CES Preview: Why Nintendo Needs Wii U

REDMOND, Wash. (MainStreet) -- Nintendo can scarcely stop itself from bouncing Mario-style into CES with its brand-new toy the Wii U, but all is not well in the Mushroom Kingdom.

Nintendo is letting a select few get their hands on the high-definition Wii U and its video touchscreen controllers for the first time at the Consumer Electronics Show in Las Vegas this week. All Nintendo's let on so far, mostly through a presentation at the Electronic Entertainment Expo last year, is that its sizable touchscreen controller has motion control, a front-facing camera, a microphone, speakers, two circle pads, a directional pad, Bluetooth and the ability to display games while something else is on the television.

Nintendo faces slumping sales and growing losses only a new hit console can cure.

Much else beyond that is a mystery. Nintendo has implied that early software will include an installment of Ubisoft's Assassin's Creed series, Tecmo's Ninja Gaiden 3 Warner Brothers (TWX) Interactive's Batman: Arkham City and a homegrown Super Smash Brothers title. None of it has been seen yet. Nintendo's promised downloadable content, but has implied that the Wii U lacks a permanent hard drive. Considering the audience that drove sales of 90 million Nintendo Wii's worldwide didn't care much about third-party games and tech specs to begin with, it probably won't care that they aren't confirmed for the yet-to-be-released console that's been a non-factor since it was announced last summer.

"The casual consumer, the primary Wii target audience, is generally unaware of these types of announcements," says Jesse Divnich, vice president of insights and analysis at video game research firm Eedar. "Announcing new hardware doesn't typically have a negative impact on legacy console sales."

Nintendo, however, has plenty of reason to worry. Since Microsoft (MSFT) released the slimmer, more stable version of its Xbox 360 in 2010 and Microsoft and PlayStation maker Sony (SNE) introduced motion control devices that same year, Wii sales have been on the downswing. Worldwide Wii sales for the half-year ending in September were down from 4.97 million units in 2010 to 3.35 million last year. Wii game sales, meanwhile, dropped from 65.2 million units to 36.5 million during the first half, though the end-of-year number may be bolstered a bit by the more than 1 million copies of Legend of Zelda: Skyward Sword that Nintendo sold during the holiday season.

That sales drop is just one nasty blemish on Nintendo's far uglier big picture for 2011. Overall sales were down 41% as Nintendo's net loss grew to $925 million. That forced the Nintendo to seriously reconsider its July forecast of a $263 million net profit for the fiscal year ending in March. The company now expects a net loss of roughly that much.

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