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Wii U still flounders but Nintendo predicts full-year profits

Sales forecasts drop but currency shifts help target of ¥30bn for FY 2015

Nintendo has presented another mixed financial report, publishing figures for the nine months leading up to December 31, 2014 which show dropping sales, increased profits and an ambitious full year profit target of ¥30 billion. Once again, the company's balance sheet shows considerable reliance on the exchange rate between Dollar, Yen and Euro.

Sales for the period, combining software and hardware across all lines, dropped by 11.3 per cent compared to the same period last year, totalling ¥443 billion. Nintendo's handhelds lead the charge, with 7.08 million "members of the 3DS family" sold worldwide - a figure Nintendo expects to leap upward once the New 3DS hits American and European markets. 53.04 million units of 3DS software went to consumers, although that may have slowed recently as customers wait for the big releases that will accompany the launch of the new hardware.

The Wii U, however, is still mired in mediocrity. Despite a crop of critically acclaimed releases, the console has managed a paltry 3.03 million sales since April last year, bringing lifetime sales to 9.2 million. Nonetheless, a relatively healthy 20.59 units of Wii U software were sold, showing a strong attach rate amongst the faithful. Just how long Nintendo can sustain that faith, and whether there remains the hope to instil it within others, is the company's key concern on the console front.

In a year-on-year comparison, combined hardware sales were down to ¥235 billion from ¥287 billion, with software dropping slightly less dramatically from ¥210.7 billion to ¥207 billion. Nintendo continues its slightly begrudging shift toward digital marketplaces with an increase in download sales of ¥3 billion to ¥21.1 billion from last year's 18 billion.

Pokemon sales shone once more for 3DS

Pokemon sales shone once more for 3DS

Despite all of this, profits for the nine months rose to a net total of ¥59.5 billion - a phenomenal sounding 483.7 per cent increase from last year's ¥10.2 billion for the same period. As a result, Nintendo is predicting its first profitable full-year result since 2012, with a projected target of ¥30 billion profit for the year ending March 31, 2015 - an upward revision of ¥10 billion despite missing nearly all of its sales targets.

"As a result of exchange gains totalling ¥51.0 billion due to depreciation of the Yen at the end of this period compared with the one at the end of the last fiscal year, ordinary income was ¥92.3 billion and net income was ¥59.5 billion."

One factor in the shift in that all-important figure seems to be Nintendo's vulnerability, for good or ill, to the fluctuations of exchange rates. As the report notes:

"As a result of exchange gains totalling ¥51.0 billion due to depreciation of the Yen at the end of this period compared with the one at the end of the last fiscal year, ordinary income was ¥92.3 billion and net income was ¥59.5 billion."

Further clarification can be found at in a statement accompanying Nintendo's separate forecast specific report.

"Based on the sales performance for the nine months ended December 31, 2014 and afterwards, net sales and operating income are expected to be lower than our original forecasts. Also, considering recent trends in foreign currency exchanges, assumed exchange rates for the fourth financial quarter as well as at the end of the full fiscal year have been revised as follows: ¥115 per U.S. dollar (previous rate: ¥100), ¥130 per euro (previous rate: ¥140). As a result, we have revised up the ordinary income and net income forecasts."

Mercedes-sponsored DLC for Mario Kart 8 divided fans.

Mercedes-sponsored DLC for Mario Kart 8 divided fans.

However, that market windfall isn't the sole factor in Nintendo's profit jump - in fact, last year's report noted a similar boost, alongside a prediction that this year would not see it repeated.

"As a result of exchange gains totalling ¥48.1 billion due to depreciation of the yen at the end of this period compared with the one at the end of the last fiscal year, ordinary income was ¥55.5 billion and net income was ¥10.1 billion," read the release from January 2014. "Also, we expect the yen to rise from the end of the third quarter to the end of the fiscal year, reducing exchange gains and ordinary income."

R&D expenses at Nintendo remained largely static at ¥44.8 billion compared to ¥43.2 billion a year ago, but advertising spend has dropped considerably, with this period's ¥44 billion budget shaving another ¥13 billion from expenditure when compared to the ¥57.6 billion spent in the nine months leading up to December 2013 - perhaps a result of the slugging match it faced with the launches of the PS4 and Xbox One.

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Latest comments (18)

Art C. Jones Writer / Blogger 4 years ago
"Despite all of this, profits for the nine months rose to a net total of ¥59.5 billion - a phenomenal sounding 483.7 per cent increase from last year's ¥10.2 billion for the same period."

Way to sell it! Nintendo profits increase almost 500%...hmmm...Nintendo? Can't be. Bury that somewhere in the article and put it in a sarcastic line when you do put it in. We can't have a positive article about Nintendo. Nothing like "Nintendo surviving era of the iPhone and increasing profits while learning how to better steer their company into the digital era" can appear in our articles. Speaking of digital, if you talk about digital make sure to speak badly of Nintendo's increase in digital revenue.

Alright, Nintendo didn't give us as much to work with this year. They made money again, so we can't keep hammering them for that. They are adjusting how they work in the marketplace, better controlling inventory to match demand and not take losses on equipment in warehouses. They are getting better metacritic scores (#1 in 2014) and releasing more games that core gamers enjoy, including exclusives like Bayonetta. They also had the top-rated metacritic game in 2014. Nintendo is really making it hard on us, but that is no reason to say anything positive about them!

Focus the article! Every positive thing said about Nintendo MUST be wrapped in a line that makes it seem like Nintendo is doing something wrong. Every victory of Nintendo must be put down! They are way too positive over there! It's the media's job to explain to them that they are doomed! Doomed!!!

Edited 1 times. Last edit by Art C. Jones on 28th January 2015 6:14pm

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Jeff Kleist Writer, Marketing, Licensing 4 years ago
If my lemonade stand makes $5 today when it made $1 yesterday, but I lost $30 the day before, that's not good news

The WiiU is doing sub-Dreamcast numbers, and just because the fanboys buy Smash and Mario Kart means very little for their future. Thry expect a profit because by all accounts they're going to launch the successor to the DS in the fall. See, the profits they show arent making up for the long term losses. Launching the WiiU cost the, at least a billion dollars, still in the hole on that, the DS market is steadily being eaten by tablets and phones, and their long term outlook is poor on their current path, which is not changing much. They're simply trying to copy what has been successful for others, they're way behind. The new GameBoy by all reports is a ripoff of the Kindle Fire, and android tablet with a walled garden. Amiibo is just their attempt at Skylanders

Nintendo has a lot of money and strong IP with a large, but shrinking fan base of adults mostly based on Nostalgia. Like Japanese franchises like Resident Evil, where the costs of producing the titles is quickly approaching revenue, Nintendo isn't dead today, they aren't dead tomorrow, but fifteen years from now they're going to be in a lot of trouble without a merger or going third party.
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Paul Johnson Managing Director / Lead code monkey, Rubicon Development4 years ago
One thing I've thought a bit stupid for a long time is that they make exclusive software purely to sell their hardware. Their mantra is that they're essentially a toy company selling toys, not a games developer selling software.

Fine in theory, but their software is great whilst their hardware is shite. A quick rewrite of their manifesto and they'd be drowning in new money. There's no shame for Nintendo in focussing on their strengths and they've got a buttload of money from former glories to sit back and make a shitload of awesome AAA stuff at their own pace. As for mobile...
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Show all comments (18)
Art C. Jones Writer / Blogger 4 years ago
"The WiiU is doing sub-Dreamcast numbers"
That's actually not true. The Dreamcast sold 10.2 million units lifetime. The WiiU will easily break that this year, its NPD numbers are at least 2x the Dreamcast numbers for every month starting 5/14. Great, no. Sub-dreamcast? No.

Notably, from your example, I disagree. Going from -$30 to $1 to $5 is good news. It's absolutely the right direction, no matter how much the haters want to hate, distort or just falsely report ("sub Dreamcast"). It's a very pessimistic viewpoint supported by rhetoric instead of real numbers. Bring on the Doom!
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Jeff Kleist Writer, Marketing, Licensing 4 years ago
No it really is selling worse than Dreamcast, a highly innovative console that influenced the entire market up until today I might add. Sega just had too many bullet holes in their feet not to bleed out.

http://o.canada.com/technology/gaming/segas-failed-dreamcast-actually-outsold-the-wii-u
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Steve Peterson Marketing Consultant 4 years ago
Nintendo is project 3.6 million Wii U's sold for this fiscal year, which is putting it on course to be Nintendo's worst-selling console ever. They just lowered their forecast for the 3DS from 12 million to 9 million units for the year, despite introduce the New 3DS. Yes, they are doing well with software, but the slow hardware sales limit that upside. A substantial amount of their profit was due to favorable foreign exchange rate shifts, which is not something you can plan on.

Nintendo's great software titles are not being released fast enough, nor are they compelling enough, to lift hardware sales to a significant degree. The company keeps projecting better numbers for hardware sales, then revising them downward. Repeating that strategy and expecting it to work someday isn't realistic, but that's basically what they've been doing for the last year or two. Nintendo needs some dramatic shift to get out of this rut... there are a number of possible solutions, and they have enough money to try various things, but they have to make a bold move to get back to significant profits.
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Paul Jace Merchandiser 4 years ago
Nonetheless, a relatively healthy 20.59 units of Wii U software were sold
For an entire quarter that amount of software would be worst than what the Ouya sells. But I think thats because you forgot to throw in the word millions after 20.59 and before units.
bringing lifetime sales to 9.2 million
If thats true they have now also been surpassed by the Xbox One in worldwide sales, which is a little embarassing considering XBO sells roughly 20 systems a month in Japan and thats only during a good month.

The good news for Nintendo is that their software and amiiba's have been selling well but long term, as Steve already alluded to, this will probably end up being their worst selling console. But if they end up making a profit off of the hardware they probably won't care. I think what they really need at this point is a merger.
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Daniel Hughes PhD Researcher, Bangor University4 years ago
Repeating that strategy and expecting it to work someday isn't realistic, but that's basically what they've been doing for the last year or two.
Steve, I'd hardly call missing sales targets a strategy! :-) And I'd point out while Wii U sales are low, Nintendo have actually done a decent job of estimating them this year. They forecast 3.6 million at the start of the financial year, and they should be within 5-10% of that at worst. Obviously low sales, but I think internally they accepted Wii U's fate twelve months ago, when price cuts, bundles, a Zelda remake and 3D Mario didn't do enough to turn the system round. Nintendo would also have known when their internally developed titles were likely to release, and that that wouldn't have been enough to lift the system. I don't doubt they'd hoped for better results with Wii U, but they quite clearly planned for the worst.

And again, with 3DS, I think there were plenty of signs twelve months ago. Nintendo had to revise full year targets down last year by 5 million units, despite Pokemon, Animal Crossing, Zelda and a host of smaller, but very high quality releases globally. 3DS has done enormously well in some regards--shifting 50 million units in a market that's altered hugely is impressive--but will obviously fall far short of DS and likely be Nintendo's least successful portable system. (Unless you count the GameBoy Color separately and the Game & Watch line as one handheld, in which case 3DS is already more successful than those devices)
A substantial amount of their profit was due to favorable foreign exchange rate shifts, which is not something you can plan on
And substantial losses in past years were down to unfavourable foreign exchange rates... yet the articles never span it that way?? ;-)

All in all, yes, these are bad results, moreso for 3DS which I expect will concern Nintendo more than Wii U does. Nintendo were obviously prepared for Wii U to continue to struggle, but I don't think they were prepared for 3DS to decline so rapidly and that leaves them in a tough situation. Any revival of their fortunes is going to be a long-term project, and not something that will happen while Wii U and 3DS are the main drivers of their business. But then we've heard as much from Iwata's financial briefings in the last twelve months, we know Nintendo are re-evaluating their long-term approach, planning new product lines and new videogame hardware, as well as a new strategy for their platform business.

I don't think your reporting is as bad as Art C. Jones is making out, but there are segments that come across more like a blog than a professional website, which is a shame because I've used this site for years and do generally think you come to a very high standard. "slightly begrudging shift toward digital marketplaces", when there's more DLC, experiments with free-to-play, cross-buy, microtransactions? Can a company be 'begrudging' towards digital, when they're obviously testing it out, and have for the last four years, continually increased their digital revenues? Seems like "hesitant" or "cautious" would be more fitting.

But I've gone on long enough. It'll be interesting to see what's said at investor meetings. What little I've seen translated suggests Nintendo will continue to ride this generation out, by pushing as much software out as possible. An extra 5 million units of software sales on Wii U is a good sign that that strategy might allow Nintendo to continue to grind out profit off of a small install base. In the long-term pushing new hardware into developing markets, continuing the digital shift, moving to a network based platform, exploring options on smart devices and launching non-videogame business will be crucial; and all of that was lined out by Nintendo last year. Near-term pain for long-term gain, I expect.
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Klaus Preisinger Freelance Writing 4 years ago
In the past, Nintendo produced entire TV shows to promote their product. Today they ask for 40% of the revenue, if a Youtuber plays a Nintendo game. Call it the ongoing struggle to understand the year 2015.
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Jeff Kleist Writer, Marketing, Licensing 4 years ago
@Klaus

As I've said many times in the past, Nintendo is still stuck in 1995, a situation unlikely to change in any meaningful way. They're frightened and confused by these strange modern things like game tournaments, Twitch, and party chat.

https://screen.yahoo.com/unfrozen-cave-man-lawyer-1-223412426.html

All kidding aside, they can toss out buzzwords all they want, but history shows NINTENDO says a lot of things, and then continues to do the same thing they always do. Their obcession with control, and reliance on a "what Japan likes everyone else wil too" strategy. I expect that pride, an business as usual will prevent them from changing direction until they're financially unable to do anything else. I just hope it's Disney, and not Sony who does so, because that not only has anti trust issues, but Sony has a pretty poor track record when it comes to a lot of Nintendo's core business. Nintendo needs a marvel deal, where they're left alone to make the games they're good at making, with a support team to bring them up to modern standards and fill in the gaps. I sure Sony and Microsoft and Amazon will trip over each other giving them pretty much whatever they want to cone to their platforms
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.4 years ago
Jeff, do you really think they are frightened and confused by Twitch, game tournaments, and party chart (which, by the way, they use 2 out of the 3)? Your hyperbole is showing sings of bias (along with many other comments) and it's unbecoming of members of this community. I think we can point out Nintendo's faults without conjuring images of frightened old Japanese men huddled together as the Twitch monster looms on.

Nintendo is as Nintendo does. For better or worse. It is a method that shows signs of imaginative greatness and difficulty adjusting. 1 generation it works, another generation if falters. But if they changed just to conform, they'd no longer be Nintendo.

As a consumer, I still get all the Nintendo IPs plus great second and some 3rd party support (which hasn't been good since mid 1995 anyway).

Are they arcane is many aspects? Certainly. When I'm playing Mario Kart, Smash, Zelda, Xenoblade or Metroid, am I thinking about those arcane issues? Certainly not. And that should tell you something. Now the games media will tell you a "modern" console must have A, B, C, etc...but I'll be damned if number 1 on that list shouldn't be, and it has been and always will be fun games. Everything else is icing. If the game sucks, great, let's party chat about it, let's twitch about it, let's hold a tournament about it.

I don't care how many Nintendo consoles they sold. I know I have one and I'm enjoying the games. When you start looking past the fun of the games...well, that's just sad.

A scenario of Hyperbole:

Gamer A: I can twitch, chat, collect trophies and save my game file to the cloud.
Gamer B: Wow. That must have been a really fun game.
Gamer A: Not really. It was largely broken, bug riddled, had connection issues, I lost my save file, account got hacked and I returned it to Gamestop within 2 days.
Gamer B: Ouch. So, wanna play Mario Kart?
Gamer A: Why do you think I came over?
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Jeff Kleist Writer, Marketing, Licensing 4 years ago
Jim, click the link. It's an old SNL sketch I was aping.

I definitely believe, as do ex-NIntendo executives, that Ninteno is stuck in the past, and in a market that is highly divergent from the rest of the world in how they use and experience the Internet. Home broadband penetration is poor, because people don't spend a lot of time at home. There are no streaming services worth mentioning. The WiiU is designed for a Japanese child who lives in an apartment where everyone sleeps I the living room to have his own screen to play While the parents watch the news. Bad idea? no! But not a selling point, because all these kids already are in tablets and phones. They already have their own screens.
Seriously, they're so stuck in the last they don't even play their competitions consoles. They designed the WiiU Network without using PSN or XBL! Why would you do that? Because you're arrogant, and disconnected. And from fifteen years of dealing with very traditional Japanese companies in the same mindsets as Nintendo demonstrates, and Nintendo's ex-Indy Guy capably illustrates exactly what I've seen. They lack the personal experience, and the market in front of their nose to have any motivation to change their ways, and making major policy and eye-opening shifts is like turning a cruise ship with one rudder and opposing prop running with a head current. And Nintendo is about as conservative as they get.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.4 years ago
No streaming services worth mentioning? Hulu+, Amazon Instant Video, Youtube, Netflix, Crunchyroll....
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Jeff Kleist Writer, Marketing, Licensing 4 years ago
Jim, not in Japan.

Hulu tried, bombed and retreated. Tsutays, which is the equivalent of Blockbuster at its height has a terrible very limited streaming rental bundle, but there is absolutley nothing like Netflux in Japan. I will bet you money that 50% of the decision makers in Kyoto have never seen it, and that fifty percent of those would have trouble, up to and including blank stares telling you what it is.

NOA knows a lot that NOJ does not, but they also know that they don't set policy. I'm trying to illustrate the blindness of the management over there
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.4 years ago
"I will bet you money that 50% of the decision makers in Kyoto have never seen it, and that fifty percent of those would have trouble, up to and including blank stares telling you what it is."

Jeff, I really think your assumptions are reaching well past reality.
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Steve Peterson Marketing Consultant 4 years ago
Nintendo's general approach to the market makes sense when you consider that it's mostly family owned, very old-school Japanese. They base their decisions on what they see in the Japanese market; selling internationally is really a secondary consideration for them. An engaged online presence is expected in North America, but that's not the usual case in Japanese households. Sony is much more internationally focused, and understands that what may be best for Japan may not work as well elsewhere. While Nintendo has many execs in the US and elsewhere who can give them an international viewpoint, I don't think those opinions carry much weight in Kyoto.

I don't expect sweeping changes from Nintendo. I expect they'll keep plugging along pretty much as they are, and at some point they will introduce new consoles which may or may not have a better reception than the current ones. I don't think their Quality of Life initiative (medical devices, from what they have said) will make much of an impact. Overall, I expect their market share and influence on the game industry to continue to diminish. (When was the last time they introduced a major new IP or character that can stand with the best of them?) I hope that some company can, in the future, deliver the polished gameplay and wonderful characters that has been Nintendo's hallmark. I just don't really expect it will be Nintendo.
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Jeff Kleist Writer, Marketing, Licensing 4 years ago
@jim

You can choose not to believe me, and it's no skin off my nose. But I speak from years of direct personal experience dealing with major Japanese toy, film, and game companies,

@Steve

Thanks for the backup, I detect similar battle scars in yiur words :) the QOL products are in my opinion a move to try to diversify Nintendo. Personal medical products, especially when it comes to things that align with the kind of things they obcess over like blood type. No one here is going to buy this stuff from Nintendo, but in Japan you can buy a Toshiba Backhoe, and Olympus has an extensive medical devision. It's going to become a set of curiosities for obcessiv overseas collectors, of this I'm positive ;)

Edited 1 times. Last edit by Jeff Kleist on 30th January 2015 7:44am

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Carlos Brandão Director, Game Rental4 years ago
Nintendo still bill money in the gaming market on account of your portable that sells well, the 3DS. They know they in bad shape with Wii U but can not give up now and leave many consumers see the ships that would tarnish the image of the company...

What is left? Maybe Optimism! There are not many options in a market as competitive and demanding as this! Then continue to release their classics titles more faster, if possible, and hope that rise sales...

Or Nintendo could try to create a promotion for all 3DS users a good discount on the console Wii U...

Edited 2 times. Last edit by Carlos Brandão on 18th February 2015 2:42am

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