Nintendo Shipping Two Wii U SKUs For Nov. 18 Launch

The analyst meeting followed a preview event at which the company said it will field two SKUs for the new console: A $299.99 “Basic Set” and $349.99 “Deluxe Set.” Nintendo also unveiled a Nintendo TVii application (pronounced TV) that it said will enable Wii U owners in the U.S. and Canada to “find, watch and engage with their favorite video entertainment in fun new ways.” The application enables the Wii U’s SmartPad controller to work as a remote control interface for the TV via infrared technology and online integration with on-demand video services.

The $299.99 SKU will include a white Wii U console with 8 GB of internal storage, a white GamePad controller, AC adapters for the console and controller, a sensor bar and an HDMI cable. The higher-priced bundle’s components are black and it includes all products from the Basic Set, but adds the game Nintendo Land and a console stand that allows users to place the GamePad vertically on a table. It also features 32 GB of storage, and consumers who buy the SKU will be enrolled in a Deluxe Digital Promotion that the company said lets Wii U owners receive points for each digital download and redeem those points for future downloadable content from the Nintendo eShop. The promotion is planned through 2014, Nintendo said.

Analysts we polled were split on Nintendo’s two-SKU strategy for the Wii U. M2 Research analyst Billy Pidgeon praised the pricing of the console. While the Wii U “could have been” cheaper, he said Nintendo was looking to make a profit, so the pricing it picked made sense. He predicted that the $349.99 bundle will sell better “out of the gate,” especially with early adopters, because it offers “a lot more value” than the entry-level SKU. But a factor that could affect sales performance is the supply level for each. For example, while mass market consumers may be more attracted to the $299.99 bundle, many may opt to buy the $349.99 bundle if that is the only SKU available.

Pidgeon predicted that Nintendo won’t be able to supply enough systems to meet demand this holiday season. But he said what was more important to see is how strong the software-to-hardware tie ratio is on the Wii U through the holiday season and into 2013. While the Wii has been the best-selling console overall globally through the current console cycle, more games have often been sold per each PS3 and Xbox 360 sold in a given month than for the Wii. That’s, in part, due to the fact that Nintendo included the game collection Wii Sports with each Wii console sold in the U.S. since launch. Pidgeon warned that market expectations for the Wii U “may be too high,” based on the strong success of the Wii out of the gate. How the Wii U is marketed could be an issue because it will be important for consumers to see the console and its tablet-like GamePad controller demonstrated, he said.

The wisdom of Nintendo’s two-SKU strategy was questioned by Wedbush analyst Michael Pachter, who told us he was “not sure what they're thinking” because “flash memory is cheap, and I don’t see a huge benefit to paying” more for the 32-GB bundle. The Wii U is “probably going to be perceived as expensive by the mass market, and they will probably have to consider price cuts by next summer,” he predicted. “The console is not ‘expensive’ for what they give you, but it will be perceived to be so if the Xbox 360 and PS3 are priced lower, and I think that they will be,” he said, predicting price cuts on the current rival systems. “I also think some consumers will prefer a moderately priced iPad Mini,” which has been rumored and may sell for $299, or a Kindle Fire to the Wii U, “so the price point will probably have to come down well ahead of holiday 2013,” he said. He predicted that the 8-GB bundle “will see higher demand, but they'll sell out of both regardless for the next several months."

The Wii U pricing “seems like it’s a good value for what’s in the box,” but the price is too “high … for the audience they're trying to reach,” said Needham analyst Sean McGowan. He said via email that the two-SKU strategy “makes sense” because just one SKU could “limit the appeal to some consumers.” But he said Nintendo “should have included at least SOME game with the lower priced SKU.” The “biggest surprise” for McGowan on Wii U pricing was that he expected the high-end SKU would cost $300, he said. He predicted the Deluxe bundle “will do better” than the entry-level one “because it’s pretty clearly a much, much better value.” He guessed that the Wii U “will do pretty well -- actually very well” because consumers “have been waiting” and there’s been “nothing new in a long time.” The HD console also offers “the best graphics quality ever on a Nintendo platform,” he said. The Wii is the only one of the current-generation consoles that’s not HD. If a consumer has kids 8-15 years old, “buying this instead of waiting for one of the new HD systems” from Microsoft or Sony that haven’t been announced yet “could make sense, since the graphics on Wii U are good enough to satisfy the older kid, and to attract publishers to put out Wii U versions of core gamer titles,” he said. He predicted that the coming console cycle “will be the first generation of video game consoles in which the installed base does NOT exceed the installed base of the previous generation” because there’s “too many other devices on which to play games, and not enough performance jump to induce everyone who owns” a PS3 or Xbox 360 to upgrade to a new system. The installed base of the coming generation of consoles may eventually “equal the last generation, but it will take many more years” to reach, he predicted.

McGowan gave high marks to TVii, telling us he “wasn’t expecting to see so many features executed so elegantly for NO extra cost to the user.” But he said “one of the disappointments is that there are no games in the launch window that really take advantage of the fact that you can use two control pads” with the Wii U. “Sports games are very often played by two (or more) people sitting next to each other in the same room, and to offer Madden or FIFA without the ability of two players to use the control pad seems silly,” he said.

Nintendo didn’t say how much extra GamePads will cost. NOA spokesman Charlie Scibetta told us that the company won’t start selling them separately until next year because no game will be released until 2013 that requires two of them. Until then, if the GamePad that comes with the console breaks or is lost, Wii U owners will be able to contact Nintendo customer service to get a replacement, he said. He didn’t say how much that will cost.

Nintendo wanted to make sure that it offered a “strong, value-oriented price point” for the Wii U, Fils-Aime told analysts. It decided not to include Nintendo Land with the entry-level SKU because some consumers may not see that as a game that added value to the offering, he said. The two SKUs provide consumers with more choice, Scibetta told us. It decided to include a black console with the Deluxe bundle because the core gamers that SKU is targeted at “like black,” he said.

The Nov. 18 U.S. launch date didn’t come as a surprise because that had been rumored for many weeks. Before Thursday, Nintendo had said only it would ship the console by the end of 2012. A launch date before Black Friday makes the most sense from a business point of view and Nintendo shipped the first Wii Nov. 19, the Sunday before Black Friday in 2006. Nov. 18 falls on the Sunday before Black Friday this year. “Who won the bet?” Fils-Aime joked after announcing the launch date. The Wii U will arrive “in time to take advantage of the key holiday selling season” in the Americas, he said.

Fils-Aime declined to say how many Wii Us will ship at launch in any market, telling analysts only that he would sell “as much as I can get” from NOA’s parent company in Japan. “The market will eventually tell us” which SKU is more popular and the company can “adjust” allotments “accordingly” at that time, said Scibetta.

The company decided not to include any standard controllers with either Wii U bundle because the new console “already works with your existing” controllers for the Wii, Fils-Aime said at the preview event. Nintendo has sold more than 100 million Wii Remotes and more than 65 million Wii Nunchuk controllers in the U.S. alone to date, he said. The company didn’t want consumers to have to buy controllers that many of them already own, he said. Nintendo will continue to sell the older controllers separately and also start fielding Wii Remotes and Nunchuks featuring Wii U branding that will “start appearing on store shelves in the next few weeks,” he said. Nintendo said at its website that about 40 million Wiis have been sold globally to date.

It was “a little too early” to say what games will ship for the Wii U at launch and which will be released shortly after that, said Fils-Aime. But he promised the “strongest” game launch slate of any Nintendo platform to date and said by the end of March, when Nintendo’s fiscal year ends, there will be more than 50 Wii U games available. Activision Publishing CEO Eric Hirshberg said at the preview event that his company will release 007 Legends, Transformers Prime: The Game, Skylanders Giants, Wipeout 3 and Call of Duty: Black Ops II for the Wii U in the console’s “launch window.” First-party packaged Wii U games will cost $59.99 and third-party game pricing will be up to each publisher, said Scibetta. Cheaper digitally-delivered games will be made available for the console also, he said.

The Wii U will have a “significant presence at retail,” Fils-Aime told analysts. Nintendo’s mall tour demonstrating the console to many U.S. consumers will continue, he said. It started just after E3 in June, said Scibetta.

Nintendo had already indicated prior to Thursday that the Wii U will offer expanded, non-game video entertainment compared to the Wii. Thursday was the first time it discussed Nintendo TVii, which Fils-Aime said was “something we've been kicking around for a long time.” The company, however, “had to wait for the right technology to come along,” and now it has with the Wii U, he said. The application was developed by Nintendo with Utah-based private company i.tv, said Zach Fountain, NOA director of Network Business.

I.tv said at its website that it’s the No. 1 TV listings and entertainment guide for iOS devices and that “millions of people” use its technology each month. The application will be available on day one of the console’s launch in the U.S. and Canada, said Fountain. Nintendo is “exploring the expansion of the service throughout the Americas” at a later date, Fils-Aime said, without specifying when. Launch details for the application in other markets will be announced at a later date, said Fountain. Nintendo didn’t say if it will extend the application to overseas markets.

The home page of the TVii application will allow users to select from TV, movies and sports they want to view, Fountain demonstrated. In addition to selecting sports programming to watch, Wii U users will be able to receive sports scores, he said. Initial sports to be featured are baseball, basketball and football, but other sports will be added later, he said. Users will be able to also select on-demand video via services including Hulu Plus and Netflix, Nintendo said. They will also be able to set TV recording using the application, said Fountain. Each user of the console will be able to “personalize” the TVii experience based on their interests and the services they use, he said. The application should work in conjunction with all U.S. and Canadian TV service providers’ offerings, he said. Nintendo also forged a “special partnership” with TiVo that will create a “deeper level” of integration with that company’s service, he said. It “hopes to in the future” add similar pacts with other companies, he said. “We don’t have any announcements at this time” about exclusive content for TVii, he said. The focus for now is making the app work with live TV, DVRs and the most popular online video services, he said. Ninety-eight percent of TV viewing is still done via live TV, he said.

The Wii U will ship Dec. 8 in Japan at 30,000 yen excluding tax and 31,500 yen including tax for the Deluxe bundle, there called the “Premium Set,” and 25,000 yen/26,250 yen for the Basic Set, said Nintendo. The console will ship Nov. 30 in Europe and pricing will be left to retailers there as is typical for that market, said Scibetta. He said the Wii U will ship Nov. 18 in Canada. Ship dates for the rest of the Americas weren’t provided.