Wednesday, January 4, 2012

Wii sales plummet in 2011; Wii U coming at the right time?

Lost amid today's talk of strong 3DS sales was Nintendo's revelation that it sold just 4.5 million Wiis in the U.S. last year.
At first glance, that might seem rather impressive. After all, the device has been on store shelves since 2006, and to continue to sell an average of nearly 400,000 console units each month so many years after launch is somewhat surprising. However, further inspection reveals the Wii's apparent late-term success needs to be taken with a grain of salt.
For the first full year since 2007, Nintendo didn't hit 7 million unit sales in the U.S. last year. In 2008, Nintendo sold over 10 million Wii units. The company followed that up with nearly 10 million units sold in 2009. But starting in 2010, the venerable game company started to lose its footing as sales slumped 30 percent to settle at 7 million units. With 4.5 million unit sales last year, Nintendo's losses dropped by 35 percent compared to 2010.
Nintendo's troubles over the last year have not gone unnoticed by investors. During the first six months of 2011, the company announced that it lost nearly $1 billion due in large part to slumping Wii sales.
Of course, slumping sales are to be expected over a console's lifecycle. Initial demand is high, and after consumers start buying up the device in droves, sales start to drop. Nintendo's Wii might simply be following that path.
However, its competitors have bucked that trend so far. In fact, Sony is currently on pace to sell 15 million PlayStation 3 units worldwide by the end of its fiscal year in March. During its 2010 fiscal year, Sony sold 14.3 million units. Between 2007 and 2009, worldwide PlayStation 3 sales hit 9.1 million, 10.1 million, and 13 million units, respectively.
It's a similar story with Microsoft's Xbox 360. During Black Friday last year, Microsoft sold nearly 1 million Xbox 360 units in the U.S., making it the console's biggest week ever. Several months last year, U.S. Xbox 360 sales easily outpaced their counterparts in 2010. All the while, the Xbox 360 trumped Wii sales last year.
The Wii has many issues. For one, the device lacks HD graphics, making it appear obsolete compared to its competitors. In addition, the Xbox 360 and PlayStation 3 now offer motion gaming, eliminating the key advantage that made Nintendo's console so popular initially. Add that to a relatively shallow third-party Wii game library, and it quickly becomes clear why Nintendo's console might not have the lasting power its competitors do.
But Nintendo has a plan. The company last year unveiled the Wii U, a predecessor to the Wii that it plans to launch later this year. Specs and other key details aren't available just yet, but Nintendo has said that the console will produce HD graphics, and it's believed they will match (if not trump) those found on the PlayStation 3 and Xbox 360. Most importantly, the device will come with a 6.2-inch-touchscreen-equipped controller to enhance gameplay.
As long as its priced correctly, there's a good chance that the hardware will help jumpstart Nintendo's ailing console business. And based on what Nintendo is seeing with the Wii, that jumpstart might be coming at exactly the right time for the company.

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