Japan's Nintendo said it will launch a social and content network dubbed Miiverse for its new Wii U games console, as it plays catch-up with rivals such as Sony and hopes an online strategy will bolster hardware sales in an industry under fire from smartphones and tablets.
The online strategy, unveiled on Monday in a webcast by Nintendo President Satoru Iwata, is similar to that of Sony and Apple Inc, though analysts raised concerns that Nintendo, the world's leading game console maker, is late to online gaming, and will have to work hard to gain ground.
"Nintendo is falling behind its rivals in the online gaming area. The idea of entering the field is good, but the question is whether the company can generate profits," said Hajime Nakajima, a wholesale trader at Iwai Cosmo Securities.
Shown for the first time a year ago, the Wii U console has received a frosty reception from investors worried that the hardware will struggle to find buyers in a $78.5 billion industry that is a target for mobile devices such as the iPhone and iPad. Mobile games on those devices already account for $8.5 billion of the gaming market.
"Some people may wonder if Wii U is a simple evolution of Wii or something completely different. I think maybe the best answer is both," Iwata said in his webcast ahead of the E3 videogame industry trade show in Los Angeles, where he will unveil the launch version of the Wii U.
The addition of Miiverse suggests Nintendo - which began in 1889 making playing cards in the back streets of Kyoto before gaining prominence as the creator of the "Super Mario" franchise - may be relying on online content on its Nintendo Network and social networking to underpin hardware sales.
Iwata has been slower than others to take on online social and content delivery platforms, and has a lot of ground to make up to catch up with the millions of subscribers plugged into PlayStation 3's network, iTunes and Microsoft Corp's Xbox.
In his webcast, Iwata showed off a video chat function and functions to allow users to message and share pictures and other content. "Not only can it connect people in a better way within the same living room, but it also connects people (from) living room to living room in a much more compelling way," he said.
The Nintendo boss promised that Miiverse in the future would be made available to subscribers on smartphones and other mobile devices, a first tentative step by Nintendo to offer services on devices built by other companies.
In a more traditional hardware bid to attract consumers, Iwata said the Wii U's tablet touchscreen controller would come with a built-in joystick, called a GamePad, that would double as a TV remote, while a pro controller for the games machine would be available for hardcore gamers.
"All these things sound like they're playing catch-up to the Xbox 360 and PlayStation 3," Michael Pachter, an analyst at Wedbush Securities, said after Iwata's webcast.
Nintendo needs a hit to see it through a waning Wii boom. Since a 2006 launch, it has sold 96 million Wiis, outselling both the Xbox and PS3. But in its last business year, Wii sales slowed to 9.8 million from 15 million, triggering the company's first annual operating loss, of 37.3 billion yen ($477 million).
The risk for Nintendo is that by loading the Wii U with new functions and features, it risks losing the simplicity of the Wii that appealed to consumers who were not traditional gamers, says Dan Ernst, a consumer technology analyst at Hudson Square.
"It's still not obvious to the consumer what it does. When the Wii came out, the consumer walked and everyone could walk into a store and even your grandmother could figure out how to wave a WiiMote," he said. "The Wii U needs more explaining and they'll need to explain in detail, which could be a barrier."
The advances may also mean a higher price tag for the Wii U.
Nintendo may have to sell the new console for as much as $350 to break even, reckons Nanako Imazu, an analyst for CLSA in Tokyo. That's $100 more than it charged for the Wii in 2006 and would be more expensive than both the PS3 and Xbox 360, which can be picked up for less than $300.
WII AT EEE
Nintendo's latest console will be in focus at this week's Electronic Entertainment Expo (E3), which is expected to draw more than 45,000 analysts, retailers, investors and reporters, and may see Nintendo disclose the Wii U's price and launch date.
Nintendo shares dropped by as much as 3.2 percent on Monday - to their lowest since November 2003 - before rebounding to end unchanged from Friday's close at 9,020 yen. The broader TOPIX index fell 1.9 percent.
After previewing the Wii U a year ago, Nintendo stock has more than halved, and is currently well below its level when the first Wii was launched.
"The market has begun to discount the possibility that the situation is going to get worse after this year's E3," Mizuho Securities analyst Takeshi Koyama said before Iwata's broadcast.
In April, Iwata admitted that making an annual loss was a below par performance. Speaking in his pre-recorded webcast on Monday, Iwata, standing alone in front of a brown wall decorated only with a small picture of Japanese calligraphy "dokuso", which translates as originality or initiative, was more upbeat about the new console.
"Even with no one else in the room, you won't feel alone," he said.