Nintendo's Wii 2: Dreamcast All Over Again?

By James Brightman

Nintendo made big news today, not necessarily because their annual profits plummeted 66%, but because after endless speculation, the company’s top brass in Japan finally decided to confirm that a Wii successor is planned for 2012 and we’ll see it in action at E3 this year. But what if the Wii 2 is entering the market too late for this generation and too soon for the next? Is this like Sega’s Dreamcast all over again?

“It is an open question whether the Wii successor is an in-between console, much like Sega’s Dreamcast was back in the late 90’s—too late to compete with the PlayStation and N64, and not sufficiently advanced to compete with the PS2 and Xbox,” noted Wedbush Securities analyst Michael Pachter.

He had plenty more to say, which we’re publishing below:

“Nintendo’s announcement of a Wii successor is quite sketchy on details, and arguably raises more questions than it answers. In our view, if the successor is nothing more than a high-definition Wii, the company has waited too long to launch, and has conceded a tremendous first mover advantage to Microsoft and Sony, who launched Kinect and Move control schemes, respectively, in late 2010. We are seldom disappointed in Nintendo’s ingenuity, and we do not believe the Wii successor will be an exception; it is highly likely, in our view, that the successor will innovate mightily, and rumours of a controller with a 6″ LCD screen are rampant.”

“Of course, with innovation comes risk. First, the Wii successor may be costly to make. If the device is truly more powerful than the PS3, it will likely cost more than $200 to produce, and may cost as much as $250. If the controller really has a 6″ touch screen as well as dual analogue controls, this could add another $30 or more to the cost of production. Given Nintendo’s reticence to sell any products at a loss (or even at breakeven), a $230 or higher bill of materials suggests a price point well above $300. Considering the timing of launch in early or mid-2012, it is likely that the competitive PS3 with Move and Xbox 360 with Kinect bundles could be priced well below $300 by then, perhaps as cheaply as $250; if that is the case, it is hard to envision Nintendo making inroads into market share.”

“Second, we believe that the Wii successor will require third party software support to recapture market share from Microsoft and Sony. If the platform is on par technologically with the PS3, it is likely that third parties will support it; if it is a significant advance over the PS3 technology, it is possible that games will have to be developed separately, rather than ported from Xbox 360 and PS3 games. A higher technological standard could mean that some publishers will be reluctant to develop for a platform with a small installed base, and will wait for greater penetration before bringing games out.”

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