New challenges for Nintendo
The Nintendo Wii, the motion-control darling of the video game console world, faces new challenges and questions about its future like never before.
The industry-leading hardware has been the hottest gift three holiday seasons in a row since it was released in November 2006. This summer, the Wii topped 50 million consoles sold worldwide, making it the fast-selling console ever.
But in recent months, sales have fallen off and holiday supplies are plentiful for the first time, removing some of the cachet of being a sold-out product. Some independent game publishers are restless as well, unhappy that they aren't having the success on the platform that Nintendo's games are.
Rivals Microsoft and Sony have both announced plans to add motion-control systems, which will appear next year, negating some of the innovation advantage that Nintendo has enjoyed.
The question is whether the Wii can maintain its market lead or if it will fall back into the ranks of more traditional game systems, Microsoft's Xbox 360 and Sony's PlayStation 3.
"The Wii ... has passed a significant milestone in that supply has met demand," said analyst Billy Pidgeon of Game Changer Research. "It's not an issue that you can't get a Wii. A lot of people ... are eager to see what happens now."
Nintendo executives dismiss concerns about the Wii platform, saying it has legs to compete for years. Sales of the console, however, dropped 43 percent from April to September this year, and are expected to fall far short of the 10 million units sold a year before. Nintendo has also revised its revenue forecast for the fiscal year ending March 31 from $20.6 billion to $17 billion.
Nintendo lost the title of best-selling console in September for the first time in three years, but regained it in October, in part due to a price cut of $50 for the formerly $250 Wii.
Cammie Dunaway, executive vice president of sales and marketing for Nintendo of America, said the Wii has plenty of momentum left and sales have increased because of the recent price cut. Wii sales are up 85 percent on a weekly basis since the pricing move.
"I think going into the holidays, the Wii is in a very good position," Dunaway said. "It has an unbeatable combination of games, experience and unbeatable value, and that continues to put it to the top of people's wish list."
Dunaway said one of the reasons for the lower numbers is the record set last year, when Nintendo sold 10 million Wii consoles. And Nintendo only recently began putting out high-profile games like Wii Sports Resort, Wii Fit Plus and Super Mario Bros. after a long time that saw no new games from the company.
The release of those games, however, hits a sore spot with some independent publishers who have bet big on the Wii only to find their returns less than stellar. Electronic Arts CEO John Riccitiello said recently that sales of third-party games could benefit from more support from Nintendo.
"To be honest with you, I think the Wii platform has been a little weaker than we had certainly anticipated. And there is no lack of frustration to be doing that at precisely the time where we have the strongest third-party share," he said.
Nintendo also faces more competition from Microsoft and Sony, who have both cut prices on their consoles. Two versions for the Xbox 360 sell for $199 and $299, while PlayStation 3 consoles sell for $299 and $349.
The two companies also have announced plans to release motion-control systems for their consoles. Microsoft is working on Project Natal, a camera-based motion system, while Sony is prepping its Motion Controller system, which uses a camera and a controller wand, for next year.
Rivals tout advances
Xbox 360 project manager David Dennis said Natal will blow people away with experiences that won't be found on the Wii. Jack Tretton, CEO of Sony Computer Entertainment of America, said last month that the Wii, with its technical limitations and lack of high definition, will have trouble growing to provide customers with the entertainment they are looking for from game consoles.
"The Wii is a novel device, and they've generated a lot of excitement for the category, but we feel our approach with the PS3 is to have a device that is a high-tech, high-definition all-in-one entertainment device," Tretton said.
Analyst Michael Pachter of Wedbush Morgan Securities said the Wii, with its market lead, will enjoy a sales edge for years. But he said the hardware on the Wii will require an upgrade to high-definition in the next year, something he's predicting Nintendo will do in 2010.
"I feel like the gimmick of playing with the Wii fades as people get HD displays," said Pachter. "They want HD content, but the Wii games don't look great on HD TVs."