How Nintendo Lost Its Stride
By Mike Schuster Oct 29, 2009 12:15 pm
Where’s the innovation in the Wii?
On Thursday, Nintendo announced its grim full-year forecasts after a significant drop-off in Wii sales. Interim net profit plummeted by 52% to 69.49 billion yen, or roughly $770 million, from 144.83 billion this time last year. With operating profit dropping 58.6% to 104.36 billion yen, the Tokyo-based company was forced to slash its net-profit forecast for its full fiscal year to 230 billion yen -- a sizable reduction from its previous projection of 300 billion.
What's it all mean? It means Nintendo desperately needs to quit resting on its laurels and work a little harder on its Wii line if it wants to remain the console king. But judging from the Wii's history, it isn't likely.
Despite having noticeably weaker technical specs than Sony's (SNE) Playstation 3 and Microsoft's (MSFT) Xbox 360, the Nintendo Wii capitalized on its unique motion controls which appealed to folks who never touched a gamepad in their lives. Likewise, its family-friendly lineup didn't cater to hardcore gamers but rather tapped into older demographics who could now play along with their kids. Nintendo went on to sell over 56 million Wii consoles -- occasionally surpassing monthly sales of the PS3 and Xbox combined -- by capturing the non-gamer market.
But therein lies the problem: Once Nintendo became so focused on appealing to undiscerning non-gamers with a flood of terrible titles -- also known as "shovelware" -- it lost its drive to produce long-lasting, quality games and innovate upon past successes. When awful releases like Game Party -- which scored a dismal 25 out of 100 on Metacritic -- became one of its most successful third-party games, there wasn't a dire need to put much effort into developing better titles.
As a result, lasting appeal declined and customers abandoned the underwhelming console and lineup. Current sales are down 48% from last year and the company expects to sell 20 million Wiis worldwide in 2009 -- six million fewer than a previous estimate.
Making matters worse, the future looks just as bleak.
A supersized version of its portable Nintendo DS failed to excite investors, and rumors of a hi-def version of the Wii for 2010's third quarter feels too insignificant to warrant an upgrade -- especially when it won't affect previous releases. And while Netflix (NFLX) reportedly waits for the new Wii to drop before streaming content support, the window for Sony and Microsoft to pull ahead grows wider.
As for now, until the end of the year, Nintendo has to pray that New Super Mario Bros. Wii sells like hotcakes and its version of DJ Hero (ATVI) outsells the Xbox and PS3 versions. (See also Peripherals Controlling Video Game Market.) With such a dismal outlook on an even more dismal future, things aren't looking good for the Wii folks.
Sorry, Nintendo. It was fun while it lasted.
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2009-10-29 23:28:59
mike is a hack
i actually spent 20 minutes signing up just for minyanville to tell mike what a hack he is. yes, 20 minutes, just to tell him what a terrible article this is.
1. nintendo holds massive amounts of forex - if you bothered to read the operating statements - you would see that the majority of the profit declines were from forex-related losses and appreciation of the japanese yen
2. sony and msft are facing equally dismal futures - their gaming divisions both are facing loss after loss, and recent price drops indicate that it is possible they will continue to lose money next year despite it being nearly 4 years into this console cycle for msft and 3 for sony
3. typical console cycle is 5 years, console sales always taper off near the end - nintendo has a software title shortage yes - and it frustrates me as a gamer - but make no mistake that a 20 million forecast in year 4 for nintendo means 76 million total installed base, and hence, that makes it the 3rd best selling set-top console of all time (and with another 20 million for 2 years afterwards, that would make it the second best selling console of all-time behind the ps2)
4. finally, learn how to write mike - your anecdotal feel good feel bad BS along with your lack of any real analysis of technical discussion of operating fundamentals linekd to quantitative data make you look like a loser - if you have some points, quote some facts - otherwise, you are as the subject says - a mere hack - a pretend analyst
1. nintendo holds massive amounts of forex - if you bothered to read the operating statements - you would see that the majority of the profit declines were from forex-related losses and appreciation of the japanese yen
2. sony and msft are facing equally dismal futures - their gaming divisions both are facing loss after loss, and recent price drops indicate that it is possible they will continue to lose money next year despite it being nearly 4 years into this console cycle for msft and 3 for sony
3. typical console cycle is 5 years, console sales always taper off near the end - nintendo has a software title shortage yes - and it frustrates me as a gamer - but make no mistake that a 20 million forecast in year 4 for nintendo means 76 million total installed base, and hence, that makes it the 3rd best selling set-top console of all time (and with another 20 million for 2 years afterwards, that would make it the second best selling console of all-time behind the ps2)
4. finally, learn how to write mike - your anecdotal feel good feel bad BS along with your lack of any real analysis of technical discussion of operating fundamentals linekd to quantitative data make you look like a loser - if you have some points, quote some facts - otherwise, you are as the subject says - a mere hack - a pretend analyst
2009-10-30 08:22:57
mike is a hack
I'm available for freelance writing, too, if you're interested.
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