Market Overview

Wii U Sales Plummet in March

Nintendo (OTC: NTDOY) may have sold a depressingly low number of Wii U consoles last month.

According to sales estimates from Wedbush analyst Michael Pachter, only 55,000 Wii U consoles were sold domestically in March. This is down from 66,000 units in February, 57,000 units in January, 463,000 units in December and 425,000 units in November.

This is not good news for Nintendo, which was previously forced to reduce its sales expectations for the new console.

"Last month, hardware sales were significantly above our expectations, but down from February 2012, due in part to the debut of Sony's (NYSE: SNE) PlayStation Vita last year," Pachter wrote in his report. "The only key hardware device to underperform our expectations was the Wii U, and its fortunes appear unlikely to improve for several months, even if Nintendo decides to drop [the] price, as there are an insufficient number of core titles that are generating interest in the console."

Pachter thinks that "core gamers" will turn their attention to PlayStation 4 and the next Xbox, both of which are due for release this fall.

He might be right. More than eight million people watched Sony's live unveiling of PlayStation 4, making it one of the most successful online videos of the year. Microsoft (NASDAQ: MSFT) has not officially unveiled the next Xbox yet, but it is expected to do so on May 21.

"…[We] believe that the long-term appeal of the Wii U will be severely limited by the perception that the PS4 and next Xbox will be much more powerful with greater online integration and multimedia functionality," Pachter added in his report. "Should the new consoles from Sony and Microsoft be price competitive, we think that Wii U sales may continue to stagnate.

"Combined Wii U and Wii unit sales were down 27% last month, while combined 3DS and DS unit sales were also down 27% compared to last February, and have not shown positive growth since October 2011."

While Pachter's forward-looking statements are purely speculative, it would be difficult for even the most ardent Nintendo fan to deny the challenges ahead.

Wii U's biggest problem could be its lack of first-year sales momentum. Excluding March sales (which have not yet been announced), Nintendo has sold just over one million units in the United States.

This might sound like an impressive number, but it pales in comparison to the original Wii, which sold more than 2.8 million units during its first eight months at retail. In order for Wii U to match those sales, it will need to sell another 1.8 million units by the end of June 2013. Nintendo's own internal projections suggest that will not happen.

While the original Wii was released one year after Xbox 360 (and days before PlayStation 3), Wii U arrived one full year ahead of PlayStation 4 and the next Xbox. If consumers are not interested in Wii U now -- when no other next-gen consoles are available -- it is hard to imagine that this picture will improve when the competition intensifies.

Nintendo may try to turn things around by adding to its slate of Internet connectivity options. According to DisplaySearch, more consumers use game consoles to connect their TVs to the Internet than any other device.

This should have come as no surprise to Microsoft. Last year the Windows maker discovered that its latest console, Xbox 360, is used more for online entertainment than for gaming.

Nintendo may also find salvation within its summer, fall and winter game lineup. The company said that it will introduce several key sequels at this year's Electronic Entertainment Expo. Those games could be what Nintendo needs to spark new interest in the console.

However, there are no guarantees that any of those titles -- a new Mario adventure game, a new Mario Kart and a new Smash Bros., to mane a few -- will arrive in 2013. Nintendo may choose to spread out the releases and save some of its biggest games for 2014 and beyond.

This strategy is not unprecedented, but it is far from effective. While Nintendo released a significant number of DS and Wii titles during their first 12 months at retail, the company held back releases for Nintendo 64 and GameCube, creating a drought of fresh software.

According to VGChartz, Nintendo 64 sold roughly 33 million units worldwide before it was retired. GameCube sold 21.7 million units. Wii, on the other hand, sold more than 99 million units. Nintendo DS, the most successful game system of all time, sold more than 154 million units.

It is not yet known which strategy Nintendo will employ with Wii U -- one with many games or one with releases that are few and far between.

For better or worse, the company has currently taken the latter route. Nintendo has not released any prominent Wii U games in America since November 2012.

Pikmin 3 was one of a handful of games unveiled at last year's Electronic Entertainment Expo. At the time, Nintendo said that it would be a "launch window" item, meaning that it would be released within three months of Wii U's release.

By January, Nintendo had delayed the game until March. By March, the game had been delayed until the end of June. Now Nintendo has updated its official website with a new release date: "To be determined."

Meanwhile, IGN has deleted its release date listing (June 30) and replaced it with a vague listing for "Q2 2013."

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

Posted-In: Michael Pachter Nintendo WedbushAnalyst Color News Rumors Analyst Ratings Tech Best of Benzinga

 

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