Nintendo [TYO:7974] suffers from a crisis, one that I’ve seen firsthand. The Wii U simply was too little too late, and when I got my hands on one years ago at E3, I already called that it was going to be a failure. Today merely confirms that as being true with Nintendo reporting that they would be cutting their expected annual sales figures for their Wii U console to be reduced by 70% over previous projections.
Nintendo this fiscal year is now expecting an operating loss of 35 billion yen ($335.76 million) compared with an initial forecast for a 100 billion yen profit. The new estimate also falls drastically short of the average forecast of a 54.7 billion yen profit in a survey of 18 analysts.
So why all the poor sales? Because the Wii You is attempting to compete with a Sony PlayStation 4 and an Xbox One which are both vastly overpowering it in terms of graphics horsepower. The Wii U still uses an IBM Broadway PowerPC chip and AMD graphics while both the Xbox One and PS4 are x86 AMD CPUs and AMD GPUs of vastly greater performance. The truth is that the Wii U was Nintendo’s attempt to catch up to the PlayStation 3 and Xbox 360, and just barely do that. Nintendo believed that they could easily get away with having an underpowered console by having a unique gaming experience like they had with the Nintendo Wii which did very well for Nintendo for a fairly long time. Although most people that own one will admit, it probably didn’t get much playing time.
I believe that Sony’s and Microsoft’s success in selling over 7 million consoles over the course of one quarter also hindered the Wii U’s sales, but the truth is that most gamers simply weren’t looking at the Wii U as a choice. To me, the problem is that most gamers that like Nintendo’s more casual style of gaming have shifted over to mobile games and that is why you see so many DS users and so many people simply disappearing from Nintendo’s customer pool. They need to properly address the elephant in the room.
This gigantic loss and reversal of profit to loss is indicative of a fundamental problem within Nintendo that I’m not entirely sure Nintendo wants to admit quite yet. They are so focused on building their own devices and their own platforms that they’ve isolated some of their very best properties from being absorbed by the huge jump in mobile device sales. If you want to play a Nintendo game legally, you have to go and buy some form of a Nintendo DS or Wii U. But the truth is that Nintendo has clearly failed to deliver an experience that justifies the lower graphical capabilities and they’ve simultaneously priced themselves out of a billion+ device market.
I believe that Nintendo needs to abandon their hopes and dreams of being a console maker and simply make their games. Sure, they could still make a console, but I don’t think its fair to gamers or their investors to make their games exclusive to their consoles. I am sure that there will still be a lot of people that will want to play Nintendo games on a DS, but as far as I’m concerned their console that connects to the TV is irrelevant. Plus, if Nintendo was really smart, they would find a way to get their DS devices to work well with people’s TVs to enable great gaming experiences on people’s TVs without having to buy a Wii U. If Nintendo wants to be profitable and relevant to the broad market, they should release their games on Android and iOS and allow people to buy their games even if they don’t own Nintendo consoles.
I’m sure there has been a lot of internal conflict within Nintendo about this fact, but the truth is that Nintendo isn’t very good at hardware anymore and its expensive to build hardware in the hopes of being profitable. If they lighten their load and stop spending so much money and resources on building consoles, they can make better games and sell them to far more people than they ever had before. I strongly believe that many Nintendo properties could easily see sales in the billions if they simply addressed this elephant in the room. Their stock is currently down 3% in the Tokyo stock exchange, however, I suspect that it will go down far more once the Japanese markets open in a few hours as many of the US-based OTC tickers are down in the double digits.