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Vying for Wii Pie

Third-party publishers aim for gains from the success of Nintendo's newest console.

Nintendo's

Wii is a hit.

But more Wii consoles in the hands of consumers during the holiday season did not necessarily translate into gains for third-party publishers, many of which are scrambling to profit from the Wii's success.

The Wii sold

more than 3.1 million units as of January, but the bestseller for the platform has been Nintendo's own title

Legend of Zelda: Twilight Princess

.

That compares with slightly more than 1 million PS3 units sold since its November launch, and

Madden NFL 07

for the PS3, which brought in the big bucks for

Electronic Arts

(ERTS)

.

"Nintendo has always dominated with games on their platform," says Brian O'Rourke, an analyst with the industry research firm In-Stat. "If you go back to all Nintendo platforms, two-thirds of software sales have been Nintendo-developed games, while with

Microsoft

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and

Sony

(SNE) - Get SONY GROUP CORPORATION SPONSORED ADR Report

, just a third comes from first-party games."

Still, winners on the Wii platform are likely to be

THQ

(THQI)

and

Activision

(ATVI) - Get Activision Blizzard, Inc. Report

, say analysts, with Electronic Arts facing the greatest challenge, though EA is probably trying hardest to win.

Riding the Wii train won't be easy, says Billy Pidgeon, a games analyst at IDC. "There's this perception that Nintendo's systems are less friendly for third parties than competitive platforms," he says.

Three's a Crowd

This is what Pidgeon calls "Nintendo's third-party problem" -- a perception among game creators that Nintendo favors its internal development team over independent publishers.

It's one reason EA didn't offer the best support for older Nintendo platforms, such as the GameCube, and has preferred to create games for Sony's platform.

Sony's position as the market leader with the largest installed base of consoles also helped.

But with the Wii, Nintendo has turned around its attitude toward third-party publishers, says Pidgeon. "Nintendo is working with developers better and giving their tools away for free, while Sony's tools are fairly expensive," he says.

A beneficiary of Wii's success could be THQ.

The company has shipped more than 3 million units of its best-selling game

Cars

, based on the

Disney/Pixar

(DIS) - Get Walt Disney Company Report

movie, for the Wii and Xbox 360. In total,

Cars

has sold 7 million units.

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Also, THQ shipped 1 million units each of its Nickelodeon titles

Avatar

and

SpongeBob SquarePants

for the Wii.

THQ's gross margins

for the third quarter rose 66%, 110 basis points over the prior-year quarter, primarily because of higher average selling prices for the Wii, DS platforms and the Xbox 360, said CFO Ed Zinser during the company's earnings call.

"For THQ, the Wii has a bigger impact," says Pidgeon. "THQ has always avoided direct competition with top publishers by going after a niche, and with Wii they have found success."

THQ plans to have 11 Wii titles scheduled for release in 2008. "We are very bullish on the Wii and the DS and we think that our product lineup maps very well to both those platforms," says Brian Farrell, CEO of THQ. "I think you should think of the Wii as incrementally more positive to us than the PS3."

Meanwhile, analysts say that EA had been too optimistic about the success of PS3. For the PS3 launch in the third quarter, EA shipped four of its more popular games:

Madden NFL

,

Need for Speed: Carbon

,

Fight Night Round 3

and

Tiger Woods PGA Tour

, but chose to bring only two of those to the Wii.

The Redwood City, Calif.-based market leader among video-game publishers is now trying to ramp up development on Nintendo systems.

The company has more than 15 SKUs (stock-keeping units) or game flavors in development for both the Wii and Nintendo DS handheld, including some original games, said Warren Jenson, chief financial officer of EA during the

company's recent earnings call. Compare that with about 20 to 25 SKUs in fiscal 2008 for the PS3 and the Xbox 360.

EA plans to offer its immensely popular game line

Sims

, dubbed

MySims

for the Wii and DS, and another called

SimCity

for the DS. It is also bringing its much-talked-about

Spore

game to the DS.

In the fourth quarter, said Jenson, EA plans to have four titles for the Wii, three for the PS3 and five for the 360.

Also, EA in December acquired Headgate Studios of Salt Lake City, Utah, which has been exclusively developing titles for the Wii platform.

"We are redirecting some other resources toward Wii and the DS," said Electronic Arts CEO Larry Probst. "By the end of this fiscal year, we will have six titles in the market -- which, other than

Ubisoft

-- will make us the most prolific publisher on the Wii platform through March."

Probst also said that EA is likely to ship "a number in the low to mid-teens" in fiscal 2008, on both the Wii and DS.

The lower cost of game development for the Wii has also given smaller publishers an opportunity to make games for the platform, says Pidgeon.

Creating a game for Sony's PlayStation 2, for instance, could cost anywhere from $10 million to $15 million, and take 18 months to two years.

But with the Wii, the investments are lower -- there are fewer complexities -- enabling smaller companies, such as independent Japanese publisher Capcom, to create games for the platform.

"You have to look at the Wii as a new platform, so you can't just port stuff from the PS3 to the Xbox 360 to the Wii, though that's the EA way," says Pidgeon.

"Companies that do differentiate between the platforms will have the edge because they can write for the platform," he adds.