Analyst Reckons Wii Investment is "Fools Gold"

Warning for third parties looking to make a quick buck

The Nintendo Wii recently became the fastest selling console of all time and is generally perceived to be doing pretty well right now. However, analyst Doug Creutz from Cowen & Company has commented that third parties looking to make easy money by sinking cash into Wii development may be falling into a trap.

Speaking to Gamasutra, Creutz had this to say:

The choice here is really between investing for the Xbox 360 and PS3 - since their capabilities are fairly similar - or the Wii. I would caution investors and developers that the larger installed base of the Wii is really a bit of a red herring.

In the U.S., there is a 19-million unit installed base for the Wii versus 22-million units combined for the 360 and PS3. Assuming some overlap in the 360/PS3 installed bases, they're roughly equivalent.

In addition, Nintendo is the dominant publisher on the Wii with over one-third of software market share on its platform. Guitar Hero and Rock Band account for one-sixth of sales.

So the addressable market for third-party Wii titles is only about half of what the installed base would imply. The situation on the 360/PS3 is less daunting, with less than a quarter of software dollar share going to first-party publishers and Guitar Hero/Rock Band.

The other issue is that the Xbox 360 and PS3 are AAA-oriented platforms, while the Wii is casual-oriented. There is a very clear correlation between game quality and unit sales on the 360/PS3, while there is very little correlation on the Wii, at least for third-party games.

Thus, in some sense you have more control over your fate on the 360/PS3 if you can come up with a high-quality game. Whereas on the Wii, it's a bit of a crapshoot for what works and what doesn't.

I think the Wii installed base represents, to a certain extent, fool's gold for someone looking to invest in video game development.

You're rolling the dice on succeeding in a market which has proved very resistant to generating meaningful hits away from Nintendo titles and the music genre.

Basically what he is saying is true to an extent; the best-selling titles on the Wii tend to be Nintendo’s. However, he’s missing one point – if you have a hit on the Wii (like Sega’s Mario and Sonic at the Olympic Games, for example) then it’s practically a license to print money, and although third parties are finding it hard to get noticed at the moment, you only have to look at the hordes of ‘me too’ FPS titles that seem to plague the PS3 and 360 to realize that it’s the same story on that side of the tracks, too.

[via gamasutra.com]