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Nintendo Wii U: Is This The Future of Console Gaming?

Nintendo Co., Ltd (PINK:NTDOY) will again bring innovation to the $17 billion console gaming industry. On Nov. 18, gamers will be able to purchase the new Nintendo Wii U for a $300 for the basic 8-gigabyte model, or $350 for the 32GB model. Nintendo Co. gave the console a complete makeover.  Aside from a few cosmetic changes, Nintendo’s new Wii will include vastly improved graphics, a charging stand, an increased amount of memory, and a touch-screen controller. This controller, called the GamePad, will come with the game Nintendo Land and will allow gamers to play games they purchased for their last Wii console. Perhaps the most interesting tidbit: the entire system will not require a TV, as gamers will be able to geek out via the controller’s screen if they so desire. Owners of the system will be able to browse the internet and link their controller to their TV, if they have one.

Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY)

Perhaps an even bigger addition to the system is Nintendo TVii, the free movie-watching feature that brings users’ entertainment services to one place. It allows owners of the console to compile various services such as Netflix, Inc. (NASDAQ:NFLX), Hulu and pay-TV accounts to one source. The console’s touch-screen controller will also have more uses than just gaming. The controller will capture and display scenes from live TV, and allow users to post comments on their social networking accounts. Between its Nov.18 release and the end of March 2013, Nintendo expects to have 50 games available, most notably New Super Mario Bros. U and Wii Fit U.

Nintendo has been notorious for marketing their products to consumers who aren’t considered to be traditional gamers, per say, but its newest console will have a greater focus on appealing to its more hard-core fan base. The fact that the company is shifting its direction may be concerning to both Microsoft Corporation (NASDAQ:MSFT) and Sony Corporation (NYSE:SNE). The Wii U’s attractiveness toward the avid gaming demographic may eat into the sales of both companies’ upcoming consoles, the Xbox 720 and the Playstation 4. Since 2006, when the first Wii, Xbox 360, and PS3 rolled out, Nintendo had been considered a market leader in the console industry. In 2011, market share between these competitors began to even out, but Nintendo still accounted for 37.8% of Internet home console sales. Looking at the Wii U’s competition, not much has been released from competitors, but after news that Microsoft was developing a patent that would essentially cover turning a family room into the inside of a video system, there was waves of speculation about the Xbox 720. The reality is, nobody really knows what to expect from the Xbox 720 or the PS4, and Nintendo seems to be setting a pretty high bar with the Wii U (Click to see why Sony needs PS4 revenue more than ever).

Console developers will not be the only party benefitting from increased sales tied to the roll-out of these new systems. Game developers will also see their sales come back to life after a tough 2012. Companies such as Sony, creators of God of War; Microsoft, creators of Halo; Activision Blizzard, Inc. (NASDAQ:ATVI), creators of Call of DutyElectronic Arts Inc. (NASDAQ:EA), developers of Madden; and Take-Two Interactive Software, Inc. (NASDAQ:TTWO), the creators of Grand Theft Auto, all have an integral stake in the next generation of console gaming. Most of these companies have witnessed depressed sales, stemming from poor macro-economic conditions, a lack of new blockbuster titles, and the ever growing shift to social, mobile, and digital gaming. Various video game companies have opened their checkbooks to buy small mobile or social gaming companies, and have increased R&D to keep up with next generation gaming.

We expect that both hardcore gamers and game developers will evolve with these next generation platforms. These platforms will take gamers’ experiences to the next level, and game developers will have to adapt their monetization strategies accordingly. A good blueprint to follow may be the trail that mobile/social games have blazed, which would benefit console game developers’ margins, assuming that more products began to be available online. Beginning with the Wii U, the hype over the next generation of gaming consoles is only going to become larger. As the fall season approaches and the holidays get closer, the competitive landscape of this industry will be truly worth watching.

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