The clock is ticking on Nintendo's (NASDAQOTH:NTDOY) Wii U. The gaming device has had the next-gen console market to itself for a year, but that's set to change as Microsoft (NASDAQ:MSFT) and Sony enter in November. The Xbox One and PS4 are coming, and Nintendo needs to make the most of the time it has left before this industry gets too crowded.
That could be one of the reasons why it just slashed the price of the console by $50. Starting on September 20, the 32-gigabyte Wii U deluxe model will cost $299, which compares favorably to Xbox One's $499 price tag and to the PS4's $399 cost.
It's just a flesh wound!
But Nintendo's move is more about defense than offense. The Wii U has had a terrible start, selling just 3.61 million units so far. Microsoft, by comparison, has sold about 10 million of its current-generation Xbox 360 console over the last year. And recent trends aren't good. Last quarter, Nintendo only managed to sell 160,000 Wii U consoles worldwide.
The company admitted that it didn't do itself any favors by having a skimpy selection of first-party titles ready at launch, and that's clear enough from the numbers. Shoppers have only purchased about four games to go along with each Wii U sale, on average. That's well below the attach rate for the original Wii, which has racked up almost nine times as many software sales as console sales.
Can Mario save the day?
However, Nintendo thinks it can start turning things around by introducing a strong slate of titles this year. It is running a kind of "grand reopening" of its console for this coming holiday season, including the above-mentioned price cut. Also on tap will be new games from all the powerhouse brands you would have expected Nintendo to bring out at launch like Legend of Zelda, Super Mario, and Donkey Kong.
There's good reason to think that Nintendo's Wii U will recover once the game library gets a boost. For example, GameStop (NYSE:GME) recently polled its own customers about why they haven't purchased a Wii U yet, and the No. 1 reason they gave was the limited number of new games available for the console. Remove that problem, and robust sales are still possible. A GameStop executive told investors as much last week, saying, "We are excited about the number of new games from Nintendo, and we do see the potential for significantly improved performance this fall and holiday ."
Nintendo needs to book some major improvement over that time period. There's no chance that it will get a third shot at establishing the Wii U.