Pleeg Zi

Will Electronic Arts Benefit From Expanding Its Nintendo's Wii Lineup?

I am puzzled by some of these comments and claims:

"As we highlighted in our Video Game Publishers: Valuation and Technical Analysis, published on 4/9/07, we are not sure the publishers will benefit from the Wii. Did the Wii really enlarge the market or did it just further segment it to Nintendo's (NTDOY.PK) advantage?"

As long as third party publishers keep spewing out third-rate titles, Wii owners will obviously shy away from them. However, some third-party titles have done extremely well, and publishers like Ubi Soft have profited immensely from going for Wii from the start.

EA blew it. They didn't think Wii would get it right. But it did, and now EA is being punished for getting too involved with PS3 and ignoring Wii. They even acknowledge this and will not focus less on PS3 and more on Wii.

You see, people are more than willing to buy games, and Nintendo games sell because they are of high quality. Third parties need to understand that they cannot treat Wii like the redheaded step-child, but they need to deliver innovative and fun games and not just rehashes or boring ports.

"Moreover, we think Nintendo's software share gains could be more sustainable. The Wii may not have as long of a product life cycle as the PS3 and Xbox 360. Therefore, it might not develop a big enough installed base necessary to build and amortize strong independent franchises despite lower development costs."

This argument seems bogus to me. Wii already has a massive install base, and it is still nearly impossible to find a Wii anywhere, WORLDWIDE! It's selling like crazy. The install base is oupacing even PS3, and Xbox 360 will soon be outsold by Wii.

"Yes, the Wii has caused the overall pie to get bigger, but the independent publishers may be getting a proportionately smaller slice."

Not if they actually make good games. Look at the sitation right now, for example. People are screaming for more good games. Nintendo is not going to release that many titles a year, and third party publishers could easily have taken advantage of this and made a killing!

You are underestimating the impact and the solid install base Wii is establishing as we speak. Already now it pays off to make games for Wii. Imagine what you will see in a year or two when Wii has an even stronger foothold in the market.