Everyone's in a tizzy about the "new" console generation, conveniently forgetting that, market-wise, it was already here a year ago with the release of Nintendo's Wii U. It isn't as advanced technologically as the new Sony's PlayStation and Microsoft's Xbox One, but the Wii U's like the kid who still likes Ninja Turtles when everyone's moved on to Power Rangers: They might not be as cool, but they're still your classmate, and they're still going to graduate with everyone else. Nintendo might seem a little square compared to Sony and Microsoft right now, but it still has the skills to succeed in school.
At launch, Nintendo sold out its entire initial allotment of 400,000 Wii U's -- which looked promising -- but after the holidays, sales softened significantly and continued to slide. By E3, the situation wasn't looking so good. Just a few months later, Nintendo announced a price cut of $50 for the console, reducing its profit on each unit sold. However, the price reduction also moved a lot of units, with the Wii U experiencing a 200 percent uptick in sales for the month of September.
Nintendo's ultimate goal in selling the console at a loss is to put more machines in homes so it can sell more games. In some cases, though, the games will sell the machines. The Wii U just experienced a 1,400 percent bump in Japanese sales due to the release of Wii Party U, going from a paltry 2,500 units moved in a week to almost 39,000. Not bad for a late-October release.
The Wii U's competition was soft on the eve of the PlayStation 4 and Xbox One launches. With the new systems yet to launch, those who hadn't purchased any system (old or new) were probably waiting to see how things would shake out before making their decisions. The entire console market was in a holding pattern, with the majority of sales spurred by new game releases like The Last of Us and Grand Theft Auto V. Nintendo's also counting on games to sell its systems, especially around the holidays -- Super Mario 3D World launched last Friday, just in time for the shopping season.
Releasing a new installment of the most popular game franchise in the world isn't just a savvy move aimed at grabbing holiday shoppers. It's also a way to steal some thunder, with gamers forced to choose between the thrills and excitement brought on by the purchase of cutting-edge technology, and the warm, safe nostalgia of their childhood. It especially helps that the Super Mario games have a proven track record of excellence, making them a better buy for cash-strapped, risk-averse consumers. But whether or not the Wii U is a better buy... that's a different story.
Discussion about the eighth generation of consoles often treats the Wii U as an afterthought because it doesn't fit into a pre-constructed narrative about these devices. Consoles aren't just game-playing devices anymore, they're home-entertainment providers that let you watch movies and listen to music. Microsoft even hired Zachary Quinto to appear for eight seconds in an Xbox One ad just so it can show you that the device plays movies like Star Trek Into Darkness.
Nintendo is the odd kid in class, not fitting in because its latest console doesn't play DVDs or Blu-ray (though at least it has Netflix, Amazon Instant Video, Hulu Plus and other streaming services via TVii), instead choosing to double down on hardware innovation with the GamePad controller. Problem is, platform exclusivity is largely in the past, and when most companies are making games for as many platforms as possible, they're not going to gear those games toward the capabilities of any one system. This leaves any of the GamePad's interesting features unloved and unused; curiosities that only Nintendo's development teams are willing to explore.
The same could be said of the 3DS, though: It has quirky hardware features, and it faces increased competition from devices that can do so much more. And yet sales are strong for the 3DS, buoying Nintendo to profit even when the Wii U flounders. Why?
Well, the 3DS has a strong lineup of exclusive games. But it also offers a suite of features that makes you want to play with it, like its 3D camera, as well as StreetPass in a very, very big way. It's a device that encourages you to play it, and play it regularly, and carry it around even though it does a lot less than your cellphone. It's a gaming device. It's a fancy toy. It's something different and fun and that's where its appeal lies.
As a result, the 3DS is a bright spot in Nintendo's sales portfolio, keeping the company going amidst periodic losses. Nintendo also has a tendency to be conservative with money even when flush with cash, and that nest egg helped it weather disappointments and outright failures before (remember the Virtual Boy?). So even if the losses continue and the Wii U is ultimately a failure, Nintendo's long-term financial stability isn't in question (yet, anyway).
In doubling down on gaming with the Wii U, Nintendo isn't trying to win the console race with Sony and Microsoft. Sure, the Wii U embraced streaming in a way its predecessor didn't, with the introduction of TVii and allowing consumers to even use the GamePad as a remote. But that isn't the device's primary purpose; it's more a measure to prevent you from pushing the console to the back of your entertainment center when you just want to watch some TV.
In contrast, both the Xbox One and PlayStation 4 come from bigger, more diverse companies with more resources and larger ecosystems -- including Sony's music and movie holdings and Microsoft's expansion of the Xbox Live platform to Windows and Windows Phone -- making it a battle that Nintendo is unlikely to win.
As the PlayStation and Xbox continue to evolve, they're moving out of the game console space and into another category entirely, leaving Nintendo as the only major contender. And that's a battle Nintendo can win, if it can justify to consumers why it's worth buying a game console in addition to a PlayStation or Xbox entertainment console that can also play games, music and movies on far more technologically advanced hardware. And to do that, it needs to dig through its own backpack a bit more to find the one shiny bauble that will impress the class at the next show-and-tell.
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