Who Will Buy a Next Generation Game Console?

The freemium online games phenomenon has truly been a welcome distraction for some, but not the manufacturers of traditional game consoles and associated software titles. Hardcore gamers still prefer the superior game console experience, however other people may never graduate to that level of engagement.

Overall game console shipments declined by over 30 percent year-over-year through the first half of 2012. Although these results do not signal the end of console gaming, they are surely an indication of a trend that will change the long-term market upside potential.

The current seventh generation of consoles is in the twilight years of the usual life-cycle and penetration rates are mature, leaving less room for new growth. Hope for recovery of the market in late 2012 and early 2013 now rests largely on the next generation Nintendo Wii U -- with its tablet-like GamePad capabilities.

According to the latest market study by ABI Research, Nintendo’s innovative TVii feature is also notable and might match if not exceed what Microsoft has done in the multi-screen market with XBOX Live Gold.

Nintendo’s next generation console, the Wii U, will launch in November within Europe and North America and then later in Japan. Pricing varies by region, but the Wii U will be Nintendo’s most expensive platform to date.

Nintendo is expected to target core gamers with stronger third party developer support. However, the Wii U’s hardware may not improve on gaming performance levels compared to Microsoft’s Xbox 360 and Sony’s PS3, both current generation consoles.

"The Wii U’s success will depend on first party game titles and the ability of the unique user interface to improve upon or augment the gaming experience. Launch titles are expected to be relatively strong, but Nintendo has extended its launch window from release through to March 2013 in order to include more games," said Sam Rose, practice director at ABI Research.

With adequate marketing, ABI says that they expect launch demand for the Wii U to be strong, but long term success will depend greatly on establishing a unique and desirable user experience with the Wii U GamePad (media tablet).

Nintendo will likely need to create separation between the Wii U and current consoles from Sony and Microsoft. If games are available across all three platforms, with equitable experiences, then the Wii U will likely fail to generate much interest from the core gamer segment of the marketplace.

ABI expects the Wii U launch to bring 2012 shipments close to the 2011 totals with early 2013 returning to early 2011 levels. Sustaining this level will depend heavily on continued Wii U demand as well as offerings from Microsoft and Sony.