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Wii On The Wane: Videogame Companies See Sales Slowing



SAN FRANCISCO -(Dow Jones)- Videogame makers are bracing for slowing sales of Nintendo Co. Ltd.'s (7974.OK) Wii console, the platform that has carried the $20 billion industry for more than a year.

Over the last week, a host of videogame makers have hinted in their quarterly earnings reports that the innovative console's waning popularity may eventually weigh on their results. The latest to fret about the withering Wii is Santa Monica, Calif.-based Activision-Blizzard Inc. (ATVI), which reported the percentage of its first-quarter revenue from Wii sales had slipped to 14% of revenue, from 22% a year ago.

"It certainly causes concerns generally," said Activision CEO Bobby Kotick. " But from a product strategy standpoint, we don't have the percentage of [Wii] market share that other companies have."

Slowing sales of the Wii are a problem for the videogame industry, which has held up well even as the recession dents consumer spending. The game's motion- activated controller made it a hit with younger children, as well as with women and older consumers who generally weren't the target audience for videogames. For much of this year and last, Wii games represented half of any given month's Top 10 games, according to data tracker NPD Group.

Now, the Wii's dominance appears to be ebbing. The signs first emerged in January, when Nintendo lowered its expectations for its fiscal 2009, ending in March, to come in 1 million units lower than forecast.

In March, Wii sales in Japan dropped 63%. Later than month, Satoru Iwata, Nintendo's president, said Wii sales in Japan were the "unhealthiest" since it went on sale in June 2007. The trend is the same in the U.S., where Wii sales fell 16% in March, according to NPD. And softness continued in April, game executives say.

The hardware slowdown likely presages a similar decline in game software, and such publishers as Electronic Arts Inc. (ERTS) and THQ Inc. (THQI) could be hit harder than others. That's because those companies have grown more dependent on the Wii and targeted much of their catalog at the console.

EA, which makes the popular "Madden" and "Grand Theft Auto" franchises, has focused more of its resources on producing games for the Wii. Over the rest of the year, the Redwood City, Calif., company is expected to release more than 20 games for the console - a large percentage of its portfolio - and at least a quarter of its Wii titles will sell a million copies or more.

Los Angeles-based THQ, best known for its "Ultimate Fight Club" games, has also become more dependent on Wii sales, which it acknowledged during its earnings call this week were showing "a little softness." Wii games constituted 17% of its fiscal fourth-quarter 2009 net revenues.

Of course, the popping of the Wii bubble doesn't spell G-A-M-E O-V-E-R for the videogame industry. As Wii sales slumped, Microsoft Corp.'s (MSFT) rival Xbox 360 surged 25% to help fill the void. Some videogame makers, like Activision, for example, have been diligent about keeping a broad mix of titles, a strategy that keeps them well-cushioned.

Nintendo remains confident, though, and is targeting an 8% rise in Wii sales to 220 million units for this fiscal year. Still, with so much riding on the console, investors in videogame software makers are hoping Wii sales hit a power-up button soon. 

-By Ben Charny; Dow Jones Newswires; 415-765-8230; ben.charny@dowjones.com 

  (END) Dow Jones Newswires
  05-07-09 1625ET
  Copyright  2009 Dow Jones & Company, Inc.

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