With last month's release of Microsoft's (NASDAQ:MSFT) Xbox One and Sony's PlayStation 4, Nintendo (NASDAQOTH:NTDOY), with its fledgling Wii U, has all but cemented its place as the third choice for gamers. With just 4.5 million units sold worldwide, the Wii U is far from the follow-up success Nintendo envisioned.
Comparatively, Windows Phone has had some success in 2013, but it still trails Apple's (NASDAQ:AAPL) iOS and Google's Android platforms in mobile computing.
The Wii U and Windows Phone have some things in common that may be the reason for their struggles. Mainly, they both rely on their own software and lack strong support from third-party developers. And, on an unrelated note, they both start with "W."
Intellectual property powerhouses
Nintendo is heavily reliant on its original and exclusive titles to sell its game consoles. Its strategy is to develop games so good, gamers will buy its console just to gain access to them. This strategy worked tremendously well in the past, especially with the original Wii, which sold over 100 million units.
Nintendo is still making great games. The release of Super Mario 3D World garnered near universal acclaim, and is certainly one of the best reviewed games of the year. For whatever reason, though, these games aren't making the same impact as in previous generations.
Likewise, Microsoft long provided exclusive access to its Office suite and SharePoint for Windows Phone users. It eventually caved, and brought support for the productivity suite to iOS and Android earlier this year, as it saw an opportunity to sell more subscriptions to its Office 365 cloud service.
Many have suggested that Nintendo start supporting other consoles in the face of fledgling Wii U sales. As Microsoft has experienced with Windows Phone, it's hard to sell exclusive software if no one has the hardware to use it on. Considering Nintendo was still taking a loss on each Wii U unit it sold as of August, the company may want to explore expanding its revenue stream if it cannot increase sales of its console.
Lacking third-party support
Windows Phone is a second-tier priority for app developers, who usually focus on iOS and Android first. The sheer number of users on the competing platforms will make it difficult for Windows to compete for priority with developers. More importantly, both platforms have more high-value users than Windows Phone.
A high-value user is someone who is likely to make in-app purchases or respond positively to ads. They're also the kind of people that buy high-end phones like the iPhone or Galaxy S4. Apple's position in the premium smartphone market has all but cemented it as the first priority for developers. Conversely, just one in four Windows Phones is a high-end model.
Nintendo once had strong support from third-party game developers. A conflict during the release of the N64 over cartridge data capacity compared to CDs caused many to abandon the company. Additionally, strong sales of Nintendo's home-grown titles have discouraged others from developing for Nintendo's hardware -- which presents different challenges from Microsoft and Sony's analog consoles.
Since then, Nintendo has had only one real success: the Wii, which was praised for its differentiated game play -- the motion control -- and easily accessible games. The Wii U failed to generated the same excitement, and it's often criticized as being the same console with a new controller. As a result, third-party support is more important to Nintendo now more than in its previous generation.
Nintendo has a couple tricks up its sleeve, including inviting developers to use its popular game characters in their own worlds, which it has had success with in the past. But with a small install base and less powerful hardware, developers may continue to give Nintendo the cold shoulder.
Both Microsoft and Nintendo are facing an uphill battle for users. Microsoft's Windows Phone is trapped in a vicious cycle of a low install base, which means less support from app developers, which means less demand for their phones. Nintendo's usual strategy of leaning on its intellectual property is highlighting its strained relationship with third party developers.
Both companies have strengths as software developers, however. Microsoft has already begun exploring support for its competing platforms in order to capitalize on the huge number of smartphone and tablet owners not using Windows. Nintendo may soon explore a similar strategy and forego sales of its loss-leading hardware.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and 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.