Nintendo's Dilemma: Time for the Wii 2?

Despite selling some 75 million units and bringing motion control gaming to the masses, the Nintendo Wii is now starting to look a bit tired. After its release in 2006, the console took just a year to surpass the Xbox 360 as the current generation sales leader, a position it has held ever since. Crucially, the Wii appealed to new markets where games had previously had limited impact, chiefly families and older people. However, the arrival of Sony's PlayStation Move and Microsoft's Kinect has meant that the Wii's unique selling point of motion control gaming no longer holds water. Factoring in the console's lack of high definition graphics and basic online multiplayer, and the Wii starts to seem rather dated. As Nintendo always has a few surprises up its sleeve, rumours persist that a new version of the Wii is on the way, possibly as early as next year. Digital Spy investigated the prospects of the Wii 2 being unleashed, including whether it may be too little, too late for Nintendo.

Before its release, Nintendo's seventh-generation console was codenamed the Revolution, later taking the name Wii to symbolise the concept of playing together (although more often the butt of numerous toilet-themed jokes). Revolution, however, was possibly a more apt title as the console genuinely brought a brand new dimension to gaming, involving the Wii Remote and infrared sensor tracking the player's movement and reflecting it on the screen. Before long, millions of people were getting sore arms playing Wii Sports into the early hours, or eagerly collecting stars on the excellent Super Mario Galaxy. However, Sega vice president of marketing Scott Steinberg expressed his belief as early as 2007 that the Wii's popularity would be short-lived, arguing that gamers and developers would soon jump ship to the more powerful Xbox 360 and PS3. Initially, Steinberg was proved wrong, but there is now a growing feeling in the industry that Nintendo is planning to refresh the Wii to keep pace with its rivals. But will the Wii 2 be a revolution, an evolution or something else entirely?

Back in 2008, Nintendo president Satoru Iwata revealed that designs for the Wii 2 were being worked on within the firm, but no clear launch plans have emerged since. In February this year, Nintendo America executive vice president of sales and marketing Cammie Dunaway said that the firm does not have any immediate plans to unleash the Wii 2, but will have the console "ready when we think the time is right". The question of time is a contentious one. The Wii is still selling very strongly and so there is a sense of 'if it ain't broke, don't fix it'. However, the console's hardware seems to be reaching the end of its lifecycle and the competition has got a lot stronger in the meantime, so surely the Wii's days as market leader are numbered.

Nintendo has never really pitched the Wii as a hardcore games machine, instead targeting a more casual market. Staying out of the processing power arms race between Sony and Microsoft has served Nintendo well so far, but the Wii's lack of HD muscle is now starting to show. The point is marked by the latest Call of Duty, as the PS3 and Xbox 360 versions of Black Ops appear sharp, crisp and impressive, while the Wii lags far behind. The biggest priority for the next iteration of the Wii will surely be supporting HD graphics to bring parity with the current generation Xbox and PlayStation. Michael Pachter, the managing director of equity research at Wedbush Securities, said that the Wii still has the potential to sell around 15 million units per year until the successor is launched. However, he claimed that Nintendo may have scored an own goal by waiting so long to launch a new HD version.

"The question is what happens when the successor launches, as it is likely it will be too little, too late," said Pachter. "I think that Nintendo missed the opportunity to launch an HD successor in 2009, and again in 2010, and waiting until fall of 2011 concedes a lot of market share to Microsoft and Sony."

Competition for the Wii has become somewhat keener ever since Microsoft and Sony jumped into the motion control market. Sony's PS Move is broadly similar to the Wii Remote, as the player holds and moves the wand-like device to control the on-screen action (although the Move does not come as standard with the PS3, instead costing around £34.99 as a standalone product, or £49.99 with the PlayStation Eye camera). Microsoft's Kinect ditches the physical controller entirely, instead using 3D cameras and motion sensors to track body movement and reflect it on the screen. Pachter said that the pricing of both systems means that they "don't directly compete with Wii", and won't until the price points are significantly reduced.

As a standalone product, Kinect is currently priced at around £129.99. However, Pachter noted that an Xbox 360 Arcade bundled with Kinect currently retails at around $300 (£189), and is selling "extremely well". That is still 50% more expensive than the current cheapest Wii bundle, but Pachter believes that Microsoft will cut the price to $250 next spring, which would cause major headaches for Nintendo. An Xbox Kinect bundle at that price would give consumers an Xbox 360, motion control, HD graphics, a large library of games and access to the Xbox Live platform for only a little more money than the standard Wii bundle.

"Anyone with a Wii who bought a HD TV has to notice that the graphics on a very large screen don't look as compelling as most HD content, and Microsoft and Sony will market to these people," said Pachter. "Kinect is pretty unique, while Move is very Wii-like, but both run in full HD, and consumers will begin to appreciate that more as prices for the PS3 and 360 bundles approach the price of the Wii."

Nintendo has a habit of surprising the industry both in terms of sales and new products, often just as it is being written off entirely. It shouldn't be forgotten that the Wii launched in the aftermath of the PS2, the biggest-selling console of all time, and at a time when Microsoft was well established in the next-generation console market with the Xbox 360. However, the Wii 2 would have to catch up on some features that are now viewed as pretty much standard by gamers, such as HD graphics and a strong online platform to rival Xbox Live and the PlayStation Network. Another important issue would be getting a better variety of software, as too many average or poor titles litter the current Wii. Nintendo's own software tends to sell the best on the platform, while few other publishers have had wholesale success. That means there is a lack of the genuinely AAA titles, particularly first-person shooters, with the recent reboot of GoldenEye being the possible exception.

However, it also seems clear that Nintendo would not want to launch a console that merely replicated the features already offered by its rivals. There would have to be something else, something unique. Starting a new revolution is no easy task, but a possible way to go for Nintendo would be launching a 'cloud' gaming machine, in which HD titles would be played over IP networks using some kind of iTunes-hybrid for video games. Pachter, however, believes that Nintendo getting into cloud gaming is highly unlikely. He instead thinks that the firm will create a controller-free system similar to Kinect, possibly incorporating the firm's long-awaited Vitality Sensor, a device which clips onto the user's finger to measure their pulse while playing.

"Nintendo is not yet competent with online multiplayer, so the notion of them being first in the cloud is laughable. They are going to be a very late arrival to the cloud," said Pachter. "I have no idea what they have planned, but suspect that they will be extremely proud of their ability to innovate. My guess is that they're working on something similar to Kinect, but the Vitality Sensor could be the direction they are heading in as well."

Strangely, the biggest challenge facing the possible launch of the Wii 2 in 2011 comes from within Nintendo itself. Next March, the 3DS handheld will hit the market, bringing 3D gaming to consumers without the need for special glasses or an expensive new TV. The 3D upgrade of the already hugely popular DS is the ace up Nintendo's sleeve and it seems unlikely that the firm would want to create additional competition for gamers' cash with the launch of a new console.

"The 3DS will be a massive success," said Pachter. "I think that the device is appealing to anyone who ever owned a handheld, including adults who owned Game Boy 15 years ago. I expect the 3DS to be supply constrained for at least a year, and expect sell-outs through holiday 2011 and into 2012. Nintendo will definitely gain a lot from this device, and reinvigorate handheld software sales, but I can't say that this will have much of an impact on their console strategy."

In the absence of any firm announcements from Nintendo, we are left with mere speculation about what's next for the Wii. The console is certainly not a dead product by any stretch of the imagination; one look at the hardware sales charts demonstrates that fact. However, the arrival of motion control rivals from Sony and Microsoft has really brought the Wii's weaknesses into focus - a lack of HD graphics, limited online multiplayer and a comparatively weak selection of truly AAA games. The Wii has certainly delivered a revolution in video gaming since its release in 2006, but the world has now turned full circle and it's surely time for Nintendo to mix things up all over again.