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Could Nintendo Salvage the Wii U by Ditching the Gamepad?

By Keith Noonan - Sep 19, 2013 at 9:38AM

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The ailing system needs a jolt.

The Wii U has, thus far, been nothing short of a disaster for Nintendo (NTDOY 1.94%). After selling the majority of its launch stock in the holiday season of 2012, sales of the console have slowed to a trickle, and its prospects moving forward are grim. Major third party publishers have withdrawn meaningful support, the system is struggling with brand and identity issues, it has been dropped from a number of European retailers, and compelling software has not been released steadily enough to capture consumer interest.

Furthermore, the feature that was used to champion the system, that being its bulky "Gamepad" controller, seems to inspire none of the imagination and appeal of the Wii's motion gaming. Now that Nintendo has decided to strip the 3D features of its 3DS handheld from its newest iteration, the 2DS, could the company take a similar course of action and drop the Gamepad in an attempt to save the Wii U?

Identity crisis
The Wii U's problems are manifold. A substantial number of consumers still believe that the system is simply an add-on to the Wii console, rather than entirely new hardware that represents Nintendo's first foray into HD output. This problem can be traced back to the system's 2011 unveiling at the E3 expo. After Nintendo of America President and COO Reggie Fils-Aime had explained to the conference crowd why "Wii U" was the perfect name for the company's new hardware, the screen behind him displayed the new Gamepad controller and a promo real began to run.

This video showed the Wii U, but because it looked so similar to the existing Wii console and because the box received such little focus in comparison to the new controller, many thought a new peripheral was being unveiled rather than a new system. CNN published an article proclaiming the Gamepad to be the new controller for the aging Wii system. Fils-Aime stated in interviews that the appearance of the Wii U system casing was near irrelevant, almost proudly claiming that it was "just a box." The rest is history.

Deadweight controller or dead system?
As of most recent reports, the Wii U still sells at a loss for Nintendo thanks to the expensive technology used in the Gamepad. This will likely be the case for the near future, as the MSRP for Wii U has dropped to $299 for an SKU that includes the Legend of Zelda: The Wind Waker HD. This undoubtedly improves the system's value proposition, though likely not enough with looming console releases from Microsoft (MSFT -0.40%) and Sony (SONY -0.32%). In order for the Wii U to have a chance at relevance this holiday, it needed a substantial price cut that Nintendo was not in a position to offer.

If Nintendo were to drop the Gamepad and ship an SKU at $199 or even $150, something it could conceivably do given the level of tech in the box, it could improve its market share and build a sustainable audience for its first party software. As it stands, the Wii U's current price point places it squarely in the middle, competing against $199 Xbox 360s and PlayStation 3s that offer superior lineups and the $399 PlayStation 4 and $499 Xbox One, which offer superior tech, networks, and media features.

The Gamepad as a paywall
The Wii U's strongest asset is Nintendo games, not the Gamepad controller, and certainly not naming and aesthetic similarities to the dead Wii console. The focus on the Wii U's controller and the resultant high price point are preventing consumers from enjoying the console's strengths. Shipping an SKU without the Gamepad would create certain problems, however. Software that requires the controller would need to be patched in order to function, and these compatibility issues would create headaches and additional confusion for retailers. That said, it would give Nintendo an opportunity to rebrand the system, recoup R&D costs, and put the focus back where it belongs: games.

Stolen thunder and deafening silence
The launch of the PlayStation 4 and Xbox One means that there is not much excitement surrounding the Wii U. The systems are releasing with third party support that dwarfs, in quality and scale, what the Wii U has received in its first year on the market. When development for the PlayStation 3 and the Xbox 360 finally dries up, publishers will no longer have the incentive to port titles to the Wii U's similar hardware specs. It simply isn't possible to compete in the console hardware space without meaningful third party support.

What's black and white and irrelevant all over?
Nintendo needs to do something and they need to do it fast. The company cannot afford being pushed out of the console gaming space. It cannot rush out a successor because it would likely face many of the same problems and because Nintendo has committed itself to substantial operating profits. It also cannot afford another 3-4 years of an irrelevant Wii U. Ditching the Gamepad could be company's best shot at saving face.

Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. 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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