Can Nintendo Recover From Its Wii U Disaster?

Source: Nintendo.com.

Approximately a year and a half after the release of the Nintendo Wii U, it's safe to categorize the system as a disaster. The console is hampered by an expensive controller that failed to spur consumer interest and a lack of meaningful software support from third-party publishers. Even worse, the Wii U is still selling at a loss for Nintendo (NASDAQOTH: NTDOY  ) and its slow sales make reducing its build cost difficult.

As the system continues on its abysmal trajectory, the value of Nintendo's tried-and-true IPs are at risk. The company's next moves are crucial. The Wii U is destined to go down as one of the most ill-conceived pieces of gaming hardware in history, and Nintendo's place as a hardware manufacturer is in jeopardy. The extent of the console's failure necessitates that the company face reality and make substantive changes to its business model. How can Nintendo come back from the Wii U?

Wii U has forced Nintendo to change
Now that Nintendo has admitted that the Wii U is not in good shape, attention turns to how the company can restore its fortunes. Its biggest successes over the last decade came from products that sought to change the way games were experienced. Alternatively, the failure of the Wii U can be traced to a misguided application of that same strategy.

Nintendo must decide whether it will once again attempt to pitch its next console on the promise of an unproven gimmick consumers or offer a more conventional console that relies on the strength of Nintendo software. The company will also look to diversify its business with a still-mysterious move into "quality of life" offerings.

Nintendo faces very similar challenges to the ones that dogged its outlook in the days of the GameCube. Sony and Microsoft are the most relevant players in the home console space and the portable market is looking increasingly crowded, this time as a result of the mass adoption of smartphones rather than a dedicated competitor like Sony's PSP. With that in mind, it's not surprising that Nintendo is returning to a variation of the "third pillar" strategy that produced the incredibly successful DS handheld.

What is "quality of life"?
The specifics of Nintendo's quality-of-life business are set to be detailed in June at the E3 gaming expo, but some basic facts are known. The QOL ventures will be separate from the company's console endeavors and will be headed up by a separate team. President and CEO Satoru Iwata has also stated that the company's plans have nothing to do with the wearable computing push that is currently under way.

Source: Nintendo.com.

Nintendo previously found tremendous success with its health-promoting Wii Fit software, but whether the company can build a stand-alone business around similar principles in the age of abundant dieting and exercise apps remains questionable. That said, the company's short-term outlook is highly dependent on its ability to debut a viable QOL business plan in the coming months.

Nintendo must win back publishers
The biggest problem facing Nintendo on the console front is a lack of support from third-party publishers. When the Wii U was first announced, Nintendo boasted of an "unprecedented partnership" with Electronic Arts (NASDAQ: EA  ) that would ultimately disintegrate and cause the American publisher to abandon the console altogether. Instead, EA has partnered with Microsoft, leading to releases like Titanfall and timed exclusive content for other games.

While other major publishers have been less vocal about their lack of faith in Nintendo's hardware, EA's desertion of the Wii U kicked off a trend that has seen a gradual erosion of support. Nintendo has a long history of fostering poor relations with third parties and there simply isn't much incentive to release software on the Wii U.

Source: Xbox.com.

The lack of support from EA and other publishers has created a situation that requires Nintendo to be almost the lone driving force behind its platforms. This problem is less severe on 3DS, but a look at the 2014 lineup for Nintendo's handheld and chief breadwinner reveals that the company is stretched thin.

For this reason, its next handheld and console hardware releases will likely receive largely similar versions of the same software. Iwata has stated that Nintendo's next hardware releases will feature hardware architecture very similar to what is currently found in the Wii U, and Nintendo is not equipped to support two distinct platforms without meaningful third-party support.

Can Nintendo make the right moves?
Having a unified hardware ecosystem could help Nintendo to improve its third-party situation by offering publishers a larger user base, but many of the issues the have led to decreasing support would likely remain. Nintendo must modernize its online offerings if it wants to regain the favor of third parties like EA. Doing so will be essential for success in both gaming and Nintendo's budding quality-of-life business. The company still has explosive potential, but there are many obstacles it will have to overcome before it can recover from the damage caused by Wii U.

Bigger than the original Wii, here's the biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.


Read/Post Comments (12) | Recommend This Article (2)

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 April 17, 2014, at 12:45 PM, Grendel wrote:

    Well it's nice to see that there are more reasonable writers at the Fool than the ridiculous pieces that Sam writes from time to time.

    Hopefully their QOL platform will put cash back in the bank and give them more time to correct the Wii U missteps.

  • Report this Comment On April 17, 2014, at 2:12 PM, Frolaskel wrote:

    The Wii U isn't just a disaster, Nintendo's actually been dead for 20 years.

    In a more serious tone, calling the Wii U a disaster is hardly any different from calling the Xbone a disaster, or the ps3 after the first few years, or the Vita for a long time. Sales figures for the first two years are not the be-all end-all for a console, especially when they're not significantly lower than the competition relative to time.

    Keep in mind that Sony and Microsoft don't make profit on their consoles, and that the software offerings on their "next gen" machines are utterly underwhelming, with no signs of improvement.

    You anti-Nintendo asshats decree it as if everything's said and done. Has Nintendo made some major missteps involving the Wii U? Yes, but that hardly portends 'failure' or 'disaster'. Such evaluations are entirely too premature.

    Even if they don't profit off of the Wii U, if they can maintain consumer interest and good will, they will continue to survive as they have for 30 years. Not every iteration has to be a rousing success, you know.

  • Report this Comment On April 17, 2014, at 11:32 PM, puppybone69 wrote:

    Nintendo? You mean Sega, right? Old school 90's tech, stuck in a time warp of gimmicky gadget spam? Yeah, I remember them, they left blue and green out of their Virtual Boy and still can't see it for all the red!

  • Report this Comment On April 17, 2014, at 11:49 PM, awang0718 wrote:

    Once again, Keith Noonan writes another anti-nintendo article for more clickbait...

    We get it. The Wii U is selling poorly. However, system sellers like Mario Kart and Smash Bros. are just around the corner (Kart launches next month), which is something Mr. Noonan conveniently forgot to mention. If those two games fail, however, expect Wii U to sell like the Gamecube. However, I don't think Mario Kart and Smash Bros. will "fail."

    As for Third party support, the Wii U will only gain third party support it the install base is large enough. In order for the Wii U to sell better, it needs more exclusive content. That's where games like Mario Kart and Smash Bros. come in, which should boost Wii U sales significantly.

    If the Wii U is that big of sisaster, then Sony Computer Entertainment would have collapsed a year ago due to terrible Playstation Vita sales. That whasn't happened to SCE, and it won't happen to Nintendo.

    By the way, the 3DS upcoming lineup this year is large. It includes Disney's Magic World (just came out days ago), Kirby, Mario Golf, Tomodachi Life, Youkai Watch 2, and Smash Bros. All of these games will be released from now until the summer. The 3DS's lineup for the 2nd half of the year hasn't been announced yet (it will be announced at E3 for sure), but it will likely be quite compelling. The 3DS will continue to sell well, make a lot of money, and dominate the handheld market (though there isn't really much direct competition)

  • Report this Comment On April 17, 2014, at 11:57 PM, TraxeSteelTrrair wrote:

    Again with the Wii U bashing? Where is the mention of Wii U outselling PS4 in Japan? Hmmmm? Or that sales have picked up in general for the Wii U? I will say I have a ton of fun on the Wii U, and the gamepad is excellent for the kids who want to play but I want to watch a movie or show, or vice versa. It also has some great graphics, even with all the hoopla about inferior graphics. The kids love the Wii U, as does the wife. We love the games and we really looking forward to Mario Kart 8. That looks amazing. I bet Smash Bros are going to be ridiculous good, and the new Zelda will be amazing, and I hope Metroid is in the works, and I loved NBA2K and Assassins Creed and Batman are great, and the Lego games are great on Wii U....so the Wii U can be awesome. Sure, the Wii U has not been this massive blockbuster....but it will get its footing, and I sick of these articles bashing Wii U when it is not warranted.

  • Report this Comment On April 18, 2014, at 12:35 PM, anrbfan wrote:

    Can Nintendo survive? Not if they keep pushing games only a 6 year old can love (Mario, etc).

  • Report this Comment On April 18, 2014, at 12:38 PM, anrbfan wrote:

    Selling well in Japan means nothing. Japan has 1/3 the population that the USA has. Nintendo needs to sell 3 times as many units in Japan as PS4 sells in the USA, just to break even....to actually be selling as well as PS4. That aint happening.

  • Report this Comment On April 18, 2014, at 6:13 PM, virgilcole wrote:

    Not unless the cure for cancer is imbedded in the hardware.

  • Report this Comment On April 18, 2014, at 8:45 PM, sypoth wrote:

    "Nintendo faces very similar challenges to the ones that dogged its outlook in the days of the GameCube" Um, no. The Gamecube didn't sell well yes but the problems are more like what they experienced in the days of the N64, being the ONLY console still using cartridges and having the most easy to break 1st party controller and the large library of games that are just SNES ports is NOT made up for the two good games on the system nor do those two games make it a successful system. The N64 bombed bad in sales and Nintendo almost went bankrupt with that system the GameCube was so sickly mostly because everyone had jumped the Nintendo ship and Nintendo themselves were licking their wounds, if it wasn't for the Pokemon craze Nintendo wouldn't have survived to release the Wii let alone the Wii U and that craze is over with nothing new to replace it. Nintendo just needs to leave the home console market, they have a bad reputation of not only having a console one generation out of date but also of having a library you have to constantly rebuy the same classic games from but also full of shovelware that the majority of the copies of will be sitting in a clearance bin brand new for $5 and STILL not sell. Leaving the home console market will allow them to focus on handheld gaming and on quality titles rather than ones that have massive flaws even the lead programmer can't fix on site with games they are announcing to the public.

  • Report this Comment On April 18, 2014, at 11:53 PM, CoreGamer5583 wrote:

    So funny to see the smattering of Nintendo apologists coming into these comments to make excuses for Nintendo's terrible products and games. Wake up guys, even with "Smash" and "Kart" coming in the near future (actually Smash is late this year, may even be next year) the Wii U is a distant 5th in the console race, behind PS3, XBox 360, PS4, and XBox One. Nintendo just has no clue how to design good hardware anymore, they're obsessed with bad gimmicks tied to cheap hardware, and their products just aren't even remotely worth it. Had they opted for a solid console instead of this gimmicky stuff, they might have had a chance; but as it is, they've lost the home console market completely, and I doubt they'll ever get it back. And the 3DS isn't a good product either, sales have been way short of Nintendo's goals, and the company has lost money for the last two years.

  • Report this Comment On April 19, 2014, at 8:44 AM, onebluephish wrote:

    I am wondering their motive for continuing to rehash the same information/perspective. I would like to challenge Motley Fool writers to take a different perspective-perhaps something to the effect of 'Top 10 Ways Nintendo Can Reclaim the Top'. Reason being is that right now many tech review sites are bashing Nintendo rather than looking at what they have to turn things around.

    -Access to historical backlog of titles (NES/SNES/GCUBE/Game Boy/etc). In larger quantities than what is available on the Wii Shop. Perhaps borrow a page from Sony's playbook and allow a subscription service.

    -Revitalize older franchises-Star Fox, Chrono Trigger, Earthbound, Secret of Evermore, Diddy Kong Racing

    -Re-imagine other quality franchises: Mega Man, Mario Party (which would be excellent for the tablet in my opinion), Metroid

    -Enable DLC for games (similar to what they did with Luigi) for titles like Mario Kart 8, upcoming Super Smash Brothers (adding maps/playable characters, etc)

    -Partner up with 3rd party developers like Capy

    Granted this list is not easier said than done, and their are plenty more ideas; however, I think MF has said enough of the same stuff over the past 6 months where if they can't say anything new then I would recommend they bite their tongues until E3. If Nintendo flops again I would hope their board finally decides to shake up management in order to right the ships direction. They are sitting on so many perfect opportunities (some for decades with no reason/response). Then I feel it would be fair to start up again.

  • Report this Comment On April 19, 2014, at 6:45 PM, diegoshmiego wrote:

    Word to the author: when you speak the truth, people get riled. Nintendo white knights will pout in attacking your credibility when it's Nintendo who continues to shovel the same IPs, same lack of 3rd party support, same revulsion for modern online gaming, same overpriced shovelware - and what do Nintendo fans say? "Please sir I want some more!". More Mario platforming? Here you go! More rehashed classics (Zelda WW: "HD"), yes please!

    What Nintendo suffers from is not only its own sad, stunted child-state, but the sad stunted child state of its stockholm syndrome fans. A company cannot grow if it's not confronted with financial reality -- and if abysmal sales of its consoles isn't a wake-up call, I don't know what is.

    On the bright side, maybe this time Smash Bros. won't be that bad!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2917873, ~/Articles/ArticleHandler.aspx, 9/16/2014 9:26:56 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement