Nintendo Reports First Loss in 50 Years

[Friendly]

Nintendo has just reported a loss of 43.2bn yen (€405m/$533m/£329m) for the business year ending March 31st.
Revenue was at $8 Billion USD; down by ~36% compared to 2010.
The main reason for Nintendo's losses are declining Wii sales and the 3DS handheld introduced last year, which at this time is still sold at a loss. They expect to start making a profit off each 3DS system sold at around August 2012.

[Ed Oscuro]

Resident Evil in the sky didn't bring them heavenly fortunes? Amazing.

[Friendly]

I find it even more amazing that they are still selling 3DS at a loss one year later, and will continue to do so for several months.
They totally dropped the ball as far as Wii is concerned, so their losses are well deserved.

[trap15]

I'm guessing you don't understand why a company would sell stuff at a loss.

They are selling at a loss in order to gain customers. The more people with 3DSs, the more people can buy and play the 1st party titles that everyone knows are going to kick ass like all the other 1st party Nintendo titles.

They make up the money lost in future revenues, and on game revenue. Eventually, the cost for making 3DSs will go down, and they'll start selling at a push, and eventually they'll profit from each system sold.

Economics, yo.

[Ed Oscuro]

Thanks for the biz lesson, but nobody was asking. Friendly made it clear that he thinks it is kinda ridiculous to be selling a handheld at a loss, and I tend to agree since Nintendo is famous for not selling their consoles at a loss. I'd be surprised to think that the PSP and its spawn have Nintendo running scared; it could just be that phones, tablets, and the DS itself are not budging to give the 3DS market share.

[Cuilan]

The 3DS was released a year too soon, and the Wii-U is being released a year too late. Back when the 3DS was released, the DS was still selling well while the Wii was already clearly in decline. Besides that, the 3DS had a weak launch and some hardware flaws/missing features that could have been remedied by launching a year later (the parts/manufacturing costs would have been cheaper too). The latter can also be applied to the Vita, but I'm guessing Sony didn't want to leave the next-gen handheld market entirely in Nintendo's hands for 2 years.

[Barrakketh]

Friendly made it clear that he thinks it is kinda ridiculous to be selling a handheld at a loss, and I tend to agree since Nintendo is famous for not selling their consoles at a loss.

Nintendo fucked up with the initial 3DS price point, which was way too high and ended up hurting sales. The decision to drop the price and incur a short-term loss was made to boost sales and regain momentum for long-term profitability, as you need to establish a userbase to entice developers to make games for your platform.

If Friendly truly thinks it's ridiculous for Nintendo to sell the 3DS at a loss, then he needed that "biz lesson". And from the sound of it, you needed trap15's lesson as well.

Nintendo was initially selling the 3DS at a price where they weren't losing money on each unit sold. The need to drive sales is why they slashed it by $70 USD. That wasn't the plan, but that's how things turned out.

the DS itself are not budging to give the 3DS market share.

According to who, exactly? According to the information on Nintendo's investor relations page, 3DS hardware appears to be outselling the DS (all revisions combined) by 2.65:1 for FY2012. If you compare it to either the DSi or the DSi XL the numbers are around a 6:1 ratio (slightly lower for the DSi, slightly higher for the DSi XL).

Software for the 3DS isn't doing too bad, either. It's a 0.6:1 ratio in favor of the DS despite having a much lower userbase.

In FY2012, sales for the Nintendo DS dropped to under 1/3rd of what they were in FY2011. At the same time, sales of the Nintendo 3DS increased 3.75 times over FY2011. It had a weaker launch than the Nintendo DS, but sales of the Nintendo 3DS are stronger during its second fiscal year of being on the market than the DS.

Your assertion that the DS isn't budging to give the 3DS market share doesn't seem to be grounded in facts.

EDIT: I'll leave this here, too:

Media Create Sales: Week 16, 2012 (Apr 16 - Apr 22)

01./00. [3DS] Fire Emblem: Awakening # <SLG> (Nintendo) {2012.04.19} (¥4.800) - 242.600 / NEW
02./00. [3DS] Code of Princess <RPG> (Agatsuma Entertainment) {2012.04.19} (¥6.090) - 19.554 / NEW
03./03. [3DS] Super Mario 3D Land # <ACT> (Nintendo) {2011.11.03} (¥4.800) - 14.491 / 1.519.303 (-20%)
04./01. [PSP] 2nd Super Robot Wars Z: Saisei-hen <SLG> (Bandai Namco Games) {2012.04.05} (¥7.330) - 13.560 / 313.402 (-61%)
05./06. [3DS] Monster Hunter 3G # <ACT> (Capcom) {2011.12.10} (¥5.800) - 13.069 / 1.403.296 (-13%)
06./02. [3DS] Kingdom Hearts 3D -Dream Drop Distance- # <RPG> (Square Enix) {2012.03.29} (¥6.090) - 12.881 / 289.668 (-39%)
07./05. [3DS] Kid Icarus: Uprising <ACT> (Nintendo) {2012.03.22} (¥5.800) - 10.915 / 231.558 (-28%)
08./08. [3DS] Mario Kart 7 <RCE> (Nintendo) {2011.12.01} (¥4.800) - 10.892 / 1.660.759 (-11%)
09./00. [3DS] Cho-ricchi! Tamagotchi no Puchi Puchi Omisecchi <ETC> (Bandai Namco Games) {2012.04.19} (¥5.040) - 8.453 / NEW
10./00. [NDS] Detective Conan: Prelude from the Past <ADV> (Bandai Namco Games) {2012.04.19} (¥5.040) - 8.312 / NEW
11./07. [PS3] Pro Baseball Spirits 2012 <SPT> (Konami) {2012.03.29} (¥7.980) - 7.954 / 139.758 (-45%)
12./04. [PSP] Pro Baseball Spirits 2012 <SPT> (Konami) {2012.03.29} (¥5.980) - 7.833 / 111.919 (-54%)
13./09. [NDS] Pokemon Conquest <SLG> (Pokemon Co.) {2012.03.17} (¥5.800) - 6.976 / 302.950 (-33%)
14./10. [3DS] Mario & Sonic at the London 2012 Olympic Games <SPT> (Nintendo) {2012.03.01} (¥4.800) - 6.104 / 137.326 (-26%)
15./14. [WII] Wii Sports Resort with Wii Remote Plus # <SPT> (Nintendo) {2010.11.11} (¥5.800) - 4.567 / 919.259 (+8%)
16./00. [PSP] Seinaru Kana: Orichalcum no Na no Motoni # <SLG> (CyberFront) {2012.04.19} (¥6.090) - 4.406 / NEW
17./00. [PS3] The Lord of the Rings: War in the North <RPG> (Warner Entertainment Japan) {2012.04.19} (¥7.980) - 4.199 / NEW
18./00. [PSP] Detective Conan: Prelude from the Past <ADV> (Bandai Namco Games) {2012.04.19} (¥5.040) - 4.037 / NEW
19./17. [WII] Mario Kart Wii <RCE> (Nintendo) {2008.04.10} (¥5.800) - 3.967 / 3.550.906 (+13%)
20./00. [PSP] Miyako: Awayuki no Utage # <ADV> (Idea Factory) {2012.04.19} (¥6.090) - 3.824 / NEW


Top 20

3DS - 9
PSP - 5
NDS - 2
PS3 - 2
WII - 2

HARDWARE

Code: Select all

----------------------------------------------------------------------------------------
|System | This Week  | Last Week  | Last Year  |     YTD    |  Last YTD  |     LTD     |
----------------------------------------------------------------------------------------
|  3DS  |     84.760 |     63.796 |     23.038 |  1.461.116 |    920.133 |   5.743.259 |
|  PS3  |     16.390 |     17.765 |     19.033 |    474.147 |    446.353 |   8.110.532 |
| PSP # |     11.779 |     13.166 |     49.427 |    317.723 |    751.974 |  19.047.107 |
|  PSV  |      8.206 |      8.250 |            |    227.891 |            |     667.877 |
|  WII  |      7.025 |      6.837 |      7.866 |    181.128 |    243.980 |  12.344.349 |
|  360  |      1.282 |      1.373 |      1.891 |     24.595 |     37.510 |   1.560.640 |
| NDS # |      1.276 |      1.433 |     13.561 |     32.738 |    376.395 |  32.841.224 |
|  PS2  |      1.172 |      1.212 |      1.163 |     18.478 |     27.561 |  21.792.585 |
----------------------------------------------------------------------------------------
|  ALL  |    131.890 |    113.832 |    115.979 |  2.737.816 |  2.803.906 | 102.107.573 |
----------------------------------------------------------------------------------------
| DSiLL |        760 |        800 |      7.064 |     18.656 |    193.818 |   2.312.975 |
|  DSi  |        516 |        633 |      6.214 |     14.082 |    165.337 |   5.848.132 |
|  PSP  |     11.779 |     13.166 |     49.162 |    317.723 |    737.647 |  18.871.120 |
----------------------------------------------------------------------------------------

[Ed Oscuro]

Both you and trap15 need a lesson in reading comprehension, and to stop haranguing people over innocent posts. For example:

it could just be that

That might be relevant when interpreting how to read my post

Thanks for correcting my impression about 3DS sales vs. the DS, though.

[guyot]

The loss is basically 85% exchange rate, 15% complacency.

[Friendly]

You people need to work on your reading skills. Re-read my above post. Nowhere did I say that it was wrong to initially sell a game system at a loss. I am just amazed they haven't managed to bring down manufacturing costs to a level that allows them to sell 3DS at a profit at his point in time.

[guyot]

You people need to work on yourt reading skills. Re-read my above post. Nowhere did I say that it was wrong to initially sell a game system at a loss. I am just amazed they haven't managed to bring down manufacturing costs to a level that allows them to sell 3DS at a profit at his point in time.

It's not really that surprising. The price cut was huge. Going to take more then a year for manufacturing improvements to bring it back to break even.

[Friendly]

You people need to work on your reading skills. Re-read my above post. Nowhere did I say that it was wrong to initially sell a game system at a loss. I am just amazed they haven't managed to bring down manufacturing costs to a level that allows them to sell 3DS at a profit at his point in time.

It's not really that surprising. The price cut was huge. Going to take more then a year for manufacturing improvements to bring it back to break even.

I disagree. Materials & manufacturing costs amounted to $103.25 USD one year ago. Factoring in economies of scale, one would assume they'd have reached the break even point 13 months and 17.5 million units later.
So yes, this is quite surprising.

[guyot]

Materials and manufacturing costs don't even come close to telling the whole story though. R&D, marketing, packing, shipping and all the costs associated with getting it to retail would all have been factored into that original cost. Just one year's worth of reducing the bos/mfg cost alone aren't going to get you all the way there considering how deep the price cut was.

[Friendly]

R&D and marketing aren't costs directly related to the per-unit cost, they also don't vary in relation to amount of units produced (I assume you understand the difference between variable costs and fixed costs?).
Aside from manufacturing and materials, only packaging and shipping do contribute.
We know that Nintendo's wholesale price is only between 20 and 30% below retail.
So once more with feeling: It's really quite amazing they are still selling 3DS at a loss at this point in time.

[guyot]

Assmuning that's true then the isupply estimate must be staggeringly wrong.

[TransatlanticFoe]

It's not really a big deal considering they've been rolling in it for years.

They made a huge mistake easing off, Wii-wise. Couple that with the 3DS needing the circle pad pro or whatever and having a shocking launch lineup. Apparently a Mario game is expected to boost its fortunes? Well that would've been good to have from the off and would've guaranteed big sales.

Why the long gap between Wii and Wii U though? It's bizarre. Wii U is a massive risk too, as reports suggest it's only as powerful as the other current gen consoles. You'd think there'd be momentum heading into the Wii U's release but what has the Wii had lately? Skyward Sword, a trio of localised year-old JRPGs and the usual shovelware (even the shovelware is way down!).

I really do think the industry is dying. Maybe the Wii U will be innovation enough to pull it out of the hole it's in?

[Ed Oscuro]

I disagree. Materials & manufacturing costs amounted to $103.25 USD one year ago. Factoring in economies of scale, one would assume they'd have reached the break even point 13 months and 17.5 million units later.
So yes, this is quite surprising.

Here is something:

http://bits.blogs.nytimes.com/2011/03/1 ... -schedule/

Hard to know exactly how to read this - could it be that they had some extra work to do in order to get back to their initial costs estimate, if prices were higher due to the tsunami? Just as importantly, I recall there was some flooding in Thailand which affected some industrial parks (i.e. Nikon) and I wonder if something like that hit Nintendo as well.

It's not clear that this is a case of hubris on the part of Nintendo - according to the sales data posted above, they weren't doing too badly compared to the competition. It may well just be that the other guys were hit pretty badly as well; delayed recession fallout, perhaps.

[Ed Oscuro]

I really do think the industry is dying. Maybe the Wii U will be innovation enough to pull it out of the hole it's in?

Well, doom and gloom aside, I don't really see anything that suggests the magnitude of harm to the other makers to suggest they are going to fall (although Sony is not in great shape overall). It's hard not to see this as an experiment from Nintendo that is less successful than they had hoped it would be.

It's funny to consider, but Nintendo has never really had a "traditional" style console like the other guys (in the PlayStation mold). They went from essentially early-style 3D consoles with funky controllers (even the GameCube) to systems built around their funky controllers. No Dual Shock in sight - I think that feeling of the lack of a traditional control scheme has kept a number of people away.

[Moniker]

Nintendo will live forever. My mental health depends upon it. Miyamoto is the closest thing I have to a God.

I am concerned that they've strayed from their withered technology approach. Although I'm guessing that the 3DS will follow the same pattern as the DS proper - after an initial honeymoon with the new features, devs will settle back into standard control schemes. I can't say as I know why the DS got so much more goodness than the PSP, but I imagine a similar chain of events will go into the future. The feature overload on the Vita seems incredibly desperate.

As far as the Wii U goes, I'm not sure what to think, TBH. As long as the X360 continues to be well-supported, I can't see myself investing in another console, but maybe mainstreamers who only have a Wii will do otherwise. If they let me keep my VC and WiiWare games, I might buy one in a couple of years...

Then again, I might fold once the Wii U Mario game comes out.

[Ed Oscuro]

There was a small time, before the iPhone and the iPod, where any old touchscreen device could really capture market share if it had something going for it. All the DS really had going for it was Nintendo's weight. The clamshell design is important so people can take it with them without destroying it and without unnecessary delays extricating it from a bag, but I think that the time where they could simply say "we are NINTENDO" and rely on what is essentially a terrible design, from the gamer's perspective, is over (it should be, in any case).

The "withered technology" approach had me somewhat interested because of the thought of good games being developed more cheaply but bringing excitement, but unfortunately it comes with the baggage of sticking you with one control scheme that doesn't work well for traditional games. What somebody really needs to do is just combine both approaches in one console, perhaps something like a PlayStation with an integrated EyeToy, so that developers won't feel they have to choose one approach or the other or else lose out on market share from people who don't have the right peripherals. Of course, I never forgot that I felt disappointed in the GameCube's lineup for a long time, so losing the mainstream gamer who cares about graphics was a bad thing if it meant losing the next groundbreaking game like Resident Evil 4 to one of the hot and loud big consoles.

[Teufel_in_Blau]

Hey Nintendo, how about a handheld display that DOESN'T reflect the light? You know, something that I could actually use outside.

Since the release of the original Gameboy in 1989 I have yet to see a handheld with a display that isn't a mirror. But 3D and touch...

[Skykid]

It's not really a big deal considering they've been rolling in it for years.

Indeed.

This loss in sales -- 36% since 2010 -- is hardly even news. Wii has run its very successful course and outlived its usefulness, 3DS is now blazing in sales and has been doing so steadily since they took the decision to drop the price and sell at a loss. Selling hardware at a loss has never been commercial suicide for the other bazillion companies that used the tactic as its standard business model.

The whole of Japan was economically tragic the whole of last year across all industries, and only showed a blip on the ecconometer in the last few weeks.

Nintendo are fine at the moment. Still sitting pretty in terms of Japanese game giants, in-fact, but it's the Wii U and it's success (or lack of) that could really shift their fortunes. Smartphones are starting to make a lot of gaming, console or otherwise, redundant for a lot of people, so that tablet better be something amazing.

[neorichieb1971]

NCL are the one game company that don't want a repeat of this though. They are the weakest by far.

I would never buy a NCL product brand new on day 1 anymore. I would for the other 2, 3 if you include Sega.

[Friendly]

I would never buy a NCL product brand new on day 1 anymore. I would for the other 2, 3 if you include Sega.

The only upcoming system I'm definitely not going to buy at launch is Xbox 3, due to reliability concerns. Not interested in being a beta tester who pays for the privilege. I'd have no problem buying a launch model Wii U (if it offers compelling games). Nintendo systems are made of nintendium, the most durable substance known to man. Anyway, buying game hardware on day-1 is hardly ever a good idea because it's expensive and there is usually little to play...

I agree that Wii was disappointing as a whole, and like I wrote above, Nintendo dropped the ball big-time. But I still think it's worth owning as a secondary system. It has several worthwhile games that aren't available elsewhere (some neat 2D stuff).

[Cuilan]

Nintendo systems are made of nintendium, the most durable substance known to man.

Nintendo ran out of that material back in 2005; do a Google search for "WiiConnect24" and "DS Lite cracked hinge".

[Despatche]

Better: The Nintendo 64 controller's one flaw (the control stick) is one of the biggest flaws on a controller, and the GBA SP started the entire "Nintendo shoulder buttons suck" phenomenon. I honestly don't know where the Nintendium thing came from, other than the GameCube. Oh, and... WiiConnect24 is a software thing, specifically an internet software thing.

edit: no, that really is one of the dumbest things i've ever heard

[Cuilan]

Oh, and... WiiConnect24 is a software thing, specifically an internet software thing.

Yes, a software thing that can lead to the Wii's GPU overheating (and eventually dying).

And no kidding on the shoulder buttons. When I still had a DS Lite, I remember having to blow really hard into the edges around the L button to get it to work properly (and only temporarily), and I was a victim of the cracked hinge too.

[Friendly]

Well, and there was the cartridge loading design-flaw of NES, along with the cheap connectors used in NES game cartridges. I'd still say that their home consoles are pretty durable in general. You are right about their current handhelds, though.

[louisg]

Well, and there was the cartridge loading design-flaw of NES, along with the cheap connectors used in NES game cartridges. I'd still say that their home consoles are pretty durable in general. You are right about their current handhelds, though.

You have to compare them to the competition, too. Yeah, the NES design was fairly awful. SNES, that whole generation was durable. But then the N64 isn't very breaky because it doesn't have a drive (even the crappy controllers are usable after several years even though they do degrade), GameCube is damn solid, Wii doesn't have nearly the breakage rate of PS3 or 360...

Nintendo puts out fairly reliable stuff in general, in my observation. I'm pretty soured on Sony and MS seeing practically everyone one of my friends' consoles bite the dust this last generation. Well, Sony always had issues. But I thought the XBox 1 was pretty reliable..?

[Friendly]

But I thought the XBox 1 was pretty reliable..?

Actually, my first Xbox 1 did crap out (GPU related I think) so I replaced it, but that was probably just bad luck; there were few reports of broken Xbox 1s.

Anyway, the more complex hardware gets, the more potential for failure there is. However, I don't understand what's so difficult about using reasonable cooling systems in modern consoles. How hard can it be to prevent overheating?