Nintendo: Wii U pre-orders strong, shortages likely this year

The Japanese game company said the new consoles will sell at a loss, hurting its bottom line in the near term

Nintendo said Thursday pre-order sales of its new Wii U console are strong and the game is likely to have shortages this holiday season after its launch.

The company also expects a hit on its profits in the short-term from the game which is being sold at a loss.

Company president Satoru Iwata, speaking to investors a day after his company slashed hardware and profit targets for the current fiscal year, said that many retailers have sold out of their pre-order Wii U allotments, according to a transcript of his comments posted online by the company.

He held up major U.S. game retailer GameStop as an example, stating it had created a waiting list after pre-orders filled up and has 250,000 names on it.

Nintendo aims to sell 5.5 million Wii U consoles from its launch, which takes place in the U.S. and Europe in November and in Japan in December, through March of next year. But Iwata said it was likely that some potential gamers will be left empty-handed.

"As production only started this summer, it has now become more likely that it is our production capacity, rather than consumer demand, that will place limits on our Wii U prospects for this calendar year," he said.

Iwata added Nintendo is selling the console at a loss, so its success will hurt the company's bottom line in the near-term. The company makes more profit on software titles, but it will take time for the platform to spread among consumers. The cheapest version of the Wii U is slotted to go on sale for US$300 in the U.S. and 250 euros in Europe.

"The Wii U hardware will have a negative impact on Nintendo's profits early after the launch because rather than determining a price based on its manufacturing cost, we selected one that consumers would consider to be reasonable," he said.

The new game is an update to Nintendo's smash-hit Wii console, which introduced motion-controlled gaming to the mainstream market in 2006, and also experienced shortages after its launch. Iwata also said sales of the older Wii have faded in most markets, especially with the approaching launch of its successor.

The main feature of the newer Wii U is its "GamePad" controller, which is similar to a full-fledged tablet in itself, with a touchscreen, motion detection, camera and stylus. Its small screen can be used to supplement games played on a larger TV, or serve as the main display. The main console will use NFC (near field communication) technology that is widely used in mobile payment systems, as well as an expanded online system that includes game play and social networks based around various titles. It can also serve as a home entertainment center, and allow users to stream videos from online services such as Hulu, Amazon and Netflix.

A day after Nintendo slashed its global target for the handheld 3DS console, which has had an uneven performance since its launch last year, Iwata defended its sales, saying they are as strong as the original DS at the same point in its life cycle. But he added in the crucial U.S. game market, 3DS sales "cannot be said to be satisfactory."

Iwata said that sales of home consoles in the U.S. are also fading as offerings from Nintendo, Sony and Microsoft age.

"The U.S. home console market has traditionally been strong in contrast to its Japanese counterpart, but as it has been six years since all of the current home consoles were put on the market, the fact that they are nearing the end of their product cycles is clearly having a big influence on their sales," he said.

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Jay Alabaster

IDG News Service
Topics: business issues, Nintendo, Handhelds, Game platforms, games, financial results, wii, nintendo ds
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