Nintendo is changing tactics, combining social-media features and TV screen action with a touch-screen controller as the company, based in Kyoto, Japan, faces competition from an online game market that may grow to $37.9 billion by 2016. The question is whether the new console, Nintendo’s first since it introduced the Wii in 2006, features and games will attract consumers who may have moved on to newer ways to play.
“It changes your gaming, it changes how you interact with your gaming friends and it changes how you enjoy your TV,” Reggie Fils-Aime, Nintendo’s president for North America, said from the stage today at the E3 conference. “It stands to revolutionize your living room.”
Nintendo has lost 48 percent of its market value over the past year and rose 3 percent to close at 9,290 yen in Osaka trading today. Annual sales of games at U.S. retailers including GameStop Corp. have fallen for three years as consumers flocked to online titles such as Zynga Inc.’s “FarmVille.”
U.S. sales of game hardware and software dropped to $17 billion last year from $18.6 billion a year earlier, according to NPD Group Inc., an industry researcher based in Port Washington, New York. Revenue for online games is projected to rise to $37.9 billion by 2016 from $19.3 billion in 2010, DFC Intelligence of San Diego said in September.
“It’s crucial that the new software create demand and a market,” said Satoru Kikuchi, a Tokyo-based analyst at Deutsche Bank AG, who rates Nintendo shares hold. “They need two or three original titles that can exploit the features of the Wii U.”
Titles introduced today include a new Wii Fit that records how many calories players burn, a richer “Super Mario Bros.” and “Just Dance 4.”
Nintendo showed images of “Super Mario Bros.” and its Zelda character in a Wii U webcast by Iwata this week.
“Mario is a necessity” for the initial game lineup, Deutsche’s Kikuchi said.
Harder-core games were represnted by a new Batman title from Warner Bros., “Zombi U” and and Ubisoft Entertainment’s “Assassin’s Creed III.” The company also announced links to video services such as Netflix and YouTube.
The centerpiece of the new machine is a touch-screen controller called the GamePad, which serves as a second screen for games or as an independent screen for functions including video calls or Internet browsing.
The 6.2-inch touchscreen controller, about the size of a tablet computer, lets users connect wirelessly to the console. A player can switch camera angles in a game, change the lighting and flick the picture back to the touchscreen should another person want to watch a TV program.
“What is being seen or even done on the small GamePad screen is different from what’s happening on the big-screen TV,” Iwata said in the video.
Nintendo, which forecasts it will return to profitability with net income of 20 billion yen for the year ending March 31, learned from the mistakes made introducing the 3DS, Iwata said.
“When we launched the Nintendo 3DS, we failed to prepare a software lineup which could satisfy our customers,” he told analysts in Tokyo on April 27. “We have learned the lesson that we have to make that kind of preparation for the Wii U.”
Sales of the 3DS have gained momentum in Japan, though U.S. demand for the player is “far less” than Nintendo’s expectations, Iwata said in April.
The company may be able to sell 6 million to 7 million units of the Wii U, which may retail for 25,000 yen in Japan and $250 in the U.S., this fiscal year, Hideki Yasuda, an analyst at Ace Securities Co. in Tokyo, said in an April 27 report.
Nintendo forecasts 10.5 million combined unit sales for the Wii and Wii U.
Microsoft Corp. sold 14.9 million Xbox machines in 2011, according to calculations based on quarterly announcements. Sony Corp. sold 13.9 million PlayStation 3 consoles last fiscal year, it said in an earnings statement in May.
Microsoft will begin selling the next version of the Xbox in 2013 at the earliest, people with knowledge of the plans told Bloomberg News in March. Sony plans a release the same year for the successor to the PlayStation 3, the Wall Street Journal reported last week, citing unidentified people familiar with the matter.
The Xbox 360’s online service will add sports and entertainment content through 35 new providers, adding shows including “Monday Night Football,” Microsoft said yesterday at E3. The Redmond, Washington-based company also introduced an application called Xbox SmartGlass that will link the console to phones, tablets and personal computers.
Sony’s PlayStation 3 is adding movies, TV shows and exclusive games including “Wonderbook: Book of Spells” from “Harry Potter” author J.K. Rowling, the Tokyo-based company said yesterday at the trade show.
“Nintendo may remain in the current tough situation for another year or so, until there’s a sign that the Wii U takes off,” Yasuda said.
Yasuda is among five analysts tracked by Bloomberg with a buy rating on the stock. Fourteen analysts rate Nintendo a hold, and three recommend selling.
Many of the customers who made the Wii a hit have since moved on to social and mobile gaming, said Edward Woo, an analyst at Ascendiant Capital Markets in Irvine, California.
“For Nintendo to be able to recapture those people, they would really need to come up with something that is unique,” Woo said. “The challenges they face are pretty significant.”