Nintendo Wii: A First Six Months for the Ages

From an investor standpoint, the Wii represents financial and strategic nirvana for Nintendo, a phenomenon about which I've written on several occasions. Some of the reasons for this nirvana-like state are as follows:

• Low sales price
• Mass-market appeal
• Leverages wealth of existing cross-market IP, i.e., Mario and Donkey Kong
• High margin on console sales
• Comparatively low game development costs
• Lower risks for third-party developers, e.g., due to costs and rapid growth in installed base
• Fun platform on which to engage and excite developers, e.g., Wiimote and portabililty
  
• Adequate supply upon launch
• Viral word-of-mouth sales growth

Given my deep interest in the "console wars," I was interested to read a post by Blake Snow over at Infendo yesterday which quantified the first six month U.S. sales figures for the last generation and current generation consoles of Nintendo, Sony and Microsoft. He included this very interesting chart as an exhibit to his eye-opening post.

 

Blake then goes on to ask a very interesting question concerning what the market really wants, especially given the empirical data at our disposal:

So do people want “next-gen” or “different-gen”? Nintendo says they want the latter and so do initial U.S. console sales. Assuming history repeats itself, the 360 and PS3 will end up in a distant second and third place with Wii perhaps outselling the PS2’s unprecedented 115 million worldwide units. What does it all mean? It means fans of motion-controls can expect to see a boatload of good games with fewer titles gracing “real next-gen” platforms. I feel like I’m taking crazy pills!

Different-gen or next-gen? I'd tend to agree with Blake, and it appears that the market supports this view. Just because something is loaded with features, does that mean it will necessarily sell better than something more spartan, but which provides a more enjoyable user experience? I think we know the answer to that question. One need only look at today's console wars, or perhaps Sony's legendary flop the PSX to see that feature mania and whiz-bang are not what sells product, at least on a mass-market basis. Enjoyment does, of which features are only one small part. Whizzy graphics, sure, but is it easy to use? Are the games easy to learn? Are the games fun to play with others? Oh, and what about value? Is my cost of entry high or low relative to the fun I'll have playing the game? Because of its superior fun/cost ratio, the Wii has been the answer for most of the mainstream game players, and even some hardcore gamers who want a second console to mess around with that provides a materially different user experience than the button-mashing "high-end" Sony and Microsoft offerings. And while I'd love to see the global numbers, I think the U.S. is a pretty good representation, especially given what we know of the Wii's run-away success in Japan and the struggles of both PS3 and Xbox 360 in that core gaming market.

Now I'm not sure if the Will will surpass the legendary success of the PS2 over its life. 100 million+ consoles is pretty hard to beat. That said, Nintendo has built a remarkably profitable, exciting, fun-filled platform over the past 6-7 months, and is only gaining momemtum both in console sales and excitement across the third-party developer community. I'm glad Blake created a picture to help put the Wii's early success into perspective. Because a picture is worth 1000 words, and in this case the picture is speaking loud and clear: Go Nintendo.

Comments

[kim]

Interesting. Mild correlation with normalized-console-price-at-launch, which you can see here:
http://curmudgeongamer.com/imgdisplay.php3?shotfile=console-prices-relative.png

[Macro Dave]

The Wii is the best thing since Guitar Hero. I live in a college town and I hear of Wii parties once or twice each week. Why? Because it is fun and even gets non gamers into playing games. As long as they keep coming out with good games the Wii will keep selling like it has been.

[Noumenon]

According to this article from Slate, the Wii was actually outsold in December by the Playstation 2. Next-gen, different-gen, ... same-gen?

http://www.slate.com/id/2161405/

[Kal]

Imo, it would be interesting to see some normalization of unit-sales wrt:

1. Price-at-launch, incl. inflation effects and

2. # of major competitors in initial 6-month window.

cheers