After a fairly successful launch, the Nintendo (NASDAQOTH:NTDOY) Wii U has failed to garner significant sales traction, which has created doubts about the company's market savvy and ability to compete in a changing industry. The explanations for why the system has failed to catch on are many, but one of the most repeated arguments is that the console lacks standout software that justifies its feature set and price tag.
That may be changing. With the release of Super Mario 3D World, Nintendo has delivered an impressive critical hit that looks to be giving the system a degree of momentum. Is a high-quality entry in Nintendo's most loved and successful franchise enough to alter the Wii U's fate?
The releases of the Sony (NYSE:SNE) PlayStation 4 and the Microsoft (NASDAQ:MSFT) Xbox One have long threatened to make the Wii U irrelevant this holiday season. After roughly a year on the market, Nintendo's system faces an early demise if it stumbles through its second holiday as little more than an afterthought.
With news that the Xbox One has almost eclipsed the Wii U's LTD sales in the UK and reports of sold out PlayStation 4s, this represents a likely possibility.
The new systems bring the promise of more advanced hardware, online features, and media capabilities. However, it appears that neither system currently offers an exclusive title with the level of prestige that has accompanied Super Mario 3D World.
Battle for the holiday spotlight
The PS4 and Xbox One have delivered somewhat predictable arrays of third-party software amid small selections of retail exclusives and downloadable indie titles. For now, each new system is primarily selling on future promise and offering slightly improved versions of cross-generational software.
The fact that Nintendo's latest entry in the mainline 3D Mario series has landed with such strong critical reception gives the company a much-needed opportunity to change the narrative about its Wii U platform. Publications such as The New York Times have put forth articles claiming that the Wii U is the only next-gen system to have a game worth playing this holiday. That said, considerable evidence suggests that the Wii U cannot be saved, and that Mario 3D World will have minimal impact.
When Nintendo issued its latest quarterly results, many analysts were quick to point out and deride the fact that it had failed to revise its mind-numbingly optimistic target of 9 million Wii U's sold in the fiscal year. Having sold only 460,000 in its first two quarters, CEO Satoru Iwata sought to remind investors and the media that one game can change everything. To be sure, Nintendo and Iwata have placed great hopes in the possibility that its iconic plumber's latest outing will alter the gaming landscape and give Wii U its moment in the sun. Unfortunately, early sales tracking indicates that the title's performance will disappoint.
According to Japanese sales tracker Famitsu, Super Mario 3D World moved approximately 107,000 units in its first weekly tracking period. This marks the lowest recorded debut for a 3D Mario title. For comparison, Super Mario Sunshine sold approximately 280,000 units in roughly the same time period on the company's GameCube platform.
The GameCube, although profitable for Nintendo, was a struggling platform that saw the company lose significant mind and market share. That Super Mario 3D World is underselling Sunshine by a considerable margin suggests a dire situation for Nintendo. In fact, it confirms that the Wii U is on track to become a failure of colossal proportions and that a recovery is out of the question.
Time for a change of strategy?
In following up the GameCube, Iwata famously stated that the company should not be in business if its goal for subsequent home consoles was to outdo that system's modest performance. While the Wii proved to be a tremendous success by most measures, the Wii U is on track to come in well below the GameCube's 21 million LTD sales.
With some UK retailers dropping the console altogether, the Japanese market showing a loss of interest in console gaming, and the Wii U's failure to appeal to its most important market, North America, the system is in serious danger of selling approximately half of what the GameCube managed.
If the apparent collapse of Nintendo in the console market reads as good news for Sony and Microsoft, give pause. It is still too early to tell if a broader industry contraction is under way. A Nintendo console has never performed as poorly as the Wii U and never before have the company's industry-shaping IPs looked less capable of carrying a system. Super Mario 3D World will not alter the Wii U's fate, but without breakthrough software, Sony and Microsoft's new consoles could face similar disappointments.
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.