2011 Holiday Console Wars: Nintendo's ChallengesNintendo is facing three challenges for this holiday season, and they have been making a major effort to succeed in all three areas. Nintendo's performance through the end of the year will shape their strategies for 2012, and it also affects many third-party developers as well. IndustryGamers takes a look at these challenges and how Nintendo plans to win the holiday console wars coming up.
Make the 3DS a Hit
After a strong initial month, the 3DS encountered a drastic fall-off in sales. The drop prompted Nintendo to drastically cut the retail price (from $249 to $169) in August, and two weeks ago they announced a lengthy list of software titles for this holiday and beyond. Many stories in the press have been written about Nintendo's problems with the 3DS. Their challenge now is to sell enough hardware and software over the holidays to dispel any doubts about whether or not the 3DS will be a successful platform. This is key not only to keep sales going to consumers, but also to convince third-party developers to keep coming up with more software.
"Their challenge now is to sell enough hardware and software over the holidays to dispel any doubts about whether or not the 3DS will be a successful platform."
The sales situation facing Nintendo is a difficult one, if you look at their stated goal of selling 16 million 3DS by the end of their fiscal year (March 31, 2012). Currently they have sold somewhere in the neighborhood of 5 million units, which means they have to sell 11 million in the next six months to make their goal. September sales will likely be up from August and typically sales jump during the holidays. Many analysts think Nintendo will fall short; Michael Pachter of Wedbush Securities feels they will only reach around 10 million to 11 million. For comparison purposes, the Nintendo DS sold 30 million units worldwide during its best year, a rate of about 2.5 million per month. Nintendo should be able to hit that rate during the holiday buying season, but can they keep the rate of sales high in 2012? They've got to be ready for the worldwide threat of Sony's PS Vita next year, and that means coming out of the holidays looking very strong.
Keep Wii Sales High
The Wii's sales have been down in recent years; Nintendo sold about 24 million in 2008, then 21 million in 2009, and 18 million in 2010. So far this year they've sold about 5.6 million; last year at this time they had sold 8.5 million. Nintendo has tried to boost sales with a price cut to $149 a few months ago, but the Wii has been unable to break into the first place in console sales, usually settling for third place. The announcement of the Wii U for 2012 release has probably affected sales of the Wii, but the more difficult problem has been a lessening of third-party support.
Nintendo is hoping to boost Wii sales with the release of The Legend of Zelda: Skyward Sword on November 20. The Wii's $149 price will certainly be attractive to buyers, and should help propel sales upward. Nintendo needs to have strong holiday sales for the Wii to keep profits and third-party development flowing. They do have a potential nuclear weapon, if they choose to use it: A price drop to $129 or even $99 would probably cause sales to zoom. Nintendo will probably be very reluctant to use that weapon, though. Strong Wii sales would be a wonderful cushion to have in early 2012, as there may be many long months before the Wii U appears. It's difficult to see how Nintendo can maintain strong Wii sales after the holidays without some major software releases, a price drop, or both.
Make Your Software Best-Selling
Nintendo has been a while without some of its major franchises appearing in new versions, but thankfully the drought is ending. The holiday season is seeing the return of such iconic brands as Super Mario, Mario Kart, The Legend of Zelda, and Starfox. Next year we'll see even more, such as Luigi's Mansion 2 on the 3DS. The key challenge for Nintendo is to make these titles sell well. Nintendo needs to reaffirm its status as a software powerhouse by turning in some impressive sales hits for its holiday lineup. Yes, that doesn't help the third-party publishers directly, but it will keep up the revenue and enthusiasm for the hardware.
This should not be especially difficult for Nintendo, as they seem to produce top-notch gameplay with some regularity. They'll need to deliver that, especially for their crucial 3DS titles, and Skyward Sword needs to be huge in order to move the needle on Wii sales. We'll probably see a fair amount of TV advertising from Nintendo to get the message across.
Conclusion
Nintendo needs to demonstrate success with the 3DS, keep Wii sales moving, and produce some hit software for the holidays. Some of that may depend on things beyond their control; the sales of the 3DS might be affected by new smartphones and tablets coming on the market, or just audience shifts away from the dedicated handheld consoles. Nintendo's going to have to work hard to achieve these goals, and success is not assured. We'll have to check on how well they did early next year.
