Nintendo Shoots Itself In the Right Foot To Save The Left Foot

I love E3 wrap-ups and reading those report cards for the video gaming industry, which are a bit more entertaining than the year-end report cards my kids receive at just about the same time. I have learned to stay out of the initial barrage of opinion articles - not just to avoid the wrath of the video game fanboy, which is about as capable to hold a reasonable discussion as the Intel/AMD fanboy of 2001, but also to digest the amount of information that was dished out.

Caution: Yes, this will be a pretty harsh opinion piece and you are welcome to comment, but please read the entire article, before you start yelling.

I have to admit that I initially missed the Nintendo keynote and was a bit late to the party figuring what this Wii U really is. The advantage, of course, was that I was playing the role of the average consumer who sees a product without the PR and marketing bubbles during a flashy press presentation. At first sight, my initial reaction was: What were they thinking? They must be kidding.Nintendo, Seriously?

Of course, I knew I was wrong since the press reaction was overwhelmingly positive and I was certain that I just had not enough information to understand what the Wii U is about. So I waited a few days and chatted with colleagues who attended E3 and discussed the console and the additional information Nintendo provided to analysts (which was not very much, by the way.)

It turns out that your first impression is often spot on and my initial reaction was not really off track. In fact, it appears that Nintendo is taking a huge bet that could easily backfire and quite likely reverse Nintendo's pre-2010 fortunes.

Alienating your customers

There is absolutely no way around it. The Wii U controller is a slap in the face of the existing Wii user base. Period.

Apparently, Nintendo has been infected by the tablet fever and is now running a pretty high temperature. Someone get some Ibuprofen, please. This new controller-slash-tablet-slash-mobile-game-console is everything the current controller is not. You need two hands to hold it. It's somewhat clumsy. Small children are unlikely to be able to comfortably hold it and use the controls. Older people, especially the retirement home population Nintendo was so proud of, will not like this thing. And, I guess, this thing will be ridiculously expensive. I'll guess $299 or $349 for the base Wii U (including one tablet-controller) plus about $99 or $149 for each additional controller (apparently, two tablets are supported by each base Wii U unit). Of course, there is a reason why Nintendo would alienate its customers. There are plenty of Wii customers that turned out to be an accident for Nintendo.

The fact is that a retirement home population is unlikely to crave new cutting-edge games. It may sound cruel, but there is no value to someone who is just happy with playing Wii Bowling. What Nintendo really wants is the hardcore gamer who buys lots of games and soemone who functions as a grassroots evangelist for the console. It's pretty simple: Hardcore gamers attract game developers and more game content attracts more customers, which ensures the success of a platform.

The Wii currently does not have lots of third-party game content and Nintendo is clearly jealous of the content that is available for the Xbox 360 and the PS3. The Wii U (Notice the meaning of U? This new console is apparently not just about "we", but much more about "you" as an individual.) will attempt to get a slice of the lucrative hardcore gamer base, while sacrificing the cheapskates. Ditching an unprofitable user base isn't a bad thing from a business perspective. In this case, Nintendo is essentially dropping a user base that is stubborn and simply resists to buy enough games in the hope that it can get a portion of Sony's and Microsoft's gamers, which Nintendo so badly neglected.

20/0 vision

Taking out that unprofitable user base, of course, somewhat requires a good knowledge of the gaming market. At least as far as I am concerned, Nintendo missed what I was looking for and they missed what the stock market expected, what virtually all market analysts I talked to expected and what plenty of enthusiastic video game journalists hoped for. Seriously, Nintendo: Not everything has to be a tablet these days. If you really wanted a video game tablet, couldn’t you have released a new DS with the usual array of sensors and game streaming capability? Do we really have to have these additional tablets laying around in our family rooms?

Sure, there may be gamers who love the idea of a controller with a big LCD screen, but there is no denying that this won't be as transparent to use as today's Wii controller. Forgive my direct doubt, but there was absolutely nothing that Nintendo was able to show that could convince me that this is really a breakthrough in gaming as the Wii controller was. Some game developers I talked to said that they had really no idea how to take advantage of this tablet. Sure, they said, they can support it, but they have no clue what's inside the Wii U and therefore can't say anything how Wii U games will be more intuitive than Wii, Xbox 360 and PS3 games. Simply imagining that we will be wiggling a tablet in front of us to control a game is not a very appealing proposition to me. I am not a big fan of Kinect, but if I had to make a choice between the Wii U or the Kinect, I'd take the Kinect ten times over a clumsy tablet.

So, if Nintendo takes out its existing customer base, it better makes sure that its value proposition is absolutely stunning so it can wow the enthusiast gamer. The Wii U is not this breakthrough device and Nintendo completely misses the mark. There is a good chance that Nintendo will lose its mainstream gamers to the Kinect, which provides a natural upgrade path from the Wii (even the PS3 Move is a better upgrade from the Wii than the Wii U is) and there is an even better chance that Nintendo will not attract many PS3 and Xbox 360 gamers - especially if it doesn't have the content: As far as I can tell, there isn't a single game developer that is convinced that the Wii U can succeed. Heck, they don't even understand what Nintendo is aiming for.

Quite frankly, this early announcement of the Wii U and the revelation that Nintendo will abandon the Wii controller model and move to higher-resolution games has left Wii sales as well as Wii game sales in limbo. There is little value in buying a Wii right now - no one right in there mind will invest money into a Wii, if they are planning on buying more video games in the future: they will either switch to a competing platform or wait for the Wii U. You can look at the Wii U from several different angles, but the announcement wasn't an especially smart move and the market strategy is questionable at best.