Today Nintendo felt a blow like they have never felt before; their first annual loss was reported, a loss of approximately 45 billion yen (£340 million). The gaming company, which started out in 1889 making playing cards, has suffered a steep drop in sales throughout all its current gaming hardware.
In summary the losses were incurred because of the following factors;
- Strong Yen for much of the previous year making products more expensive in export markets
- Sales targets missed. Nintendo expected sales of the Wii, 3DS and DS to be 13 million, 16 million and 11 million respectively. Figures ended up closer to 10 million, 14 million and 5 million respectively. Together these figures amounted to a 36 per cent sales drop compared to the previous, profitable year.
- Competition from smartphones and tablets in portable casual gaming which is traditionally a strong market for Nintendo.
- The Wii nearing the end of its life cycle with fewer games developed for it than rival systems.
- Nintendo cut the price of the 3DS to encourage sales and make back the money on software but the strategy wasn’t enough to put the figures for this year into the black.
While Nintendo may feel under pressure it still has plenty of cash reserves (US$14 billion) to last another couple of hardware launches. The management are confident of the success of the coming Wii U which will be available significantly earlier than new systems from Microsoft and Sony. The new figures, the first annual loss for Nintendo, are not going to result in any strategic rethink, said Nintendo boss Satoru Iwata. With the weaker yen now in place and launches of some big Nintendo games coming up (inc a new Mario Party and Dragon Quest) the company might be able to get back in the black this year. Then the Wii U will be launched and Nintendo say they have learned from the mistakes of the 3DS launch.
Analysts suggest that the expected costs of making the new Wii U will require that it is sold at approx $350. Also a suggested tactic is that the company should consider releasing its famously playable games on other manufacturers’ devices. However that would be a drastic change of strategy for Nintendo which would only possibly follow if the next couple of hardware releases are resounding failures.
