Are they not profitable? That's a genuine question. Their R&D team never green lights hardware that won't be profitable. When it comes to comparing the Wii U to the Wii, then they are definitely not as profitable, and never will be. They are still making money though.
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Problems.
The Wii U appears to be in an unfortunate slump. Reasons being:
1.) The Wii U name is confusing to the casual market. I'm betting many casual consumers assume the Wii U is a marginal upgrade, or minor variance, to the Wii, much like the what the iPhone 5S is to the iPhone 5C.
2.) Small increase in hardware for graphics. On top of that, the prospect of much more powerful hardware for PS4 and XBO.
3.) Nintendo's core fanbase may not be large enough to solely sustain them.
4.) The price. Just way, way too high for the market.
5.) Tablet / touch screen gaming for the Wii U is really nifty, yielding creative input for games, but it's not what the original Wii's casual user base wants. I reckon many of them are opting to reserve their touch screen gaming to the iPad, Galaxy Tab, and mobile phones. The Wii U's main attraction is something that can be found elsewhere, albeit you won't get games as complex on a tablet.
Many casual gamers, such as a few of my friends, and some family members, were put off by the tablet concept. They all said, "why the heck would I play that, this isn't an iPad." or "I can play games on my phone and also make calls." This may reflect a good percentage of the mainstream consumer, and / or the sheer stranglehold in popularity Apple has on touch screen gaming.
6.) Terrible online support. All multiplayer is local. This sucks, because Nintendo literally refuses to adapt. Social is booming. Humans are social creatures, point blank.
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Solutions.
All of the above points rendered the Wii U's perceived value to minimal worth, sadly. Now, I'm no economist, so I can only offer some personal solutions for what Nintendo can possibly do to turn things around.
a.) Make new games outside of Mario and Zelda. I'm talking their EAD studio, not some studio they bought, like Monolith. Get some more core exclusives like the Gamecube had with Resident Evil 4. Actually, that may be what Bayonetta is for them, I just don't think it'll sell well. Kamiya is an honorable guy for supporting the Wii U, lol.
b.) Better advertise and promote interest for the mainstream consumer, which seems to have been a difficult process so far.
c.) Lower the damn price. This should be number one. Is the tablet controller that expensive to produce? From what I remember reading last year, this was the main reason the launch price was so high.
d.) Be patient and take their losses, and begin internal development on a new console, which I'm certain they are. But of course don't give up completely on the Wii U.
e.) In the future, better interpret the market for both core and casual consumers. Make huge strides in online gaming! Reevaluate their philosophical approach, perhaps?
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I don't know if I'd like to see them go multiplat. I also don't think they're in that bad of a position to have to develop for Sony and Microsoft. Maybe they have to take the Wii U on the chin and keep going forward. They'll be fine in the long haul as they always seem to flip shit around when things look dire :).
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