Has Nintendo Done the Seemingly Impossible and Saved the Wii U?

The Wii U has been getting a healthy dose of positive buzz. Is the system on the comeback trail?

Jun 21, 2014 at 2:02PM

Screen Shot

Source: Nintendo.com

There's recently been a lot of talk suggesting that Nintendo's (NASDAQOTH:NTDOY) Wii U is making a comeback. After two dismal E3 showings, the most recent expo show saw Nintendo make big strides in its presentation format. The company's E3 Digital Event showed off a selection of new and upcoming games that might help to give the Wii U some spark. Additionally, Nintendo's Mario Kart 8 has landed to great reviews and strong commercial reception. Were criticisms of the Wii U premature? Is the system now on track for a healthy performance?

Big increases on small numbers
The release of Mario Kart 8 has provided Nintendo's home console with a bit of much needed momentum. News articles from around the time of the game's release touted sales increases of 666% percent for the system in the UK and drove home the fact that the racing title sold approximately 1.2 million copies in its first weekend. More recently Nintendo indicated May that sales of the Wii U were up 90% compared to the previous year. All of these numbers sound very good, but they have led to an overly rosy portrayal of the Wii U's future.

Is this the tipping point?
Nintendo of America's VP of sales and marketing Scott Moffitt recently indicated that the Wii U is about to reach its tipping point, suggesting that the console had beaten its hardships and was headed for bigger success. Moffitt pointed to this holiday's Super Smash Bros. as a game that would finally help the struggling console breakthrough to the mainstream audience. While the upcoming mascot brawler should move good software numbers, its effect on hardware is likely being overstated. This type of positive spin from Nintendo on the Wii U situation is not unfamiliar.

Looking back to the release window for Wii U's Super Mario 3D World, there was a lot of similar comeback chatter. Nintendo's President emphasized that one game could change the fate of the platform, much as he did prior to the release of Mario Kart 8.

Strong reviews for 3D World, and a number of press articles suggested that Wii U was the best choice for a console that season. These elements prompted a selectively held belief that Wii U had hit its stride and was on its way to a healthy lifecycle. Positive perceptions helped drive the company's share price to a two-year high. The only problem was that media and fan buzz suggested sales numbers much higher than what were actually delivered. When the figures rolled in, Nintendo's valuation reacted accordingly.

Wii U still has a software problem
Nintendo deserves credit for improving its E3 presence and delivering with Mario Kart 8, but the broader problems facing the Wii U remain unchanged. The new games that it unveiled at E3 did not have the appearance of high-budget megahits. Instead, the new titles looked like mid-budget games with charming art styles -- titles that would appeal to the core Nintendo audience, but fail to ignite broader interest. Captain Toad: Treasure Tracker is built from Super Mario 3D World assets. Splatoon looks like fun, however the title could pass for a browser game. Yoshi's Wooly World and Kirby and the Rainbow Curse have appealingly clean aesthetics, but the Wii U really isn't in need of more 2D platformers.

Ubisoft (NASDAQOTH:UBSFF) CEO Yves Guillemot recently indicated the belief that Wii U has a future if Nintendo can get it to the right price point. The French publisher is sitting on a finished, unannounced game for the platform, just waiting until Nintendo's latest console establishes a viable user base. That's a pretty tepid endorsement from one of the platform's biggest supporters, and it's obvious that the GamePad is a hindrance to reaching a more attractive price point.

Amiibo toys won't move many consoles
Nintendo's Amiibo figurine platform is a smart move for the company, but its success faces a major obstacle. As great as Nintendo's characters are, there's no overcoming the fact that the Wii U has not built a healthy install base. The Amiibo figurines should sell well enough to Nintendo's core audience, but expecting the toys to drive sales of the Wii U doesn't make a whole lot of sense.

The GamePad continues to be dead weightScreen Shot

Source: Nintendo.com

The expensive GamePad controller remains a substantial barrier to entry for consumers who might otherwise be interested in a Wii U. This year's E3 highlighted the fact that Nintendo has yet to justify the lumbering device, as legendary designer Shigeru Miyamoto could only introduce small prototypes as evidence of the controller's worth. For the system's third E3 showing, trotting out demos like Project Giant Robot and Project Giant Shield as proof-of-concept for the GamePad is unacceptable.

Nintendo dismisses VR while praising the GamePad...
Nintendo's decision to ride out the Wii U hardware situation is understandable, though the lack of reactive strategy does not deserve commendation. The company's decision to stick with its GamePad-centric messaging while failing to deliver the content to back it up suggests Wii U's problems will be ongoing. Additionally, recent comments from Nintendo executives on the potential of a VR revolution have been dismissive and evoke the company's trademark stubbornness and conservatism. Nintendo can still change its fortunes, but such a reversal won't come courtesy of Wii U.

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Keith Noonan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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