Nintendo Caught in Winter Doldrums

Although it is far from “game over” for the video game industry, February saw a 25 percent drop in sales compared with the same period a year ago, according to an NPD Group report released Thursday.

Hardware sales were down 36 percent to US$244.2 million. Surprisingly, it wasn’t Nintendo’s Wii U, the only new system released this past holiday season, but the still-going-strong Microsoft Xbox 360 that claimed the top spot in console sales. The Xbox has been in the top place for 19 months in a row, and now holds 41 percent of the share.

Xbox Knocks Out the Competition

This is surprising, not just because the Xbox 360 outsold the Wii U, but because it is expected that Microsoft will have its own next-generation system out later this year. However, as with past console cycles, the end game can still be strong as owners of the rival systems may look for deals.

Even with a new Xbox system on the way, it is likely that Microsoft will support the 360 for a few more years to come.

“Microsoft has done an amazing job of managing the second half of the Xbox 360 life cycle. Most of this success is a direct result of the introduction of Kinect,” said George T. Chronis, editor of DFC Dossier.

“The dance and exercise titles that popularized Kinect attracted just the new mainstream demographic that Microsoft was hoping to appeal to in order to broaden the user base,” he told the E-Commerce Times. “It’s those new users that have extended the reach and life of the Xbox 360.”

Microsoft has also done a better job of attracting the core gamer. While Nintendo did an excellent job of creating a casual game platform with the original Wii, the Xbox 360 went for the video game purists. As noted, the company is affirming that commitment to those long supporters.

“They continue to have the best titles, and they are not yet playing up their next-generation product like Sony is,” said Rob Enderle, principal analyst at the Enderle Group. “Sony announced their offering but isn’t selling it yet, and that typically will stall the product in market.”

Wii U Woes

Traditionally, the period following the launch of a new system is the honeymoon period, when sales are strong and systems are usually in demand. The Wii U has not been a repeat of the smash hit that the Wii was for Nintendo back in 2006.

In this case, it is more than just the overlapping of the old with the new. The Xbox 360 arrived a year before Sony’s PlayStation 3 or Nintendo’s Wii, and it captured the market. Nintendo may have followed a similiar strategy this time, but it hasn’t paid off.

“At least in the U.S., it is our view that marketing for the Wii U has not been sufficient to successfully launch a new console — both in quantity and in substance,” said Chronis. “Go to Europe, and you will see Nintendo advertising and product everywhere. That hasn’t been the case in North America, where launch advertising was arguably scarce.”

Wii’s Ubiquity

One reason could be that Nintendo expected the Wii U to easily ride on the coattails of the Wii, a game console that defied expectations. That system became ubiquitous, even in places where video game consoles might not be expected, such as community centers and senior living communities.

“[Nintendo] assumes the viewer already is familiar with the Wii U, and for those who are unfamiliar with the product, they can easily come away with the idea Nintendo is selling a new tablet, not a new console,” Chronis noted.

“The UK ad, on the other hand, does a real good job of explaining the product and its features,” he said. “To us, it seems like Nintendo of America decided to market to core gamers alone and not the wider mainstream needed to make the Wii U a success.”

None of this is to say that Nintendo is facing a game-over situation, especially as video games are all about do-overs. However, Nintendo will need to use its next “lives” wisely if it expects to take on the competition. It could do this is by launching games with wide appeal.

Better Games Coming?

“A strong run of highly anticipated Nintendo-published software titles begins on March 18 with the release of LEGO City Undercover for Wii U,” said Nintendo spokesperson Andrew Kelly. “A massive lineup of Wii U titles will be featured at E3 this year, including new entrants in the Mario Kart, Super Mario and Legend of Zelda franchises.”

However, even these titles could be just a lot more of the old Nintendo. The company scored a hit with casual gamers with the Wii, but that was an innovation. It now seems to be going back to its core properties. Can titles that have been around for so many years really save the company?

“They could try heavy marketing tied to one or two compelling titles, but I think they just misunderstood the market and built the wrong thing,” Enderle told the E-Commerce Times.

“The issue for all these guys is that tablets and smartphones are chewing up the budget for this product class and taking over much of the market,” he explained, “except for high-performance first person shooters and driving games, both of which Nintendo doesn’t do well.”