Nintendo Profitable Once More, But Reel Back Sales Forecasts for Wii U

Nintendo
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Avatar of James Read
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on January 31, 2013
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Gaming veterans Nintendo released financial results yesterday that were a mixed bag for the Japanese powerhouse.

The good news is they are back in the fiscal black after recovering from their annual loss of ¥48bn (£333.5m) in 2011, this being the first time in the five decades of being a public company they recorded a loss.

The report showed that in the first nine months of their current financial year, which runs from April, Nintendo recorded profit of ¥14.5bn (£101m).

This has a lot to do about the strength and weakness of the Yen to the dollar, basically the stronger the Yen the worse the figures are for Nintendo, when they recorded the annual loss the Yen was doing well, now it’s faltered Nintendo are reaping the rewards.

Fluctuations in the currency market will continue to keep Executives on edge and will probably result in the fiscal results doing little to quell nerves caused by bad news coming from the financial report.

This news is Nintendo having to slash sales forecasts for their flagship gaming console the Wii U, as well as both portable offerings in the 3DS and the DS, due to a year-on-year decrease in sales.

The sales forecast runs until the end of their financial year, in March, and Nintendo had hoped shipments of the Wii U would reach 5.5m by that point, they have now revised this estimate by 27% to 4m.

Portable device sales are also thought to turn out lower than original predictions, with 3DS forecasts being slashed from 17.m to 15m and the older DS models forecasts changing from 2.5m to 2.3m.

WiiU

What is probably most awkward for Nintendo is the fact that the Wii, a console on the decline through the lack of new releases, outsold it’s successor. Nintendo shifted 3.53m Wii units compared to 3.06m Wii U sales.

Also worth noting is the fact that the Wii, which took the market by storm due to its low cost and inclusion of casual gamers, reached 5.84m by 31 March 2007, subsequently Nintendo actually raised its forecasted sales for the home console.

So why has the Wii U and 3DS struggled to capture the market as Nintendo expected, especially as their earlier creations were so in demand when they were first released?

It may be down to titles, release titles on the Wii were a lot stronger than the Wii U, whose big title on release was ZombiU, which is an 18 rated game, effectively cutting out a large part of Nintendo’s demographic of young gamers, families and the casual gamer.

There is also the shift in tendencies by these casual gamers Nintendo used to rely upon, with smartphones and tablets providing the casual gamer with cheap and fun alternatives to more traditional devices such as home consoles

What may be more worrying for the veteran company may be the fact they’re currently making a loss on Wii U sales, which is caused by them adopting an approach similar to Sony and Microsoft for the first time.

Nintendo usually ensure they are making a profit on consoles from day one however in a change of policy which aligns them with the other big console manufacturers they opted to accept a loss on the console in the first few months, until production cost falls and sales from that point will cover the early loss.

The massive reduction of sales forecasts will have the top brass at Nintendo worried that this change in policy may prove disastrous, with profit on the Wii U taking longer to appear than expected.

Wii U vs Wii. A little bigger, but still fairly compact.

Things aren’t all gloomy for Nintendo and its Wii U however, they hope the forthcoming releases of big titles like Wii Fit U, Mario Kart, Super Mario, Legend of Zelda and LEGO City will boost sales of the Wii U.

This doesn’t mean Nintendo will be out of the woods completely as they have had to cut back many fiscal forecasts to align with the new sales predictions, they now expect an operating loss of ¥20bn (£139m) rather than the ¥20bn profit they first expected.

Overall profit is still expected to be in the £100m region though, so the issue isn’t in fiscal terms, rather the problem is the unnerving uncertainty that Nintendo may not have felt for a long time, especially with the strength of the Yen likely to be subject to gross and unpredictable change whilst the Euro recovers.

Despite this it is unlikely that Nintendo are going to change their policy of gaming for all, which is certainly a positive for the gaming market, Nintendo’s expansion of the gaming demographic is refreshing and it would be a shame to see them change this policy on the basis of hard numbers.