When you're in third place, nobody takes you seriously. In the case of Nintendo (OTC BB: NTDOY.PK) and its risky Wii console, things are only made worse by the fact that you are putting out a console that lacks the DVD gadgetry of its larger competitors and is being marketed around quirky controllers and motion-activated gameplay.
Oh, and don't get me started on that ridiculous name. Wii? As in "Wii" couldn't think of a better name? As in "Wii" know that owners are going to be hit with size and overflowing bladder jokes?
However, if you take the time to do more than just laugh at the tea leaves, this may actually be Nintendo's best chance to matter on the console side. Quite frankly, it may be its last chance, too.
Three's company, so who's the Tripper?
Over the years, the industry has shown a knack for granting no more than two consoles a fighting chance at any given time. Atari and Intellivision were doing fine in the early 1980s until ColecoVision crashed the party. Then you had Nintendo and Sega own the next few console generations, easily vanquishing systems like 3DO and Atari's Jaguar.
The elasticity of that theory was stretched when Microsoft (NASDAQ:MSFT) rolled out its Xbox in 2001. At that point, Sony (NYSE:SNE) owned the market with its PlayStation and had introduced the PlayStation 2 a year earlier. Nintendo was the distant silver medallist in the process of upgrading its gamers to the GameCube platform.
Microsoft's introduction came at Nintendo's expense as Sony was able to own two-thirds of the global market. However, with Microsoft and Nintendo running neck and neck domestically, the industry was able to absorb all three players as legitimate standards. Game publishers were left with little choice but to service all three systems, even though both Microsoft and Nintendo made sure that they had their own proprietary "must have" franchises to keep their owners loyal.
Four years ago, I suggested that Nintendo drop out of the console race and stick to its handheld and software strongholds. I don't see it that way anymore. In fact, even though Nintendo is taking some pretty risky chances in launching a revolutionary system, I think the climate couldn't be better for Nintendo.
However, before digging into the prospects of Nintendo, it's important to explore why the Xbox 360 and PlayStation 3 are vulnerable.
Even giants see their game screens freeze from time to time
I'm one unhappy camper when it comes to my Xbox 360. I had to ship it out to McAllen, Texas, two weeks ago when I got the dreaded "three red flashing lights" hardware failure error.
It's a common flaw. Microsoft even has an entire page devoted to it, and it's also one of the prompts on its customer service line. I've owned just about every major console since I was old enough to earn an allowance, and this is the first one that went bonkers on me within the first year of ownership. Thanks to what I see as a pretty skimpy warranty -- and my boneheaded ways for not looking into an extended warranty -- I'm out $139 plus shipping. I still don't know if I'll be getting my original unlucky machine back or some other refurbished reject, but at this point, my faith in Microsoft is about as buggy as my 360.
Naturally, I reserve the right to change my mind once Halo 3 hits stores next year. Until then, I'll just gripe about seeing red (literally) and feeling gypped after overpaying for software titles that don't offer a whole lot more than their sixth-generation versions.
Then we have the PS3. The company has teased gamers with product delays. Now, a problem with its Blu-ray drive finds the company nearly halving the number of units it expects to have on the market in time for this year's holiday selling season. The price tag -- at $499 to $599 -- is also steep given the limited resources of younger gamers.
In short, there's a reason why many of the companies presenting at the Merrill Lynch Media & Entertainment Conference earlier this month expressed a surprising healthy market for the PS2.
"Sony has talked about this PlayStation 2 cycle having -- I don't know -- five more years to it," Electronic Arts (NASDAQ:ERTS) CFO Warren Jenson said during the conference. "It's going to be around for a long time."
In other words, the PS3 is going to be a slow gainer. It really doesn't have much of a choice given its production snafus, but the high price is going to make it appealing more to upscale celluloid junkies than actual gamers for another year or two when the price starts to drop.
At half the price of the PS3, and ready to fill the retail channels with nearly twice as much product, Nintendo has the perfect chance to matter again.
Wii
the people
So are couch potato gaming fiends ready to get moving to make the most out of their new games? It's an odd proposition until you walk into the arcade and see folks playing Dance Dance Revolution. That can sometimes rival even the most ardent of aerobic workouts.
Even though folks will be able to enjoy their Wii games in the more conventional vegetative state, won't the active gameplay elements win over parents who worry that their kids aren't getting enough exercise by spending way too much time staring at their television screens and computer monitors?
You bet. Childhood obesity is the real deal. Even McDonald's (NYSE:MCD) is feeling a guilty conscience these days as it seeks to motivate the Happy Meal crowd to embrace physical fitness.
Even if you're jaded and argue that kids will rebel against their parents, there's got to be something in a new parental mindset that will encourage video game playing and the guilt-free purchase of new software titles.
Nintendo has already proven that it can rework the market with the success of the touch screen and voice-activated Nintendo DS. It has opened up the portable market to the cerebral with Brain Age and Big Brain Academy, as well as the pet-loving Nintendogs set.
Nintendo won't catch up to Sony, but it can certainly help close the gap with a successful Wii rollout. Because the PS2 is in ample supply at the $129 price point, the Wii marketing message shouldn't be based on the value proposition relative to the PS3 and Xbox 360. In reality, the Wii will be duking it out over the holidays with PS2 and second-hand systems being sold at GameStop (NYSE:GME) more than the scarce and pricey PS3. That's where Nintendo needs to pitch its revolutionary controller and evolutionary gameplay.
If this is Nintendo's last hurrah in the console market, it couldn't ask for better playing conditions. If it plays its cards right and the competition continue to play theirs wrong, Nintendo may very well overcome its ill-advised name.
Electronic Arts and Gamestop are Motley Fool Stock Advisor newsletter service recommendations. Microsoft is a Motley Fool Inside Value selection. Try out these or any other Foolish newsletter free for 30 days.
Longtime Fool contributor Rick Munarriz has been a fan of video games dating back to Pong. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
