Sunday, September 16, 2012
Wii U's Problem
Nintendo spent a big chunk of its presentation showing off Nintendo TVii, a unified interface on the GamePad controller for finding and playing video from various services (like Netflix and Hulu), and controlling your Tivo (assuming you have one). Pretty nifty, actually, though not sufficient to buy a Wii U all by itself. Still, it brings the Wii U into rough parity with the Xbox 360 and PS3 as far as entertainment options go, and even one-ups them (along with Apple TV and Google TV) in some respects.
They also announced more details about the software lineup, and said there will be more than 50 titles available by March, calling it the best software "launch" lineup in Nintendo's history (a rather loose definition of "launch," giving it a whole 5 months). The biggie was Activision announcing the latest Call of Duty title, Black Ops II, will be coming out for the Wii U along with all the other platforms.
My concern is basically with the longer term for the Wii U. I grant that hard-core fans will rush to get one, and Nintendo would have been leaving money on the table to price the console lower. Supplies may well be limited, as Nintendo is not know for being able to manage high-quantity manufacturing well. (Though that would seem to be so much easier these days; again, cynics might suspect Nintendo will keep quantities limited through the holidays to maintain an image of a "hot seller" and so propel some more third-party publisher support.) Still, $349 is a high price to pay for a console that has no apparent graphic advantage over the Xbox 360 and the PS3. None of the titles that have been shown so far that appear on other consoles looked different in any way on the Wii U. Not any worse, like they would on the Wii; but not any better. Nintendo would certainly have been touting a clear graphic advantage if one existed. So I think it's safe to say that the Wii U, graphically, is on par with the 360 and PS3.
So here's the problem I see: Is there any compelling reason for a 360 or PS3 owner to drop $350 on a Wii U? None that I see. If you're a Call of Duty fan, the Wii U version offers no compelling advantage, so you'll just buy CoD for your existing console. New console buyers will be looking at Xbox 360 and PS3 bundles that are cheaper than a Wii U, and a much better value; the game lineup will be much better on the older consoles, with lots of inexpensive options, too. The Wii U may have a game play advantage with the GamePad someday -- but right now that's largely theoretical. A few of the games shown use the GamePad, but it's not clear the concept will be hugely popular. It may end up like 3D on the 3DS; initially Nintendo marketed it as the key reason to buy the console, and now it's hardly even mentioned.
My guess is that Nintendo will do well over Christmas with "limited" supplies, but that sales will fall off a cliff sometime early next year, and then a price cut will be in order. Microsoft and Sony have plenty of ability to drop prices and pile on freebies, so they will keep the pressure up on Nintendo. The Wii U is not really a next-gen console; it's competitive with this generation, it's just that Nintendo is about 5 years behind. They will need to get the price down as much as they can, as quickly as they can, to keep momentum going.
Even then I'm not sure it will work. Tablets are gaining in performance and falling rapidly in price, and they will become a key game platform for the future. The general consumer audience (non-core gamers) will be weighing the value of tablets against the value of consoles when they think about purchases for the household, and I think consoles will increasingly come up short.
Microsoft and Sony have some tough decisions to make about their next console offerings. If they boost performance by 5x to 10x over the current consoles, the hardware will likely cost $500. How can they offer a good value at the price? Or will they have to eat losses of hundreds of dollars per unit to achieve any kind of market share? Will there even be a large enough hard-core audience to pay for ever-increasing development costs on big-budget titles?
Posted by Steve Peterson at 5:20 PM