How Much Is Riding on Nintendo’s Wii U?

Nintendo�s (PINK:NTDOY) chief executive, Satoru Iwata, recently told investors that the company is determined to get right the launch of its Wii U video game console, which is expected to debut during the 2012 holiday season. It will be Nintendo�s first console to feature 1080p high-definition graphics and will include a new controller with an embedded touch-screen. In addition to offering secure interactive multiuser accounts, Nintendo said, Wii U users will be allowed to buy its top-tier games at stores or online at its rebranded �Nintendo Network.�

Nintendo hopes the Wii U, which will essentially double as a tablet and game controller, will lure core gamers. That will be a challenge, though. Nintendo could have a hard time convincing these gamers that it understands them unless the console includes a compelling innovation, such as a touch-screen feature that would give players more freedom to move characters directionally.

Most other key gaming features, however, are already offered on Microsoft�s (NASDAQ:MSFT) Xbox 360 and Sony�s (NYSE:SNE) PlayStation 3 consoles, and through Apple�s (NASDAQ:APPL) iPhone and iPad. So Nintendo�s Wii U may not just be late to the game, it may miss an important market altogether as consumers increasingly shift to online and mobile gaming. With more than 100 million smartphones in use in the U.S. and an estimated 88% of consumers using the devices to play games, it may be that Nintendo hasn�t thought enough outside the box.

It was only a few years ago that Nintendo dominated the video game market, thanks largely to the popularity of its handheld DS consoles and the interactive Wii gaming system, which was introduced in 2006. The Wii, whose motion-detecting handheld remote offered a three-dimensional interactive experience, was a gamble for Nintendo, but it helped expand the casual gaming market and made the console one the entire family, including grandma, would feel comfortable using.

Now many Wii and DS systems are collecting dust, and the 3DS, Nintendo�s most recent hardware offering, had disappointing sales even at a reduced price largely because more consumers favor playing games on their smartphones. The transition to mobile, in fact, likely will continue to push down sales of traditional hardware and software indefinitely.

A new world for Wii

Convenience may be a factor. The DS in many ways paved the way for portable gaming consoles, but it is a dedicated, game-only device. Now games can be downloaded to multifunction devices like the iTouch, iPhone, and iPad, and parents can upgrade their Android phone and pass it along, game ready, to their children. What�s more, some games for mobile devices can be downloaded for free, and many others are available for only 99 cents apiece � a far cry from the $20 or $30 retailers charge for traditional games.

No matter what hardware manufacturers come up with, industry experts don�t expect the free-game trend to reverse itself. On the other hand, the market for traditional multiuse video platforms isn�t going to evaporate entirely. Holiday sales of Microsoft�s Xbox 360 were strong enough to push past 66 million units. And sales of Microsoft�s Kinect, which allows controller-free gaming, have nearly doubled, to 18 million, since March of last year.

If Nintendo wants its offerings to once again be among the must-haves, it is going to have to offer more than what consumers can get somewhere else. As it did with the Wii, Nintendo is going to have to give consumers something they haven�t seen before.