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Analyst Reckons Wii Investment is "Fools Gold"

Posted by Damien McFerran

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]

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User Comments (23)

Hardy83

#2

Hardy83 said:

He makes some good points.
The casual market is a good market to invest it, but does bite other markets in the butt if you're trying to appeal to them.

thewiirocks

#3

thewiirocks said:

Long story short: make a game that people who purchase Wii's want to buy or GTFO. Guitar Hero is a perfect example of a developer/publisher that got it right. Yet there's plenty of examples where companies got it wrong.

On the flip side, a lot of the small-time studios are doing really well with the Wii. A few months back, THQ reported that they were refocusing their efforts on the Wii and DS platforms. They found that their profits were coming almost entirely from Nintendo's platforms and that the other platforms were not making them money.

motang

#4

motang said:

Did they think that making good games will actually sell?!? There are core gamers who own the console.

Ren

#5

Ren said:

Wouldn't want to have to make GOOD games or anything. Innovative games do sell pretty well, and if you can execute a good concept well without breaking the bank in dev than it's sure profit. I don't think it's that much of a gamble. Not any more than for the other two.

Bahamut_ZERO

#6

Bahamut_ZERO said:

So he is saying that good games dont sell on Wii because the Wii has less hardcore games than 360?

If that was true there wouldnt be all of us hardcore Wii owners on this site posting comments right now.

thewiirocks

#7

thewiirocks said:

If that was true there wouldnt be all of us hardcore Wii owners on this site posting comments right now.

I have a feeling that The Conduit will be smashing all preconceptions about the Wii and hardcore gaming very shortly now...

MrPinguy

#8

MrPinguy said:

Analyst Reckons Wii Investment is "Fools Gold"
MrPinguy Reckons Wii Analyst is a Fool

I'm so tired of Hardcrap and Casualcrap, Jesus.
I hate this lame terms that are just plain stupid, you like games and play them as a hobby or even work, your a "gamer" thats it.
Wii is a true console for everybody, and by everybody i don't mean "Casual" i mean "EVERYBODY"
Just go see the great games that the Wii have.

The 3 actual home systems, are the 3 good systems, maybe not so great in the eyes of some, comparing with their older versions, but they are all good, don't make lame separations only for some lame people "feel" "special"

GN0LAUM

#9

GN0LAUM said:

@ MrPinguy

You're absolutely right about that. One of the biggest problems with those terms (casual and hardcore) is that they are ill-defined at best. No one really knows what they mean in this context and anyone you ask will give you a different arbitrary definition.

The terms only serve to divide the gamers into "us" and "them" categories, which is the last thing the video game industry needs right now when its being scapegoated as much as it is.

This is the sort of thing you used to see on the playground back in 3rd grade and now it just seems ridiculous. Kids like to make clear seperations and distinctions, usually as you say "for some lame people [to] 'feel' 'special'" or to hide their inadequacies. Once you grow a little older you realize that this binary splitting is neither necessary nor realistic. Yet, again many of us find ourselves in our 20's and 30's talking the same tripe over and over again.

Bahamut_ZERO

#10

Bahamut_ZERO said:

@thewiiirocks: I dont think that really matters, if one game could, it would have been MadWorld. I think that its gained such a rep that no amount of changing could save it from the eyes of others now.

Its like if some kid picked his nose in 2nd grade, everybody calls him a nose picker throughout high school too, even if he stopped in 4th grade.

deadly_by_design

#11

deadly_by_design said:

I think more devs need to approach the Wii like the Star Wars: Force Unleashed model. (not that it was necessarily the greatest game)Say what you want about the Wii version, yet at least it wasn't a dumbed-down clone.

Games like Madworld prove that some 3rd-party devs can actually get it done right. The Wii isn't bleeding edge hardware, but the right art style can still nail a great presentation. (like Galaxy did, though it's 1st party)

jpfan1989

#12

jpfan1989 said:

before its release I originally thought that it would've been the wii to get plagued by FPS's. but aside from MP3 and a few rail-shooters I hardly see any. why not? the wii is a perfect for FPSs especially for people who cant work duel analogs worth poo

thewiirocks

#13

thewiirocks said:

@Bahamut ZERO - The problem with MadWorld is that it's a niche title. Not that many players are going to be turned on by an excessively gory game. Enough to make it profitable, but not enough to prove the market.

The Conduit is different in that it has mass appeal. Mark my words. It will easily sell 3 million copies, putting up there with the popular FPSes on the 360 and PS3.

Wrenski

#14

Wrenski said:

The thing everyone seems to ignore is that despite what the last couple generations have been shoving down our throats, you don't need to be a megaton hit to be a success. Many many great third party games that whiners hold up as 'THIS IS WHY THE WII IS HORRIBLE FOR GAMING BECAUSE THESE DON'T SELL' get perfectly pleasing sales for their creators, and even get sequels. No More Heroes only sold like what, a couple hundred thousand? That sounds like nothing when we've been listening to how you have to hit millions to be a success, but it's Suda's most successful game (And the one on the least supposedly Hardcore system period), and it's getting a free pass for a sequel. Capcom is even still debating doing a Zak & Wiki sequel, and they were one of the very few developers to go 'Ehh it did kinda bad..'

The real problem right now is that developers need to ween themselves off this 'EVERY GAME MUST BE A BLOCKBUSTER THAT NEEDS TO SELL MILLIONS TO BE A SUCCESS' mentality, and accept the idea of making games which can be successful even if they only appeal to a niche. That is what the big pitfall is.

Stuffgamer1

#15

Stuffgamer1 said:

The analyst is correct in saying that number of Wii consoles sold does not equal number of people you're selling your game to, but not necessarily for the reasons he stated. Many people buy Wii's and don't actually use them very much, rarely buying a new game at all. This intersects with his point in that when they DO buy a new game, it's usually Nintendo-published.

As an employee of a video game retail store, I can attest to the poor sales of the majority of Wii games, partially due to my own efforts to keep people from buying crappy games. Nintendo sells best because Nintendo MAKES best, especially for multiplayer.

Then you get to titles like No More Heroes and Zack & Wiki. Why the heck DIDN'T those titles sell well? I don't even know. I own the latter and my brother owns the former. Actually, I'm coming up with some theories as I type. For one thing, No More Heroes got mixed (and overall, somewhat poor as I recall) reviews. The mere look of the box would keep it from selling to the kind of gamer who doesn't keep up with the latest news and never saw a review at all, while many people were probably swayed by reviews, even though I have found most professional reviews to be HORRIBLE at telling me what I will or will not like (this site does the best job, I think :)).

Come to Zack & Wiki, though, and I've far fewer ideas. The style probably turned off most "hardcore" gamers, and I suspect the one-player-only (not counting the lousy "help" feature) kept most others away. I think the best way to kill a Wii game's sales is to not have multiplayer. Not to say that there aren't plenty of multiplayer games that don't sell well, but it does have some effect on sales.

I'd like to comment on the "hardcore vs. casual" thing. The Nintendo Channel gives THE best display of how flawed the black-and-white system really is, when the most "hardcore" VC game I've ever looked up still had at least 10% claiming it was for "casual" gamers (that being StarTropics). Obviously, those who voted that think of themselves as "casual" due to spending relatively little time gaming or something. The extreme difficulty of the game never seemed to be a factor in the rating. I rate games "hardcore" when the majority says "casual" sometimes, due to seeing them from different perspective. Most games can be played either way, after all, depending on whether you want to go the completionist route or not.

Damn, this post got long, and I'm not even sure I've said very much of value. Oh, well. Thinking out text may prove at least a LITTLE bit helpful, I hope. shrug

rodoubleb

#16

rodoubleb said:

I like how he adds microsoft and sony's numbers and states that they outsell Wii as if they were the same company. Oh wait because if dual ownership they only equal it.

Wrenski

#17

Wrenski said:

"Then you get to titles like No More Heroes and Zack & Wiki. Why the heck DIDN'T those titles sell well?"

No, this is exactly the problem the entire industry needs to move away from. Zak & Wiki did arguably do bad, but No More Heroes DID sell well. We've had it thrown around and beaten into everyone's skulls that 'Well' = 'MILLIONS GANGBUSTER SALES'. But that isn't true, if that were true, well, most (even fantastic) developers would be completely , long LONG before the Wii ever existed.

No More Heroes only broke a couple hundred thousand, and the conventional wisdom says that should be horrible... Yet Suda, a man who has put out quite a few games (and all on extremely popular systems like the PS1, PS2, and DS) was extremely pleased with the sales, thanked western gamers, and we're getting a sequel.

There are only two possible explanations: Either Suda51 is a moron, or we need to get over this mentality where being a success can ONLY be achieved by selling millions.

Given that so many companies (ATLUS) live, survive, and thrive pretty much all of gaming despite rarely selling what conventional wisdom says is 'great', my money is on the latter.

thewiirocks

#18

thewiirocks said:

@Stuffgamer1 - Zack & Wiki did the sales it did for one reason: Capcom didn't promote it. At all. Most games get huge press for months prior to release, with everyone becoming super-excited for its release. Zach and Wiki got nuttin'. If it wasn't for the word of mouth campaigns (originally started by IGN), it would have had even worse sales.

As it was, the game sold pretty well for not having a marketing budget. If VGChartz is to be believed, it moved nearly 400,000 copies. Which I believe pretty much exhausted the original print run. (I remember the game getting really hard to come by for a while there.) So nothing to scoff at. But it could have been a breakaway success if Capcom had tried harder.

Hawker

#19

Hawker said:

@thewiirocks about what you said about Madworld being a niche title because of the blood & gore, most people I see bad mouthing the wii actually do it cause they think that a game isn't "hardcore" unless it has blood & gore & there's not enough games like that. Just shows some people are just really stupid.

Sean_Aaron

#20

Sean_Aaron said:

Wrenski and thewiirocks hit the nails on the head. This analyst is just being "controversial" to get some media attention and he's succeeded.

EA's Peter Moore has recently stated that clearly the publishers need to learn how to market their games to people who aren't like us and don't spend a lot of time trying to find out the news on the latest releases if they want bigger numbers; a lot of publishers seem to misallocate their marketing money or simply don't spend anything trying to sell a game. This is already difficult when you've got a retail model with tons of white boxes on the shelves; it will only get worse if games go to a download-only model.

And one of the strengths of the Wii that comes from using older, off-the-shelf technology is that it's a lot easier to program for and cheaper to produce a game. If there was no money to be made EA wouldn't be refocusing their efforts. I'm definitely hoping for a future will less lackluster ports and more original content from 3rd parties and what I'm hearing from the big players lately is very encouraging.

Kid_A

#21

Kid_A said:

Yeah, it's true to some extent, but you're a new developer trying to get noticed, you're not going to gain any respect putting out a mini-game collection on the Wii. At the same time, you're not going to gain any respect putting out some first-person-shooter on the 360 or PS3. Sure, if you're looking for a quick buck, do what you gotta do, but if you actually care about making quality games, you'd be smart to put it on the top selling console on the market--the Wii.

grenworthshero

#22

grenworthshero said:

Has this analyst ever even played video games before? Of course there are only a few popular games from third-party developers; most of the third party support is for completely horrible games, and Wii Sports rip-offs. It has little to do with the Wii itself, other than the fact that 3rd parties are too stupid to figure out that games with flailing wiimote controls don't work. I'd still much rather have a Wii, because I'm not much of a Playstation person, and 360...come on. I don't even want to go there. The only games XBox360 has is FPSs. I think this idiot analyst underestimates just how dedicated Nintendo fanboys are. Nintendo has been fertilizing these embryos for over 20 years now.

wiiboy101

#23

wiiboy101 said:

REPLACE ANALYST WITH MICROSOFT PAYED JERK.............

and sonys ps3 was going to take 1st place was it 2007 then 2008 then 2009 ok analyst go analize some more bs figures

better still go get anal -ized by sony

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