OCT. 30, 2013 • Since Nintendo Co. Ltd. reduced the price of the Wii U by $50 on September 20 in North America and Europe Wii U sales have increased. For the quarter ending on September 30, units sold totaled 300,000, up 88% from the 160,000 moved during the preceding quarter. At 460,000 units sold through the first two quarters of Nintendo’s fiscal year, the gamemaker is well short of its forecast of selling 9 million Wii Us by March 31. On total sales of ¥115 billion ($1.2 billion) Nintendo posted a ¥8 billion ($81 million) loss for the quarter driven by total selling, general and administrative expenses that exceeded gross profit, plus a boost in advertising activities to increase sales, as well as research and development for the Wii U software.
Impact: There are two major factors we see boosting Wii U hardware sales. First, Pikmin 3 was released last July in Japan and Europe, and a month later in the United States. Then in September, The Legend of Zelda: The Wind Waker HD shipped in Japan and the United States. Those are first-party titles strong enough to sell hardware. More importantly, the lower MSRP on the Wii U played a significant factor, even if only for the last 10 days of the reporting period. Nintendo is headlining the holiday season with Wii Party U and Super Mario 3D World, both of which should draw the attention of many gamers in the weeks ahead. Nintendo also plans to aggressively bundle software with the console during the holidays. Nintendo also has a much bigger marketing push planned that will be accompanied by many more promotional activities to get the Wii U in the hands of more consumers. Taken together with the lower $299 price we expect to see Wii U hardware sales continue to improve. We do not, however, see a critical mass of demand that will lead to fulfilling Nintendo’s 9 million-unit forecast. When DFC Intelligence releases its November forecast it is expected the forecast for Wii U will be lowered over the forecasts released this July. The Wii U’s biggest problem is getting lost amidst the massive launches of the PlayStation 4 and Xbox One. The best-case scenario for Nintendo’s console is a slow and steady build to relevancy with consumers. While it is hard to see Wii U climbing out of third place, if Sony and Microsoft fight it out to a draw, Nintendo may eventually be able to have a nice installed base for selling its first-party titles. The company is talking the talk with promises of proactively releasing key first-party titles towards early in 2014. We’ll have to see if they can keep that pace up over 24 months.
