An Initial Look at Nintendo's Project Cafe / Wii 2 Strategy
by Jacob Mazel, posted on 30 April 2011 / 14,316 Views
Nintendo has recently confirmed the existance of Project Cafe, the successor to the Wii, Nintendo's best selling home console of all time. The new device is supposed to be playable at E3. Launch is coming in 2012, in all likelihood after March 2012, but before Black Friday 2012. As we don't know which reports and whispers are true - especially since some have already been confirmed to be wrong - such as a 2011 release, the focus here is simply speculation about features and plans based on data and common sense.
Nintendo's Pitch to Third Party Publishers
Third party support - what kind more specifically - is the first item to address for Project Cafe. As far as raw numbers go, Wii was so popular that even with, for lack of a better phrase, the "Nintendo wall of greatness", Nintendo's domination of the top ten titles for each and every one of its systems, third parties have still had more success on Wii than on any other Nintendo platform. Ubisoft and Sega have produced games that have sold over 5 million units on Wii, and several other titles have topped 4 million units. By the time you get down to titles over 1m units on Wii there are about 80 third party games and another 20 titles within spitting distance of 1m units. There have about 1,000 third party Wii games released to date, and so close to 10% of third party titles are shipping 1m units or more, which given the costs of Wii development is a profit of $10-$15 million in most cases.
The problem with these figures is that most of these titles are in the genres Wii created or enhanced with motion controls. Third party RPGs, Shooters, Racers, and other more traditional fare have performed fairly similarly to on N64 & GC with a couple of exceptions. A couple of third parties have managed to circumvent this problem by establihing reliable new franchises that fully take advantage of Wii, but most third parties have not been up to the task.
Even so, Wii did have a number of core experiments in 2007. There were games like Zack & Wiki, Elebits, Nights, ports of games like Bully and Godfather, and others announced and released in that time frame that tried to marry motion controls and experimental core game play into a commerical hit. In fact, with Move, Sony has largely been trying to do the same thing as what Nintendo tried in 2007 and they are facing similar difficulties as titles involving drawing, dancing and sports outsell traditional core titles. Wii largely became what it is today when these core motion titles failed commerically in 2007 even as Nintendo's core titles and music, sports, dance, and party games from all third parties showed growth.
To maintain its software growth that is tied to motion controls, Nintendo will likely try to lock up core titles from third parties that have motion controls optional in some way. Control options have already happened to some extent on Wii, but reviewers tend to ignore all but one option when testing a game, which is why many Wii games have such erratic reviews. With Project Cafe, Nintendo and third parties will likely try clearer messaging about what control styles can be used, particularly as the Wii successor could come with a new controller capable of traditional gameplay enhanced by some kind of screen, and some kind of Wii Remote update.
The pitch then for core games on Project Cafe goes something like this: X360 and PS3 software sales may grow slightly once again in 2011, but much of their hardware growth is now tied to motion controls - particularly on X360. Software growth overall is slowing as well. Since these devices already have the core base largely locked up to some extent, and software sales are about at peak levels for core titles, sales of core games will go down slightly to substantially in 2012-2013 without a new platform, harming publishers across the board. Sony and Microsoft may not launch new boxes until 2013 or 2014 - so as X360 & PS3 software falls, core games will desperately need a new platform in 2012-2014.
With enhanced graphics and features over both Wii and X360 & PS3, core gamers will surely buy Project Cafe, at least initially. Since Western third parties already know that some of their mainstream and motion-games will sell based on the Wii, they'll be more willing to experiment with core titles and ports as Project Cafe grows. Ubisoft in particular seems like the company most willing to build a market for brands like Assassin's Creed and Tom Clancy on Project Cafe. Once one or two big third party console brands are established on Project Cafe others should follow relatively easily, so long as the big third party brands and new properties are established in the initial 12-18 months Cafe is on the market. The pitch to Japanese third parties is a little bit harder, as their titles rarely perform super-well (3m+) in the Western core market, and they've also struggled with producing big motion-hits pretty much across the board, save for Sega. Consoles seem to become less appealing in Japan by the year as well, so 3DS and NGP could easily lock up the majority of Japanese third party support in the coming years particularly if development costs double again for PS4 and X720.
For the initial year, say, Nov 2012-Oct 2013, a two pronged console approach from Nintendo also seems likely. Nintendo will tell third parties making dance, fitness, music, and sports brands to keep making Wii games, as the base will be over 100m by the Cafe launch while putting core titles and more advanced motion gaming experiments on Cafe. By late 2013, as Wii purchasing rates per user begin to fully collapse, Nintendo will try to get third parties to move the big late-Wii era content, such as Just Dance 4 (or 5) to Cafe.
Control Scheme
Wii allowed Nintendo to enhance its software sales by appealing to more people. Third parties that successfully targetted new audiences have benefited as well. Project Cafe is likely designed to retain the Wii audience better than NES, SNES, and N64 retained thier audiences - so it will probably expand on the Wii control scheme and a core gamer control scheme right out of the box. My take is Nintendo will require entire genres, or perhaps even every game, to be mapped for core, motion, and also hybrid control schemes. Wii and GC accessories are rumored to be compatible with Cafe, which makes sense as both machines had similar horsepower under the hood.
The rumors of some kind of screen as part of the controller are likely indicative of some kind of attempt to once again enhance the fun of multiplayer gaming. In theory if the controller is capable of wireless internet transmission, one person could sit in a room playing the same game of Mario Kart as four other people sitting on the couch. It could even be possible to be playing in a bedroom, with people playing on the couch, and people playing on the other side of town if everything is internet ready. To prevent this from impacting 3DS or DS sales, which sell partly because of portability, Nintendo could probably establish some kind of limit where the screen only works for online gaming / local multiplayer gaming when connected wirelessly to Project Cafe.
Other wilder possibilities exist of course. Many Wiis are connected to the internet at all times. In house multiplayer gaming might be possible by 'streaming' the informaton from the controllers through Project Cafe for times when players just want to play Mario Kart without sitting by a TV. By using the hardware as a limit, this would once again prevent 3DS sales from being too impacted by the semi-portability of the Cafe controller.
Pricing
Although Project Cafe will likely have similar power to X360 & PS3, it may not have a Blu-Ray drive as Nintendo probably doesn't want to fill up Sony's coffers. Nintendo and Matsushita have partnered before, so some kind of cheap proprietary format is possible that won't help Sony. By late 2012, with two controllers (one like Wii, one for core gamers), fairly high-end graphics, and a bundled launch game, Nintendo could probably get away with charging $300 for Project Cafe and make a small profit on each device. The PS3 Move bundle for comparison could easily be $300 ($400 now) by late 2012, so Nintendo's new device would be fairly competitve if it had new features besides the controller screen, slightly enhanced graphics, and enhanced motion controls. The X360 Kinect bundle will probably be $200 still in late 2012, with PS3 (minus Move) at $200, and Wii and non-Kinect X360 bundles (if any still exist) at $100.
With Cafe at $300, and the original Wii at $100, Nintendo should be able to more effectively control the console transition than Sony did with PS2 ($130) to PS3 ($500/$600) in 2006. In 2006, Wii and to a lesser extent the X360, were able to appeal to the mainstream gaming audience by providing something new (better graphics / intuitive controls) because of how old PS2 was and how expensive PS3 was. At $100 and $300, there is less room for erosion of the great middle ground to Nintendo's rivals. Moreover, to significantly upgrade over X360 and PS3, Microsoft and Sony will probably have to sell their devices for at least $350 if the main X360 & PS3 skus still cost $200 in 2012. By 2013 or 2014, X360 & PS3 might be down to $100 - $200 for all skus, making a $250 or $300 launch for X720 and PS4 possible. At that point though, Wii and Project Cafe can sell for $50 and $200 if necessary, with each benefiting from a sizable user base advantage in the legacy and core console realms.
Online Features
Despite just starting to experiment with online features a few years ago, WiIWare & Virtual Console have done fairly well as services given their lack of advertising. Both services have some very profitable third party games based on conversations I've had with developers over the years, particularly as break even is very low for Virtual Console and only about 10,000 downloads for most WiiWare games. Above, I noted that about 10% of third party games top 1m units on Wii - for WiiWare the figure is supposedly about 2% of third party games topping 100,000 units. Remember though, 100,000 downloads is 10x the breakeven threshold, while 1m is roughly 4x the breakeven threshold on the retail side.
In any case, Nintendo appears hell bent on improving online penetration for Project Cafe, so that indie developers who make an excellent game can have it downloaded millions of times instead of several hundred thousand times. Part of that push will likely come from having additional servcies out of the box. Hulu / Youtube / Facebook / Netflix integration, as well as baseball, soccer, football, basketball, news, weather, shopping, game information, movie, and internet browsing services would each help build and maintain connectivity rates. At some point though, Nintendo and third parties will need to start advertising downloadable games for Project Cafe, and my guess is that begins when a couple titles look like they could be good enough to be downloaded millions of times rather than thousands of times.
Presumably some kind of improvement to online play for retail games is coming, although the complaints in this area seem to be from a small but vocal minority as games like Mario Kart and Smash Bros. still have enormous online followings on Wii despite friend codes and the other online issues Nintendo has been lambasted for in recent years. The Nintendo Channel / Cafe Shop Channel could each also be expanded to include the benefits and online features of a given game, whether its sold at retail or downloadable - to encourage users to go online more frequently. Some kind of internal flash drive is also likely, as the SD Card solution for downloading WiiWare and Virtual Console titles immediately resulted in a spike of downloads back in 2009 once the Wii-storage space issue was solved.
Release Date
Nintendo and third parties will need time to make games for Project Cafe. That was the main reason a late 2011 release never made any sense. The other issue is the Wii software market is still rather enormous - hardware sales have dropped 11m from the year ending March 2009 to the year ending March 2011 (-40% in two years), but software has only dropped 15% (202m to 171m) in the same time frame. Nintendo and third parties have very little incentive to try to destroy the Wii software market before the next fiscal year as there is no assurance the next system will be as strong for software sales as Wii has been to date.
In Japan, Nintendo and third parties are nearly out of content for Wii. Rhythm Heaven, Inazuma Eleven, Zelda and Just Dance 2 are probably 200k -700k hits in Japan. Kirby (a real Kirby, not Epic Yarn), Dragon Quest X, and the new Wii Play are probably 1m - 4m sellers. As far as significant Wii hits go in Japan, those might be the only titles that are left for the remainder of 2011 and beyond.
The West however is a very different beast. Just Dance 3, Zelda, Mario & Sonic, Wii Play: Motion, and Kirby are million sellers. A ton of new dancing games are probably in development given how Just Dance, Just Dance 2, Zumba Fitness, and Michael Jackson are trending for Wii in the USA and Europe. Third parties in the West have also been much better at releasing filler content - games like Lego Star Wars, Madden, The Conduit 2, Sonic, Tiger Woods, party games, and so on, which keeps various types of players more interested in Wii over the long haul.
Going by what still sells in each market, Nintendo is probably aiming for a summer or early fall Project Cafe release in Japan. A price cut in May 2011 and then the semi-steady release of big titles in Japan can probably keep Wii from dropping below 5,000 per week, at least for any length of time, in Japan before mid-2012. Dragon Quest X is enough for one more really good December, January, Golden Week, or Obon in Japan, but Zelda, Kirby, and the other remaining big titles won't cause much of a spike in Japan. With another price cut sometime in 2012, Nintendo can keep Wii from getting substantially weaker than it is now in Japan for about 18 more months before returning to steady declines. Given all of that, I'd expect Project Cafe to launch in Japan in July 2012, right before Obon.
In the West, Wii sales are still fairly good. N64 had sold 33m units lifetime without ever topping 10m units in a year, so Wii still has quite a bit of life in the West. It is likely that the dance explosion has saved Wii from a more rapid deterioration in the West as well. Just Dance 2 in particular has to be pushing some amount of hardware in the USA and Europe, given it is bigger than the first game by millions of units already in far less time on the market. Genres that come out of nowhere, like the music explosion of 2006-2008, tend to take a couple years to fully blossom. The dance boom really started in December 2009 when Just Dance began to accelerate quickly after a slow start - and so it probably won't peak until late 2011 / early 2012. If Just Dance follows the Guitar Hero pattern and peaks with the third iteration, Nintendo's Christmas for Wii is still strong in 2011 - two 5m+ level hits with Zelda & Just Dance 3, Mario & Sonic at 1m+, legacy software, whatever else is announced at E3, all coupled with a $150 price point and inevitable further retailer discounts to $100 or even $75 in the USA to drive foot traffic.
Presumably more substantial Western third party content is due out for late 2011 as well, so there is little rush for Cafe in mid-2012 when big content and price can carry Wii at roughly current levels. By fall 2012, Nintendo will need more big content for sure to continue pushing Wii, and another price cut, so the Cafe should launch sometime between September and November, depending on exactly how much big content is left for Wii after 2011.
Contact VGChartz at jmazel@vgchartz.com
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