It’s getting to be that time again. Nintendo, Sony, and Microsoft are squeezing the last few drops of entertainment out of their aging systems, and the next generation of consoles is waiting just around the corner. With Nintendo looking to re-establish themselves in the “hardcore” market, win back the support of respected third-party developers, and still retain the “casual” market they carved out with the Wii, all eyes are on the Wii U. With analysts like Michael Pachter saying Nintendo is at least two years overdue for a new console, and others believing the Wii U is launching prematurely, there are plenty of questions surrounding the upcoming system. Is Nintendo releasing the Wii U at the right time?
Nintendo’s last fiscal year was viewed by many as a disaster. The Wii sold less units than ever before, despite being reduced to the low price of $150, there was an unprecedented lack of top-selling titles, and for the first time in the company’s incredibly successful run, Nintendo lost money. Based on Nintendo Global President Satoru Iwata’s last meeting with Nintendo’s investors, Nintendo is bracing for another potential loss this year, estimating the total number of combined Wii and Wii U consoles sold will only be in the range of 10 million.
A quick glance at these numbers would convince most people that Nintendo waited too long to release the Wii U, but it’s not always about the raw data. Multiple factors contributed to Nintendo’s financial woes, including the fact that, since the price cut almost a year ago, Nintendo has been selling the 3DS at a loss. Additionally, as the Wii U is Nintendo’s first powerful, HD console, production costs are at an all-time high. So although declining Wii sales over the past two years have done significant financial damage to Nintendo, they are not solely to blame for the company’s deficit.
The fact of the matter is that had Nintendo launched the Wii U a year earlier, it’s not likely that the financial situation would be any better. While Wii U games would likely sell at a higher rate than the Wii games of last year, they would also come at much higher production costs. Technology becomes cheaper, easier to work with, and more efficient over time. The cost of creating an HD game in 2012 is lower than what it would have cost to make the same game in 2011. Playing the waiting game may seem like it’s costing Nintendo money, but it might actually be saving them money in the long run.
Equally important to video game production costs is the cost of the system itself. Nintendo has always been regarded as the most affordable of the first party companies. Nintendo’s goal with the Wii U is not only to be able to stay competitive graphically, but also financially. There are already discontented grumbles from many over the rumored $350 price tag for the Wii U. How much harder of a sell would the Wii U be if the system had launched in 2011 with a $450 price tag? The timing of the Wii U’s launch allows for competitive hardware at a competitive price without selling the system at a profit loss.
When Sony and Microsoft launched their last generation of consoles, both companies reported first year losses in the billions of dollars. Back to back years with losses in the $200 million range may seem bleak, but Nintendo’s strategy will likely save them from suffering the same billion dollar losses of their competition. The incredible financial success of the DS and the Wii early on have built up a financial safety net for Nintendo, and it’s that safety net that the company has banked on in this transition period, allowing them to bide their time on the Wii U’s release.
In stark contrast to the arguments of Michael Pacther is another group claiming that the Wii U is in fact launching too early. The fear is that, although the Wii U may enjoy some early success, when Sony and Microsoft unveil their new systems, the Wii U will seem obsolete. With talk of the next Xbox console not launching for two more years, hardware costs will again be reduced significantly, potentially allowing for a much more powerful console than the Wii U at a reasonable price. With the Unreal Engine 4 recently revealed to the world, there’s concern that the Wii U will not be able to run some of the more advanced graphics engines in the coming years. Many analysts have the Wii U pegged as just a “stepping stone” from this generation to the next, and not truly a next gen console.
As I covered in a previous article, it’s possible for the Wii U to achieve great success, much like the original Playstation, despite being labeled as an underpowered system. The fact of the matter is, history has actually shown that the least powerful system tends to be the leader in overall sales. With the Wii outselling the PS3 and Xbox 360, the PS2 outselling the Gamecube and Xbox, and the “underpowered” Playstation dominating the superior Nintendo 64, there’s no doubt that graphics aren’t the only factor in console success. This is no excuse for the Wii U to lack power, but it also means launching earlier than the competition is by no means a death sentence.
The main problem with waiting one more year before launching the Wii U, aside from another inevitable annual loss, is that it would undercut Nintendo’s ability to establish themselves as a player in the third party market. The Wii’s subpar graphics and terrible online abilities cause Nintendo to lose most of their support from third party developers. Nintendo executives have said time and time again that a major focus of the Wii U will be winning those developers back, and this is not something that happens instantaneously. Companies are comfortable producing for Sony and Microsoft, as they have been doing for the last six years, so why should they now get behind Nintendo? Nintendo has to prove that the Wii U is for real, and that it offers more possibilities than the competition. If the Wii U launches at the same time as Sony and Microsoft’s next consoles, or even a year before them, there might not be enough time for Nintendo to gather support.
Regardless of the Wii U’s launch date, there was always going to be pros and cons to the timing. When a new console is released, it’s generally expected to be the primary force carrying a company for the next five to six years, and as such, there’s always a lot of risk involved. All in all, I believe Nintendo chose the right time to launch. Arguably more important than when the Wii U launches is how it launches. Nintendo is just months away from kicking off the next generation of home consoles. It’s crucial that they come out of the gate running, and keep that momentum going when their competitors follow suit. Your turn Nintendo. Impress us.