Wii U "competitive position has deteriorated"

An analyst in Japan with Macquarie Capital Securities does not see a bright future for Wii U

Wii U will launch later this year (one rumored date points to November 18) and Nintendo is hoping to make a big splash with the system this year at E3 in June. Many questions about the console's capabilities still linger, however, and one analyst in Japan is not too optimistic about Wii U's long-term prospects.

David Gibson at Macquarie Capital Securities (Japan) Limited has downgraded Nintendo stock to "underperform" and remarked that there are "increasingly problematic structural problems for the company."

Gibson assigned a target price of ¥10,000 and noted that "if Nintendo went iOS/Android with games we think the stock could be worth ¥20,000+, but in our view that's not going to happen."

Ultimately, Gibson said the "competitive position of the WiiU has deteriorated" and he advises avoiding Nintendo stock until E3.

Gibson outlined three potentially big problems for Nintendo:

  1. Wii U GPU is less powerful than Xbox360/PS3 according to developers, which means it has no edge besides the tablet interface to attract core users. Initial third-party titles are likely to be only ports from Xbox360/PS3 titles. A bundled WiiSports/Mario title may help initial sales beat Wii launch, but Wii was severely production-constrained and the surprise factor from Wii U is less.
  2. iPad with its retina display shows where Apple is taking its 4 screen infrastructure, leaving Wii U less connected and less relevant. The GPU processing power for handsets is reaching consoles such that we think core gamers have no interest in buying into the Wii U. Apple might add in a controller to its line-up to be more attractive to core users. MocoSpace survey shows that 96% of gamers like to play their games at home, and with a better infrastructure we think iOS will be able to deliver a single game experience across four screens that Nintendo cannot.
  3. Wii U will have 1-year window to gain installed base before PS4 (Orbis) and then Xbox Durango launch in late 2013. At that point, the core gamer that Nintendo is after for the first time will have no interest in Wii U. We understand that Activision has no plans to support Wii U, which means the biggest selling title of Call of Duty will be missing; Konami is also planning minimal support.

On that last point, we reached out to Activision, and the official answer is that the publisher hasn't made any announcements about Wii U support. Activision Publishing CEO Eric Hirshberg has said multiple times that Wii U would more closely align with the types of games Activision makes, but we'll see how that translates into support from the company.

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Latest comments (16)

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.10 years ago
So this guy is making financial speculation based on anonymous rumors which are contradicted by open statements from other developers?

AND he's suggested Nintendo go the iOS route despite making more money with their consoles than MS and Sony do?

How do these people get and keep their jobs?
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Tom Tapper10 years ago
1. Just as many developers have said, on the record, that the Wii U is "on par" or exceeds the capabilities of the 360/PS3. It seems negative rumors spread by unnamed sources hold more weight than statements from named developers making games for the system. Regardless, since when has it been imperative that Nintendo need to exceed the graphical capabilities of its competitors in order sell more consoles? Since when have the Japanese been graphics obsessed anyway? The 3DS is killing the PS Vita in Japan and everywhere else for that matter. Also, it is like the Wii never existed and never sold 95 million units of last gen hardware, mostly at a profit margin.

2. It seems that whenever people bring up Apple hardware and Nintendo together, the price of the product simply doesn't factor in their analysis, nor does the target audience of the products in question. The launch price of the Wii-U is estimated to be 250 to 300 USD. The HD iPad is 500 to over 900 USD. That is before you add in the proposed Apple game controller. I guess I don't see many parents rushing out to spend a grand on Apple products for their kids. Sure the games are cheaper but where are the big IPs that draw in kids and core gamers? Nothing has been announced to my knowledge. Kids can't play Pokemon on their parents iPad and core gamers won't find Zelda on iOS. But really it is about kids not core gamers as this guy is seemingly fixated on. Just because Nintendo said it wanted more core gamers this time around doesn't mean the Wii-U is primarily intended for that audience. They've taken measures to make the Wii-U hardware capable of playing core games but it still takes advantage of all the same motion controllers that the Wii uses and Nintendo's target demo still remains casual users and mostly children, hence the low price points. If Nintendo was really chasing the core gamer, low price points wouldn't be a great concern. This analysis never seems to address games other than the system would only get 3rd party ports (PS3 gets many, many Xbox360 ports) but that doesn't matter because Nintendo's IPs are still as relevant as ever if pesky things like recent sales figures are anything to go buy.

3. As for Activision completely ignoring the platform, well I simply don't believe it until I hear something official. This is a publisher that managed to release its latest and greatest, COD Black Ops and Modern Warfare 3, on the humble Wii. I find it incredibly hard to believe that they would abandon a more capable platform with more conventional hardware when they supported the Wii with dozens and dozens of titles and still have releases this year. Skylanders Spyro Adventure sold more copies on the Wii than the PS3 and Xbox360 for Activision so I doubt that future iterations of the series would skip the Wii-U.

It all comes down to how Nintendo use their own platform. That is what will make or break the Wii-U. If they make a world class product like Super Mario Galaxy for the Wii, then it will sell just fine. If they can make casual games that bring out the unique aspects of their tech like Wii Sports did for the Wii, then it will sell. Everyone looks at Apple's incredible growth and sees a zero sum game. That makes no sense. If anything Apple created and opened markets, it hasn't destroyed them. If they had, the 3DS wouldn't be the fastest selling product Nintendo has every produced and Super Mario 3D Land and Mario Kart 7 wouldn't have sold over 5 million units each.

This analyst doesn't seem to understand how videogame companies like Nintendo move products versus how hardware companies like Apple move theirs.

Edited 1 times. Last edit by Tom Tapper on 6th April 2012 2:35am

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Ken Varley Owner & Freelance Developer, Writer, Devpac10 years ago
"If anything Apple created and opened markets, it hasn't destroyed them. If they had, the 3DS wouldn't be the fastest selling product Nintendo has every produced and Super Mario 3D Land and Mario Kart 7 wouldn't have sold over 5 million units each."

I completely disagree with your comment about Apple creating and opening markets. Nintendo handheld hardware has a proven track record of great sales. Starting from before mobile phones came to the mainstream.

The 3DS took off because of the price drop and the better wave of games hitting the shelves around the same time.
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Francisco Javier QA Engineering & Coordination, Saber Interactive Spain10 years ago
This report is absolutely ridicolous. They compare a future system that will retail for 250$ and which focus is the multiplayer play and the gamers, with a system that is selling twice the price, and that only one player or at much two players can play together. Ridiculous. Also, hardcore gamers are not moving into iPad shit because it's better to play dedicated games on a Xbox360 or PS3 or PC, with the comodities or a good controller, headset and big TVs. Apple can't compete with this and as the industry history taught us, adding extra hardware doesn't help expand the audience but divides it.

So I absolutely disagree with these analyst who predicts the future of game companies based on rumours (so fun...)

Edited 1 times. Last edit by Francisco Javier on 6th April 2012 12:37pm

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Did this report actually come out 4 days ago? Because it seems to be so full of "FAIL" (if not for better terms), that 'April 1st' seems the only reasonable answer if its real.

Regardless, analysts (i.e. Pachter) have a LONG track record of playing down Nintendo, and completely "miss" analysing their performance. The DS was going to be destroyed by the PSP, and the Wii ... well, that would never take off, and would finish a distant 3rd.

The reality is both platforms ended up as market leaders, changing the industry landscape (i.e. Move/Kinect) and were massively profitable (over their lifetimes).

If its true that "96% of people like to play their games at home", then the WiiU is a killer product - and easily beats whatever combination Apple can put together based on:
1/ Much cheaper
2/ All-in-one product (no separate purchases for iPad, iPhone, iTV, etc)
3/ Superior handheld gaming experience (controls, much more powerful gfx - as its not handheld constrained)
4/ Supports "multiplayer" via other (cheap) controllers on the same TV

Nintendo just have to execute properly on the WiiU launch: a solid set of launch titles, 3rd-party support, a mass-market price, solid marketing and enough launch units.
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Fieaz Ismail10 years ago
As others have said, this article is kind of ridiculous. Recently it seems the more negative news stories about Nintendo's new console are getting much more attention than anything positive.

"Wii U GPU is less powerful than Xbox360/PS3 according to developers" This statement for one made me chuckle. If the rumoured 'HD4000' series GPU inside the Wii U is true then it's already a more powerful GPU than what's in the PS3/360, it's at least a few generations ahead.
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Kevin Patterson musician 10 years ago
I think the analyst's comments are based too much on rumors and hearsay.
However, I do wonder how the Wii-u can be as powerful as a 360/PS3 in a box that is no bigger than the Wii. Everyone want's to believe it's just as powerful, but a decent GPU will generate far more heat than the current Wii GPU. In that size of a box, there are not many cooling options.
I realize that as the GPU manufacturing process improves, the heat does as well. However I still don't know how they could get the heat so low unless it's a lower voltage/lower performing part.
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Georges Paz Programmer, technical director and CEO, Psychoz Interactive10 years ago
Nintendo needs to support and attract more developers, we both knows how software can destroy a hardware. If they are a bit more open to indies, they can regain on the software side and sell pretty well thir new hardware.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.10 years ago
@Kevin, The case is a good deal longer and thicker than the Wii case. And we don't even know how final that case is. Also to note the Wii GPU is 90nm while the Wii U GPU will be 45nm. Another factor is that it's being designed from the R700 series from AMD which has more advanced shaders than the PS3 or X360. And we keep hearing it has more system RAM and VRAM.

@Georges, From the current list of in development games, it can be inferred they are supporting developers much more so than they did with Wii U. But if you want indie development, they are creating a full on app store for the system. Though details on pricing, getting certified and all that are still unknown.
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Daniel Hughes Studying PhD Literary Modernism, Bangor University10 years ago
Third party support is a wild card, but GPUs and specifications don't sell consoles in the tens or hundreds of millions; software does. Nintendo have proven that with DS and Wii, and are in the process of proving that again with 3DS. It's sad that rumours stemming from this website have proven damaging, especially rumours that don't seem to have much basis in fact and that contradict developer's public comments on the hardware.

If it's priced cleverly, and has the software, it will fly off the shelves. Long-term third party support could be an issue, but when did Wii ever receive third party support? Nintendo have proven they can shift tens of millions of units on the strength of their own software. Wii didn't have the core Call of Duty experience the way 360/PS3 has had, but it was still a hugely successful system. The support of EA, Ubisoft, Capcom and others in addition to the steady tick of Nintendo titles would leave the Wii U in a very, very strong position, provided the third party support is top-tier, quality content. That's where Wii failed, and it's where Wii U could fail.

Wii U has a stronger start in that department than Wii ever had, though. Third parties actually have a chance make an impact on Wii U with their own quality titles, they might stick with Wii U development for the long haul, which would leave the system in a very strong position. Either way, under-estimate Nintendo at your own peril, usually seems to be the lesson.
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Tony Johns10 years ago
I don't think this report has got any ground.

I first noticed this when he first suggested that Nintendo should go the iPad route, which I could only laugh at.
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Greg Wilcox Creator, Destroy All Fanboys! 10 years ago
Pardon my language here, but fuck these analysts. As a GAMER since 1972, I've had it up to the moon with these egg-brained stat-crunchers who can carve themselves a paycheck based on wild speculation, rumor and outright made-up bullshit just to make some investors' dicks (and wallets) shrink or grow. If the Wii U succeeds or fails, it'll be due to the software that goes with the hardware, NOT some asshole with an abacus, cracked crystal ball and subscriptions to etrade and the Wall Street Journal.
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g Game Designer 10 years ago
"Nintendo is planning to release a new device and analysts say its going to fail because the hardware from the competition is more 'powerful'... bla bla... exclusives... bla bla... third party developers... bla bla... hardcore gamers... "

So, nothing's new?
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Morville O'Driscoll Blogger & Critic 10 years ago
I'm going to stop commenting on rumours, because I get the feeling analysts are just trolling us now. But I can't resist this...

Atari Lynx
Sega Game Gear
Nintendo Gameboy

Which of these was the most technically inferior (shades of olive green, for heaven's sake)? Which of these succeeded? Which of these had the best games?

You discount Nintendo at your peril.

Edited 1 times. Last edit by Morville O'Driscoll on 7th April 2012 8:57pm

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Steve Peterson Marketing Consultant 10 years ago
It's worth noting the initial prices: Atari Lynx $179.99, Sega Game Gear $149.99, Nintendo GameBoy $89.99. And that was back in 1989, so the price differential meant even more.

The technical superiority of the Lynx and Game Gear was trumped by the price point of the GameBoy, plus the quality of the GameBoy games (even though they weren't in color).
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Marty Greenwell Senior Software Developer 10 years ago
And the battery life.
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