Nintendo Makes It Official: "Wii 2" At E3

No, they're not gonna call it the "Wii Wii". Or Wii 2.

Nintendo has, not surprisingly, made the news official: They will be showing their next-generation console at E3. Launch time is listed as 2012, though not before April. This is all not a big surprise given that Nintendo just announced its year-end results, with a 66% drop in profits and a nearly 30% drop in sales. Nintendo claimed the 3DS sold 3.6 million units, which didn't exactly jibe with the numbers reported in different areas, but we'll chalk that up to sell-in rather than sell-thru. Any way you look at it, though, Nintendo failed to make their stated goal of 4 million units for the 3DS.

Nintendo is still playing coy, though Iwata-san did promise "a new approach" to consoles with the new unit. He also admitted that 3D display is not a key feature of the new console, though given that it's fairly easy (and inexpensive) to implement Nintendo will probably put it in there. Apparently the console will be available for play at E3, though who knows what they might be showing off. Nintendo should probably announce a Zelda title for the new console just to get all the fanboys drooling.

Analysts are already starting to fret over whether this new console makes any sense given the fundamental changes sweeping the game industry. Is this an awkward step, just catching up to the competition and not really making a big leap past them? Hard to say until we know more details, but it's true that taking a big power jump past current consoles would mean a higher cost in materials for Nintendo. Which means they either have to price the console up in the $350 plus range, or accept a lower profit margin (or none at all, selling the hardware at a loss initially). Based on Nintendo's past strategies, I doubt they'll sell hardware at a loss.

Another factor is the development costs for third-party publishers. If this new console is going to push more polygons, a reasonable expectation, that means paying more for artwork to show off those polygons. Add in the extra costs of learning new hardware, and you can see game budgets rising even more. Will third parties really embrace higher development costs whole-heartedly? Or will this only encourage them to invest in less-expensive development of social and mobile games?

If Nintendo ends up pricing this new console at $400, or even $350, we could see PS3/Move bundles and Xbox 360/Kinect bundles substantially undercutting Nintendo on price, perhaps by $100 or $150. Which would put the pressure on Nintendo to make the new console worthy of the premium. If OnLive, Apple TV and Google TV are by then bringing low-cost and free games by the thousands to the family room, where does a high-priced console fit in?

One fact remains that often goes unmentioned: Successive generations of graphics improvement are less and less noticeable by a the vast majority of consumers. Hard-core gamers may be able to spot some differences, but that's only a small part of the potential market these days. Expensive hardware that asks for you to spend several hundred dollars more to get a visual improvement most people won't notice is going to be a hard sell.

If Nintendo is smart, they will think hard about how to incorporate all of the advances in game monetization, distribution, pricing, social networking, and marketing into their new console and its online service. That's the real technology Nintendo has to equal or exceed in order to have a successful new console.