Nick Gibson explores the most overlooked factor in Nintendo's struggles: it's own success

See you Wii U?

The Wii U’s underperformance has hit Nintendo’s share price hard in recent months. The limited scope and appeal of its software line-up has been identified as a key factor in its underperformance; but claims about
over-pricing are less convincing.

But at a recent Nintendo event I got to explore data that suggests two other critical factors, both tied inextricably to players past and present. Surprisingly, a huge factor is the ongoing appeal of the Wii. And yes, I do mean the Wii.

On the surface, the original Wii’s latest sales figures suggest a moribund platform. It may not have sold in significant volume for several years but the Wii install base is still remarkably active. Nintendo’s usage tracking data indicates that 50 to 60 million people worldwide used a Wii console in the last 12 months. 30 million people used Wii Fit alone in the last 12 months – an absolutely remarkable feat for a peripheral that launched in 2007 and was last revised in 2009. The problem is that the Wii’s active userbase of mass market families has little overlap with Wii U’s current demographic.

Nintendo initially sought hardcore gamers and the core Nintendo fanbase with Wii U, the flagship status of launch title ZombiU a case in point. According to Nintendo, the Wii U userbase is currently clustered around16 to 30-year-olds, 65 per cent of whom are male.

This represents a fundamental shift away from the mass market, family-oriented demographic that fuelled Wii’s success and pits it against Microsoft and Sony’s consoles, a war on two fronts it was never going to win. Where Wii Fit and Wii Fit Plus have managed well over 40m units between them, Wii Fit U’s sales are in the low hundreds of thousands.

Can Nintendo perform a wii u-turn?

So, with Wii U stuck in a demographiccul-de-sac, Nintendo’s challenge isn’t just how to field better games, it’s also how to upgrade the sizeable active Wii userbase that’s both happy with its existing console and is either unaware of or unconvinced about the Wii U.

Nintendo’s initial marketing focus on more hardcore gamers unsurprisingly failed to reach the typical Wii family and a more mass market Wii-like approach has yet to reap much reward. HD graphics and tablet-like interfaces are not sufficient to tempt the existing Wii Fit crowd. They need to be incentivised by other factors; by genuine software and hardware innovation, by the sorts of novel gameplay experiences that Nintendo has repeatedly come up with in the past.

Nintendo has historically been dismissive of the competition from other mass market platforms such as smartphone, tablet, and even Facebook.

But can’t all these platforms co-exist with relatively limited cannibalisation? After all the 3DS continues to sell in substantial volume. We think it is unlikely Nintendo will be able to pull off that feat again and reckon that, as it stands, lapsing Wii users will be just as likely to jump to other platforms or leave gaming altogether as Nintendo transitions to Wii U.

Perhaps Wii U will hit analysts’ forecasts of 20m units lifetime sales. With the right games and more effective marketing it could well achieve this. However, it should be remembered that Nintendo’s TV console business was in long-term decline before the Wii bucked the trend. Its highest selling console was the NES in the ‘80s and every single subsequent generation saw a material install base decline, with the GameCube managing under 22m units.

Millions are still enjoying the Wii and think fondly of the Wii brand, but without a clearer upgrade strategy and more of the innovation for which Nintendo is famed, there is every chance that Wii U will simply resume the longer-term Nintendo console slide. The Wii’s success may be the most phenomenally successful blip in games history.

Nick Gibson is a director at Games Investor Consulting, which provides commercial check-ups, strategy and data to games, media and finance companies.

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