out of a console. Even if Xbox One or PS4 wins this console cycle's sales total, it doesn't necessarily mean that it is better than the other 2 systems. Better is a highly subjective word and it depends upon which person you are talking to. The same goes for what defines a good game. I could love some game, and everybody else thinks it's garbage. Oh well. I don't own any of the current consoles. I am currently very happy with my PC and PS3, even if the PS3 gets the lion's share of my use. If anybody thinks the PS3 is trash, it won't hurt my feelings. To each their own. Just buy whatever makes you happiest. I don't trash anybody's choice in which system they choose as there are pro and cons to each. I also wholeheartedly agree with David120166 that fanboy talk is nonsense.

  • Report this Comment On March 24, 2014, at 7:19 AM, tylatz wrote:

    David120166 and KevinSchneider, a lot of the difference between the three has to do with the companies playing to their strengths rather than their goals. Microsoft is a software company. Sony is a hardware company. Nintendo is a game company. The resulting consoles and their features reflect this background.

    The real issue is what their goals are. Microsoft and Sony are aiming for domination of media entertainment. They want you to play games, movies, music, and streaming content on their consoles. They want to be the pos for all your digital entertainment needs. Second place means they failed. Determining their success relies on comparing hardware, software, sales (especially games per system and digital sales), and profits. Meanwhile, Nintendo is going for a completely different goal.

    BTW Kevin, I haven't looked at recent sales totals but historically Japanese gamers purchase less consoles and more games than other markets. In the late-90s there was an article putting the disparity to NA at a ratio of 10:1.

  • Report this Comment On March 24, 2014, at 7:23 AM, tylatz wrote:

    Why can't I edit? Forgot to point out one thing that ruffled my feathers.

    "Sony supports hardcore gamers, Xbox is all about online gaming and Nintendo is about casual and kid's games. All this fanboy talk is nonsense."

    Spoken like a fanboy.

  • Report this Comment On March 24, 2014, at 5:48 PM, speculawyer wrote:

    No. Next question.

  • Report this Comment On March 25, 2014, at 1:55 AM, KevinSchneider wrote:

    I don't think that comment was spoken like a fanboy. I think that's just generally how David 120166 looks at the different consoles. But you definitely make some good points tylatz. All 3 companies have very different backgrounds. Nintendo started out as a toy maker way back when, and was famous for its hanafuda cards. The good thing for both Microsoft and Sony is that their businesses have other areas in which they can profit and survive. It is tougher for Nintendo, and I want them all do to well to an extent. Specifically because I like having choices and the competition is good for the gaming industry. For sure, Microsoft really seems to be aiming for media domination with consumers. I think more-so even than Sony. Hopefully, whoever gets second place doesn't take it as a complete failure. But I don't think anybody in this was shooting for anything other than first. Maybe I'm wrong about that though. It's interesting to hear about the software purchasing discrepancy between Japan and NA. 10:1 is crazy. Software companies would be ecstatic if NA closed the gap with Japan there.

    I didn't agree with the comment that you thought was spoken like a fanboy either though. To me, all 3 would like to do well with hardcore, casual, online, and kids etc.

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