Why the Wii U will make or break Nintendo

November 20, 2012: 5:00 AM ET

With profits down, the company that spawned Mario desperately needs a hit. But is the Wii U it?

FORTUNE -- Can Nintendo do with the Wii U what it did with the Wii? When Nintendo launched that console in 2006, the oddly named system changed the way millions of players interacted with games with a controller that recognized gestures. This time, Nintendo aims to repeat that success, this time by including a second screen.

Our review unit was the "Deluxe" package, the black console which retails for $350 and includes 32 gigabytes of onboard storage, one Wii U GamePad controller, a charger stand for the controller, and NintendoLand, a pack of mini-games. The console, a thick slab of plastic that resembles an external hard drive, takes a back seat to the controller itself. Standing 5.3 inches high, 10.2 inches wide, and nearly an inch deep, the Wii U GamePad is positively huge, hosting a buffet of features -- video camera, microphone, speakers, motion-sensing tech, and a 6.2-inch touchscreen display -- among them. By adding a second screen, Nintendo hopes developers will create gaming experiences that can't be found elsewhere.

That experience depends on the game. The survival horror game "ZombiU," exclusive to Nintendo's console, uses the second screen to excellent effect. As I anxiously stumbled my way through a convincing, post-apocalyptic, virus-infested version of London, I was forced to look at that second screen. It was a veritable lifeline that offered a map of nearby surroundings, helped suss out nearby undead via radar, and let me manage weapons and supplies with a tap. Doing so felt integral and even enhanced my experience. In "NintendoLand," one mini-game called Ninja Castle turned that same screen into a sort of platform from which to aim and shoot ninja stars from to the TV screen. It's a simple enough concept, but incredibly fun.

MORE: Is Nintendo about to kiss its last great product goodbye?

Yet in other launch games like the action game, "Ninja Gaiden 3: Razor's Edge," the screen felt more like a gimmicky afterthought, where players can tap into features that otherwise could have been easily accessed on the TV screen with the Wii U Pro, a $50 screen-less controller  shaped a lot like the Xbox 360's that also fits snugly in hand. The onus is on the developer here to fully utilize the larger GamePad and its screen, and obviously we're only looking at the first wave of games, so it may be some time before we see what the Wii U can really do.

Over the weekend, Nintendo updated the Wii U's software, and while we still can't testify to how video-streaming applications like Hulu Plus and Amazon Instant Video fare, Netflix worked like a charm, with an entirely new-interface that uses the GamePad very well. Everything loaded quickly, and I could handily search out content, skip around around movies and episodes, fast-forward, back-track, and so on with the touchscreen. The experience overall is superior to Netflix on the Playstation 3 or Xbox 360.

Not everything's perfect. For one, I found that loading up the Wii U's main menu, say, when exiting out of a game or an app, took too long. At best, I counted 16 seconds; at worst, 28. (The average time was 20.) It's not a dealbreaker, but it gets old quickly. The GamePad's screen can also be hit-or-miss. Once in a while, I found the screen didn't recognize my finger taps.

MORE: Microsoft versus Sony versus Nintendo. Who wins?

There's also the price. $300 is pretty standard pricing for a new video game console, but may now seem like a lot to parents who could more easily load up a $1, $5, or $10 app on their smartphone and hand it over to their kids.  This reasoning is why Wedbush Securities analyst Michael Pachter predicts Nintendo could sell 3.5 million units domestically this year, and then 10 million units thereafter, potentially less than what the Wii sold during its first two-and-a-half years on the market.

Now, more than ever, Nintendo needs a homerun. The company slashed its net profit outlook from $251 million to $75.2 million for the fiscal year, and casual gaming devices will only proliferate. But will the Wii U be that for the company that spawned memorable properties like Mario, Link, and Metroid? Many of the ingredients it needs are there, including solid hardware with an innovative twist. Five years ago, I would have given an unequivocal "yes," but in a time when Angry Birds persists with its umpteenth sequel, I'm not so sure anymore.

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About This Author
JP Mangalindan
JP Mangalindan
Writer, Fortune

JP Mangalindan is a San Francisco-based writer at Fortune, covering Silicon Valley. Since joining in 2010, he has written on a wide array of topics, from the turnaround of eBay to the evolution of net neutrality. A graduate of Fordham University, Mangalindan has also written for GQ, Popular Science, and Entertainment Weekly.

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