Japan's Nintendo, the world's leading game console maker, unveiled a new online strategy on Monday, saying it will launch a social and content network dubbed Miiverse for its latest version of the Wii - the Wii U.
The strategy is similar to that of rivals including Sony Corp and Apple Inc, although analysts raised concerns that Nintendo has been late to embrace online gaming, and may have to work hard to gain ground.
"Nintendo is falling behind its rivals in the online gaming area. The idea of entering the field is good, but the question is whether the company can generate profits," said Hajime Nakajima, a wholesale trader at Iwai Cosmo Securities.
Debuted a year ago, the much anticipated Wii U console has so far received a frosty reception from investors worried that the hardware will struggle to find buyers in a $78.5 billion industry that has become a target for smartphone and tablet PC makers such as Apple.
"Some people may wonder if Wii U is a simple evolution of Wii or something completely different. I think maybe the best answer is both," Nintendo President Satoru Iwata said in a webcast ahead of the E3 videogame industry trade show in Los Angeles where he will unveil the final version of the Wii U.
The addition of Miiverse suggests Nintendo - which started out in 1889 making playing cards in the back streets of Kyoto before gaining prominence as the creator of the Super Mario franchise - may be relying on online content delivery to underpin hardware sales through its new Nintendo Network, a similar strategy to Sony and Apple.
However, Iwata has been slower than others to take on online social and content delivery platforms, and has a lot of ground to make up to catch up with the millions of subscribers plugged into PlayStation 3's network, iTunes and Microsoft Corp's Xbox.
In his webcast, Iwata showed off a video chat function and functions to allow users to message and share pictures and other content.
"Not only can it connect people in a better way within the same living room, but it also connects people (from) living room to living room in a much more compelling way," he said.
The Nintendo boss promised that Miiverse in the future would be made available to subscribers on smartphones and other mobile devices, a first tentative step by Nintendo to offer services on devices built by other companies.
In a more traditional hardware bid to attract consumers, Iwata said the Wii U's tablet touchscreen controller would come with a built-in joystick, called a GamePad, that would double as a TV remote, while a pro controller for the games machine would be available for hardcore gamers.
"All these things sound like they're playing catch-up to the Xbox 360 and PlayStation 3," Michael Pachter, an analyst at Wedbush Securities, said after Iwata's webcast.
What price Wii U?
Nintendo's latest console will be in focus at this week's Electronic Entertainment Expo (E3), which is expected to draw more than 45,000 analysts, retailers, investors and reporters.
Nintendo may disclose the price and launch date of the Wii U at the event.
Nintendo may have to sell the new console for as much as $350 to break even, reckons Nanako Imazu, an analyst for CLSA in Tokyo. That's $100 more than it charged for the Wii in 2006 and would be more expensive than both the Playstation 3 and Xbox 360, which can be picked up for less than $300.
Nintendo shares dropped by as much as 3.2% early on Monday - to their lowest since November 2003 - in a broader TOPIX index down more than 2%.
After revealing the Wii U a year ago, Nintendo stock has more than halved, and is currently well below its level when the Wii was first launched in 2006.
"The market has begun to discount the possibility that the situation is going to get worse after this year's E3," Mizuho Securities analyst Takeshi Koyama said before Iwata's broadcast.
Nintendo, which last year launched the 3DS handheld games machine, reported a first-ever operating loss, of 37.3 billion yen ($477 million), in the year to end-March - a reverse that Iwata in April admitted was under par for Nintendo.
Speaking in the pre-recorded webcast on Monday, Iwata, standing alone in front of a brown wall decorated only with a small picture of Japanese calligraphy dokuso, which translates as originality or initiative, was more upbeat.
"Even with no one else in the room, you won't feel alone," he said.
($1 = 78.1200 Japanese yen)