Wii are a family

January 20th, 2008, 13:41 Posted By: wraggster

Despite the family-friendly Wii console being less high-spec than its rivals, it still managed to be last Christmas's must-have gadget, says Richard Fletcher

They started queuing outside the Argos store in Coventry at 6.30am in the hope of picking up the year's must-have Christmas present. The object of their desires? The Nintendo Wii, a video-game console unlike any other. Four hours later, the queue outside Argos was 20 deep, despite the fact that the store had just one console in stock. On eBay, the elusive Wii, which sells on the high street from £180, was changing hands for as much as £1,000, while some desperate parents even crossed the Channel after reports that shops in Calais had stocks.

It wasn't only in the UK that Nintendo struggled to keep up with demand for the hit console. Despite desperate efforts to increase production and distribution around the world, a cottage industry of websites - including Wiitracker.com and wiialerts.com - has sprung up helping shoppers find a Wii.

On Thursday Nintendo will reveal to investors and analysts exactly how many consoles it managed to manufacture and ship around the world, alongside the Tokyo-based company's third-quarter results. The market is certainly expecting good news. In the past year, shares in Nintendo have soared more than 100 per cent. "It was an unprecedented winter shopping season for Nintendo," says Yuta Sakurai, an analyst at Nomura Securities.

But the unexpected popularity of the Wii has not only led to shortages from Coventry to Cincinnati. It has also shifted the balance of power in the $30bn-a-year videogame industry: after years of underperformance, Nintendo is challenging Sony and Microsoft for market leadership.

Only a few years ago Nintendo was an also-ran. The group's GameCube had proved a flop. Consumers had shunned it in favour of the Playstation 2 and Microsoft's Xbox, and serious questions were being asked about the company's future direction.

advertisementHaemorrhaging market share in the cut-throat games market, observers asked whether the company was going to go the way of other complacent Japanese companies. Mario, the animated plumber who symbolised Nintendo's dominance of the computer games market in the 1980s, had run out of tricks, they said.

The revival of Nintendo's fortunes have in large part been credited to one man, Satoru Iwata, who was appointed president in 2002, the first non-family related manager to lead the business.

Following the failure of the GameCube, Iwata concluded that the company could not win the bitter battle for the core gamer - 18-35 year-old men whose main interest is shoot-'em up games. Sony and Microsoft could concentrate on producing a new generation of high-specification consoles, but Nintendo would go a different way.

The result was the Wii: a console based around an innovative motion sensor which requires gamers to swing to hit the virtual tennis or golf ball (leading to thousands of minor accidents and injuries).

In terms of specification the Wii was not even in the same league as the PS3 or XBox 360, Sony and Microsoft's next-gen successors to the hugely popular PS2 and Xbox. Many in the industry wrote it off when it was launched - but the console has proved a huge hit with a new generation of gamers.

While the PS3 and Xbox 360 have focused on the traditional gaming market, the Wii has cannily focused on families rather than hardcore gamers.

Terry Duddy, chief executive of Argos parent Home Retail Group, says that the Wii "has become a family entertainment product". The lack of a traditional toy in the retailer's top 20 sellers this Chrstmas is, he suggests, largely the result of the Wii's popularity with families.

"The Wii is exploring new territory," adds Lisa Morgan, chief executive of UK-based games retailer Game Group. "Wii has not been selling to your typical hardcore gamer. There have been a lot more family purchases." Game was one of the few retailers to report a bumper Christmas last week - thanks to the popularity of Nintendo's consoles.

So where now for the company that has been dubbed the "Apple of the videogame world" ?

Late last year Iwata announce plans to develop the Wii's internet connectivity, giving it new channels and access to more downloads. Carl Gressum, an analyst at Ovum, believes that sorting out the production should be one of the key priorities. "Given the lower technical specifications of the Nintendo Wii it is interesting to note the console is still severely supply-constrained," he says.

Developing new games is also key, he adds. "Nintendo needs to keep up the game innovation around the interface otherwise the novelty factor could wear off."

Sakuri at Nomura has no doubts about the long-term popularity of the console. He believes that by 2012 Nintendo could have sold 100m Wii's around the world.

"Around 80 per cent of Wii consoles are in family living rooms. The company has managed to embed the system in people's lifestyles."

http://www.telegraph.co.uk/money/mai...0/ccwii120.xml

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