This morning, Nintendo announced massive cuts in its year-end sales expectations for the 2013-2014 financial year. Right up until the end of October last year, it was projecting a 9m figure for Wii U sales between April 2013 and March 2014 - today that was slashed to 2.8 million. It’s a massive blow, and despite the 3DS being the best-selling console of 2013 in the UK, North America and Japan, it still somehow failed to meet its targets too. That projection was cut from 18 million to 13.5 million.
As a result of this, Nintendo expects to make an operating loss, as it did in 2013 and 2012 (although Nintendo still managed to claw back an overall profit in 2013 thanks to its investments and cash reserves).
It’s not good news. The Wii U is failing to break even and its sales aren’t picking up at anything like the rate necessary to change that.
How has this happened?
Leaving the 3DS aside for a moment - I think we can all agree that despite the fact it failed to meet projections, the 3DS is doing brilliantly and there’s not much more that Nintendo could be doing to improve its performance - there are three main reasons behind the Wii U’s failure to launch so far, if you ask me. The first is branding: the name “Wii U” has been confusing since the start, and anecdotally, a large proportion of Wii owners still aren’t aware that it’s a new console at all. This confusion has resulted in a lack of awareness around the console that has meant it’s failed to hit the same market that the Wii dominated.
Even if the Wii U ends up as an expensive mistake, Nintendo can afford it.
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The second problem, which has also contributed to this lack of awareness, is marketing. Here in the UK I have seen barely any Wii U marketing anywhere since launch except on specialist games websites, and even there it’s barely registered.
The third problem, however, is outside Nintendo’s control: the end of 2013 saw the release of two new consoles that far outperform the Wii U in every aspect apart from its software lineup. Nintendo might not see the Xbox One and PS4 as competition, but the reality is that they are, and both of them sold more than the Wii U managed in a year in just a few months. Against that competition, the Wii U is going to have a very tough time regaining ground.
But here’s the thing: even if the Wii U never turns around, even if it ends up as a very expensive mistake, it’s a mistake that Nintendo can more than afford.
Wait… haven’t we seen this before?
I’ve gone into this at great length before, but bear with me: Nintendo is an extraordinarily solvent company. As of the end of the last financial year, Nintendo had around $5bn in cash assets and another $5bn in bonds. That’s $10bn essentially in the bank. Ten BILLION dollars. Which means that Nintendo could make a loss of the projected proportions for 20 or 30 years without running out of money. (Naturally if Nintendo actually did make a loss for 20 consecutive years then we really would have good cause for concern, but in principle, the company could afford it.)
Of Nintendo's six major home consoles, three were market leaders.
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Of Nintendo’s six major home consoles (NES, SNES, N64, GameCube, Wii and Wii U), three were market leaders (NES, SNES and Wii - and in much of Europe, even the NES barely even registered next to ubiquitous home computers, even though it dominated in Japan and America). The other three were well behind their competitors in sales. The current pattern of dominance in the handheld market, too, is something we’ve seen before, in every iteration of the Game Boy and DS. As yet nobody has been able to challenge Nintendo in handheld gaming, and even with smartphones encroaching on that space, it still does well.
Any talk of Nintendo’s imminent collapse or exit from the console market, then, can be swiftly dismissed. Whatever happens now, whether the Wii U rallies or dies, whether we see a new console sooner than expected or not, Nintendo will not collapse.
What’s to be done?
I’m honestly not sure what Nintendo can do to turn the Wii U around at this point. Even a wonderfully reviewed new Mario game didn’t make anything like the impact Nintendo was hoping for.
If the Wii U turns out to be a niche console with niche games, is that so bad if the games themselves are worthwhile?
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Nintendo fans are calling for a new Metroid, a new F-Zero, and other fan favourites, but the truth is that these are not games that will sell to the massmarket in the way that Nintendo needs. They sell to people like you and me - and though we’re a big market, we’re not the market that’s going to save Nintendo’s sales projections. Metroid Prime sold just over 100,000 in the UK in its lifetime according to Chart-Track, and it’s estimated at around 2 million worldwide. F-Zero GX on the GameCube sold under a million worldwide. They were fantastic games and new entries would be extremely welcome on Wii U, but these are not the games that sell millions of consoles. For that you need the FIFAs and Calls of Duty of the world.
Do you want FIFA and Call of Duty? Or do you want Smash Bros and Bayonetta 2? If the latter, there’s no reason to regret buying a Wii U. And that gets to the heart of why Nintendo fans shouldn’t be unduly worried about the Wii U’s poor performance.
I grew up in the era when Nintendo was the underdog home console (first with the N64, then with the GameCube), and it didn’t matter. The games weren’t any worse. GameCube owners, particularly, enjoyed a fantastic selection of left-field and memorable games. Even if the Wii U doesn’t turn around, those of us who’ve bought one will still get to play Smash Bros, Mario Kart, Bayonetta 2 and a new Zelda on it within the next year or two. If the Wii U turns out to be a niche console with niche games, is that such a bad thing if the games themselves are worthwhile?
In July last year following Nintendo’s 2013 results, we saw Nintendo “in profit, ticking over and not in immediate danger, but faced with the increasingly real possibility of its first proper home-console flop - and with an operating loss of around $50m to try to correct”. Now, we see Nintendo not just facing the possibility, but the reality. Nintendo will be wanting the Wii U to break even, and that looks like the best case scenario in the short-term future. But even if it doesn’t happen, the Wii U still has a great year ahead in terms of games - and even if it turns out to be an expensive mistake for the company, it’s a mistake that it can afford, this time.
Keza MacDonald is IGN’s Contributing Editor and will keep buying Nintendo consoles as long as they keep making them. You can follow her on IGN and Twitter.