Wednesday, December 5, 2012

Gaming Console Landscape Changed Forever

During its first week on sale in the United States, Wii U from Nintendo ADR (NASDAQOTH: NTDOY) sold more than 400,000 units. This is far less than the original Wii, which sold 600,000 units in its first 8 days on sale. No wonder many Wall Street analysts said that the 400,000 figure was disappointing. But is it really? It may not be, because the video console gaming landscape has changed drastically in the last few years.

The introduction of the Wii U is obviously important to Nintendo. It is trying to revive its flagging sales. . .sales that led the company to report its first annual loss in five decades as a public company. Nintendo has been especially hurt by poor sales of its handheld 3DS gaming device.

The original Wii to date has sold approximately 97 million units, the best of its generation. Its competitors – the Xbox 360 from Microsoft (Nasdaq: MSFT) and the Playstation 3 from Sony ADR (NYSE: SNE) – have sold about 70 million units each to date.

The Wii U

Nintendo is hoping to get back its mojo with the Wii U and its GamePad controller that has a 6.2 inch touchscreen imbedded in it. This not only allows a different view of the game but also permits users to transfer, if they wish, a game on the TV to the controller. This allows a game to be played on just a handheld device.

The Wii U also offers HD-quality gaming as well as online gaming. This matches its rivals and should encourage games publishers including Activision to release some of the most popular games on the Wii U, such as Call of Duty: Black Ops 2. But so far, only games publisher Ubisoft seems willing to promote its game on Wii U. This may leave Wii U with a limited selection of games and not many of the best selling games.

Changed Gaming Landscape

The Wii U is also vitally important to the video console as a whole. This launch served as the introduction to the eighth generation of the traditional video game console. The previous cycle was kicked off seven years ago by Microsoft and its Xbox 360. The worry in the industry is that this may be the final generation of video game consoles.

These worries are centered around the fact that the gaming world is very different from the one that Microsoft launched the Xbox 360 into. Back then Facebook social gaming, smart TVs, smartphones and tablets from Apple and others were not a threat. But they are today.

As Piers Harding-Rolls, head of games at research company IHS Screen Digest, told the Financial Times “It's a much more competitive landscape. The question is whether Wii U. . .has enough selling points to elevate it to being a device that consumers will see themselves purchasing and engaging with on a daily basis?”

It is right to be concerned about the industry, but don't bury it yet.

Nintendo's Future

Despite all the concerns, Nintendo will have a rather successful launch of the Wii U. The company should still be able to hit its target of 5.5 million units sold by the end of its fiscal year in March 2013.

However, late next year will see fresh competition for the Wii U as both Sony and Microsoft come out with their new consoles. Sony's next game console will be the Playstation 4 or perhaps Playstation Orbis. Microsoft' offering will be the Xbox 720.

Early talk among analysts about the competition between the three consoles is that Microsoft's Xbox 720 will be the winner. Doug Creutz, analyst at Cowen & Company, told the Financial Times that Microsoft's superior media content and services will give it a clear edge.

But the question remains whether there will ever be a big “winner” again in the video game console industry in the true sense of the world.

This article originally appeared on the Motley Fool Blog Network. Please be sure to read all of my Motley Fool articles at