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Nintendo misses forecast, posts $230 million loss

Nintendo misses forecast, posts $230 million loss

Wed 07 May 2014 2:03pm GMT / 10:03am EDT / 7:03am PDT
PublishingFinancial

3DS sales decline year-over-year, Wii U sells fewer systems in first fiscal year than in four months after launch

Nintendo today reported its financial results for the year ended March 31, falling short of its sales forecast and showing declines in both 3DS and Wii U hardware sales.

For the full year, Nintendo reported net sales of 571 billion ($5.62 billion), down 10 percent year-over-year and well shy of the 590 billion ($5.81 billion) it forecast in January. The company also reported a net loss of 23.22 billion ($230 million), better than the 25 billion ($250 million) loss forecast, but a turnaround from the previous year's 7.10 billion ($70 million) net income.

In the Wii U's first full year on sale, Nintendo managed to move 2.72 million systems worldwide. That's actually down from 3.45 million Wii Us sold the previous fiscal year, when the system was only on store shelves for a little over four months. Nintendo expects Mario Kart 8 and the new Super Smash Bros. to help turn the system around somewhat, and has forecast sales of 3.6 million Wii Us for the current fiscal year.

The 3DS has been selling much better, but still saw year-over-year declines in unit sales despite the rollout of the 2DS in the last fiscal year. Nintendo reported selling 12.24 million 3DS systems (including the XL and 2DS models), down from 13.95 million sold the year before. Unlike the Wii U, the 3DS is expected to continue on a modest downward trajectory, with Nintendo forecasting 12 million units sold for the current year.

Nintendo cited hardware sales and weaker than expected Wii U software sales as the reasons it fell short of the previous forecast, noting its operating losses were also higher due to increases in inventory write-down and research and development costs.

The company also updated sales totals for some of its best-selling games during the year. On the 3DS side of things, Pokemon X and Y combined to sell 12.26 million copies. Animal Crossing New Leaf sold 3.8 million copies during the year, bringing its lifetime total to 7.66 million. Meanwhile, Luigi's Mansion: Dark Moon, The Legend of Zelda: A Link Between Worlds, and Mario & Luigi Dream Team all topped 2 million sold. Wii U software numbers weren't quite as gawdy, with Nintendo saying it had five million-selling Wii U titles, including Super Mario 3D World, New Super Mario Bros. U, and the budget-priced New Super Luigi U.

For the current fiscal year, Nintendo is projecting sales up 3.2 percent to 590 billion ($5.81 billion), with a net income of 20 billion ($200 million).

15 Comments

Christian Keichel
Journalist

624 847 1.4
Popular Comment
Just to put things in perspective
Microsoft Entertainment and Devices division full year 2012: -263 million USD
Playstation division full year 2012: -2.8 billion USD

Edited 1 times. Last edit by Christian Keichel on 7th May 2014 3:48pm

Posted:3 months ago

#1

Andrew Jakobs
Lead Programmer

227 88 0.4
You're right, but the difference is, back then a lot of those loses were write-offs, and the PS3 and xbox 360 sold very good..
That's not the case with nintento, the Wii-U isn't selling at all..

Posted:3 months ago

#2

Christian Keichel
Journalist

624 847 1.4
You're right, but the difference is, back then a lot of those loses were write-offs, and the PS3 and xbox 360 sold very good..
I have to correct my statement, the $263 million loss wasn't for the full year 2012, but only for Q4, in FY 2012 MS made a profit with it's division, my apologies for the wrong number, but as you can see here, in fiscal year 2012 the 360 already was on a downturn

Sony's situation at this time wasn't rosy either and not because of write offs, as Gamesindustry.biz commented back then:
Hardware sales were down across the business compared to last year, with Sony selling 13.9 million PlayStation 3 units compared to 14.3 million the previous year.
PSP hardware sales were down from 8 million to 6.8 million and PlayStation 2 console sales dropped from 6.4 million to 4.1 million.
Software sales for the PlayStation 3 increased from 147.9 million to 156.6 million, while PSP game sales fell from 46.6 million to 32.2 million. PlayStation 2 game sales dropped from 16.4 million to 7.9 million units.
Predictions for hardware sales for the next financial year are also low, with combined PlayStation 3 and PS2 sales of 16 million units compared to the 18 million sold in the closing financial year. PSP (including PS Vita) hardware sales are expected to rise from 6.8 million to 16 million. Packaged software sales are forecast to remain the same with 196.7 million units.
http://www.gamesindustry.biz/articles/2012-05-10-sony-playstation-division-suffers-full-year-USD2-8bn-loss

That doesn't mean, that the Wii U isn't in trouble, it clearly is, but on the other hand, posting a loss of $230 million doesn't mean the company is going bankrupt anytime soon, it doesn't mean, that the 3DS isn't selling any more and it is clearly not an unusual high loss when it comes to video game companies.

Edited 4 times. Last edit by Christian Keichel on 7th May 2014 6:14pm

Posted:3 months ago

#3

Steve Peterson
West Coast Editor

107 72 0.7
Popular Comment
The disturbing part to me is not the loss per se, but the fact that Nintendo management has been consistently missing their forecasts (on the low side!) for years. That is a sign that the execs aren't reading the market properly. Missing a quarter or two is not uncommon, but when you do it for years it's proper to ask if management is really tuned in to what's happening in the business.

Posted:3 months ago

#4

William Usher
Assistant Editor

41 29 0.7
@Christian, Thank you for shedding some much needed level-headedness on all of this.

It amazes me how quickly people forget the doom and gloom situation that was the PS3. 2007 - 2008 was mostly "PS3 is doomed". Of course, by the time Uncharted 2 had come around the tune had changed and everyone wanted a PS3.

Software sells hardware -- and with third-parties treating Nintendo the way they are -- it's up to Nintendo to save themselves with good first and second party outings. They at least seem to have a good line-up for this year and it'll boil down to their marketing to make a proper save of the system and build some momentum for 2015.

Edited 1 times. Last edit by William Usher on 7th May 2014 7:42pm

Posted:3 months ago

#5

Klaus Preisinger
Freelance Writing

1,069 998 0.9
The PS3 doom and gloom was of a different sort. The PS3 was expensive and there were few games. In the pantheon of problems, that isn't anywhere near a worst case scenario. The WiiU is in more trouble. It is not just lacking games, it is lacking committed publishers who bring an audience to the platform as well as games. The WiiU also has a gimmick controller driving up the price while doing little for the experience itself. Nintendo might not care about either problem, less third party competition is more first party software sold in the long run, right? Not like Nintendo was in the business of discounting games the way Valve is.

Even if nothing exciting happens, even if it does not matter whether a Nintendo home console rises to world domination again, a profit margin of -5% is not happy news.

Posted:3 months ago

#6

Rick Lopez
Illustrator, Graphic Designer

1,269 941 0.7
The Mario Kart WiiU bundle sounds pretty sweet. It has 2 controllers plus game. Reminds me of the game consoles of the good old days. Im really in a wait and see position. Im really excited for what nintendo has coming, its just Ive been waiting a seriously long time. I think that has hurt WiiU sales more than anything else. As much as I want to remain optimistic, the numbers CLEARLY show, that whats going on with Nintendo... IS NOT GOOD.

Edited 1 times. Last edit by Rick Lopez on 8th May 2014 3:26pm

Posted:3 months ago

#7

Caleb Hale
Journalist

152 222 1.5
I think Nintendo execs are misreading the market on a couple of fronts:

1) They still think the average person needs some sort of novelty to get into gaming. That may have been true in 2006, when the Wii broke the paradigm of complex controllers and game boxes in living rooms, but in 2014, I think the concept of gaming is more understood by the casual audience than Nintendo realizes. Plus, designing a box that's different for the sake of being different isn't sensitive to the general state of the game development industry, where a lot of developers are looking for parity across platforms for profit's sake.

2) I'm not certain, but I think Nintendo still believes their biggest value proposition is the hardware they supply to customers. In reality, it seems it's their character franchises, and I'm not sure why they don't see this when some of their biggest-selling titles tend to be celebrations of the characters and worlds they've built throughout the years. Look at Mario Kart, which has not only become kind of meta of previous Mario Kart installments, but was originally built on the concept of having fun with well-known characters in the Mario universe. Smash Bros. is a further example of that, an all-out celebration and homage to dozens of iconic Nintendo franchises.

I know I'm going a tired route by saying Nintendo could be profitable by putting their franchises on other consoles, and I realize Nintendo's got the bank to keep building failing machines for years to come. However, it's a fairly irresponsible business model that won't do much on the legacy front, other than allow people to marvel at how long it took Nintendo to bleed to death.

Edited 1 times. Last edit by Caleb Hale on 7th May 2014 9:42pm

Posted:3 months ago

#8

Christopher Ingram
Editor-at-Large

47 38 0.8
I think that Nintendo is also suffering from an over saturation of its core first party titles too. It has tried to fill the third party gap with its own software - Super Mario 3D World is evidence enough of this. I'm typically a day one supporter of Nintendo consoles, but I've yet to buy a Wii U. Unless there is a significantly improved release schedule going forward, I'll likely either pass on the console altogether or buy it right before the next Nintendo home console releases - the install price plus the additional cost (and necessity) of the memory upgrade is simply more than I'm willing to pay to play a handful of games, when I've already got so much that I don't have time to play as it is today.

Posted:3 months ago

#9

John Arnold
Partner

28 44 1.6
Popular Comment
I don't truly believe the Wii U is doom and gloom for good. It's a concept that needs to be more vast and explorative. A lot of people fail to understand Nintendo's outlook, you can't compare Nintendo to the path the commercial games industry is following because they simply aren't doing that. The Wii U is Nintendo's misinterpretation of where the video games industry is heading.

The reality is that Nintendo at heart has known how to turn the games industry in completely different directions. The PS Move more or less publically admitted the fact that Nintendo was right and Sony was wrong just like YouTube did to Google Videos in it's inceptions.

Nintendo has invented and simplified things in the entire video game history that other companies completely failed to realise or visualise.

Nintendo has one thing that no other company ever had and that was their power to envision, a handheld with two screens?

The bottom line is that Nintendo succeeds because they do things that no brain cell has ever touched on before. Reinventing the same console doesn't work unless you're the sort of company that releases the same phone every year. Nintendo needs to stop focussing so heavily on accessory technology and focus on creating markets which not even the willdest of dreams could possibly open or predict.

Edited 1 times. Last edit by John Arnold on 7th May 2014 11:06pm

Posted:3 months ago

#10

Klaus Preisinger
Freelance Writing

1,069 998 0.9
Eight years ago, mobile gaming started and ended with Nintendo. This fact has dramatically changed with the advent of smartphones. While the Wii might not have been the darling of core gamers, it was the console most people had in their homes.

What would be said about Apple, if their next iPhone lacked some critical features and people stopped buying it? What has been written about Microsoft, when the XO appeared to be 'incompatible' to a trend in indie gaming culture? Nintendo, having been market leader in no less than tow gaming segments, will face nothing less. Nagging questions about their next magic trick to catapult their lines of products to the top again.

Posted:3 months ago

#11

Daniel Hughes
Studying PhD Literary Modernism

436 496 1.1
@ Steve

That's the important point for me and has been across the last couple of years. Whatever the reality of Nintendo's results--and their balance sheet means they can take this hit--they've clearly misread the market for a 3 year period. Their Wii U estimation seems to show how uncertain they now are about hitting their own targets. It might be higher than their last financial year, (by 900k), but in a year that Nintendo are going to debut Mario Kart and Smash Brothers, and their NFC line of toys, I'd expect a higher estimate. Not much higher, but I was thinking (even without more software announcements) they should be able to push 4 to 5 million Wii U systems in the next 12 months.

Even that 3DS target seems too high. Now 3DS is definitely a successful system in many ways, but there's no denying room for growth in the handheld sector is very, very limited. Unless Tomodachi Life becomes a break-out hit, or unless there's another hardware revision, I can see Nintendo falling short. Perhaps it'll be time for an all-digital model, along with an eShop overhaul, come year's end?

Posted:3 months ago

#12

Russ Cogman
Senior Game Artist

22 47 2.1
Number one problem Nintendo needs to solve. Market the console so people realise it isn't just a new controller for the original Wii. The amount of people that need that explaining to in my experience is vast.

Posted:3 months ago

#13

Jim Burns
Research Asisstant

44 85 1.9
Nintendo will be fine. They have big hits, they still care about the gamer and honestly? These numbers were not that bad

Posted:3 months ago

#14

Jim Burns
Research Asisstant

44 85 1.9
@Steve Peterson

They seem to be forecasting better now

Posted:3 months ago

#15

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