Microsoft's Xbox One and Sony's PlayStation 4 have officially hit store shelves and are going head-to-head for next-gen console dominance this holiday season. While this is good news for fans of either console, the third player in the next-gen wars, Nintendo's Wii U, is expected to underperform this season.

The Japanese gaming company's sales have been lower than expected ever since the release of the Wii U earlier this year. While the console performs below expectations, Bloomberg reports that the company is citing research and development costs and 3DS advertising and promotion costs as the reasons for the low profit margins. Nintendo still feels like it can bounce back and meet forcasts.

"The launch of other video game systems is also good for us because they energize the video game industry as a whole," Nintendo president Satoru Iwata told analysts. "This year, what Nintendo is promoting is, conversely, to stand out in the game industry for individuality."

Despite Nintendo's optimism, analysts believe the Wii U console has lost its mass "family" appeal that the Wii had and is now far too much of a niche platform, with the type of gamer who would gravitate towards it needing to be much more specific than one who would find a PlayStation 4 or Xbox One appealing.

"Wii U has become a game console only for Nintendo fans," Eiji Maeda, an analyst at SMBC Nikko Securities Inc. in Tokyo, said in the aforementioned report. "Wii U needs groundbreaking software to draw casual and hardcore gamers."

The president of Nintendo says the comapny is hoping to sell 9 million Wii U consoles over the company's fiscal year, which ends in April 2014. Analysts say this is an optimistic projection as only 460,000 WII U consoles have been sold during the first half of this fiscal year, only five percent of the nine million that the company expected at launch.

"They steadfastly refuse to consider that the product is not interesting to consumers," Michael Pachter, a Los Angeles-based analyst, said. "They will fail to hit 9 million, and they will likely miss their profit goals."