Nintendo Seen Missing Target as Sony-Microsoft Dwarf Wii U
Nintendo Co. (7974)'s prospects for meeting its profit and sales forecasts for this year are diminishing after Sony Corp. (6758) and Microsoft Corp. (MSFT) each sold more game consoles in 24 hours than the Wii U maker did in nine months.
Context & Ripple Effects
The arc here is a six-year descent from peak to launch-window humiliation. In 2007 Nintendo was targeting 35 million Wii sales in the U.S. alone; by mid-2012 it had swung to a $132M operating loss as Wii demand collapsed ($132M operating loss), and even its return to net profit in the July quarter rested on just 160K Wii U consoles sold.
What changed this week is that Sony and Microsoft finally gave the market a direct comparison: both new consoles outsold the Wii U's nine-month total in their first 24 hours on shelves. The Bloomberg report — analysts now doubt Nintendo can hit its own yearly forecast — spread fast, picked up by BGR, VG247 and Tech Trader Daily within a day.
First-order effects
- Nintendo's stated profit and sales forecasts for this fiscal year lose credibility with analysts; the company faces pressure to guide down or explain how it closes a gap measured in months-versus-hours of console velocity.
- Sony and Microsoft enter the holiday season holding the momentum narrative, with retail shelf space and marketing attention consolidating around PlayStation 4 and Xbox One launches.
Second-order effects
- Third-party publishers allocating scarce development resources for this hardware cycle face starker math: a Wii U install base growing at a fraction of rivals' pace weakens the case for exclusive or even simultaneous releases on Nintendo hardware.
- Retailers and component partners recalibrate holiday orders toward the two hot consoles, compounding Nintendo's shortfall through inventory and promotion decisions rather than consumer preference alone.
Third-order effects
- If the pattern holds, the console business reverts to a de facto two-player premium-hardware race between Sony and Microsoft, pushing Nintendo toward either a differentiated low-cost strategy or revenue streams beyond dedicated hardware — a question analysts were already raising as of late 2013.
- Sustained third-place economics would concentrate platform power further, raising the bar for any future entrant and increasing the strategic value of exclusive software as the remaining lever Nintendo controls.
The trend: Console-market value is concentrating around Sony and Microsoft's launch-cycle scale while Nintendo's hardware-first model searches for a response, with software exclusivity and possible non-console revenue emerging as its remaining levers.