January 26, 2012

Apple Squeezing Out Traditional Gaming Systems

The world´s largest maker of video-game machines, Nintendo, has its full-year loss forecast and can only sit and watch as Apple devices trample over a gaming market that it once dominated. The net loss in the year ending in March may be $838 million, over triple what it originally forecast, report Naoko Fujimura and Takashi Amano for Bloomberg.

Nintendo, in an effort to keep its latest gaming device the 3DS from languishing on shelves, cut prices by as much as 40 percent, only 6 months after it hit the market. Nintendo president Satoru Iwata said he expects full-year sales of 14 million units and not the 16 million originally intended, for the device that has a 3-dimensional feature that was thought would appeal to young gamers.

The creator of “Super Mario Bros.” games is predicting its first annual loss in at least three decades as a surging yen and consumer preference for gaming on the iPhone and iPad helped Apple more than double profit in the quarter.

Mitsushige Akino, who oversees about $600 million at Tokyo-based Ichiyoshi Investment Management says, “The company faces a structural problem that people are opting for their smartphones and tablet PCs to kill their time. I can´t see Nintendo´s next strategy. There will probably be a discussion about how worse it can get.”

Nintendo also cut its forecast for annual sales of its aging Wii console to 10 million devices from 12 million. “Their time of growth (from consoles) is over, and, while I don´t think the company will cease to exist, if they don´t move into new categories, they will no doubt lose the great scale they´ve amassed,” explained Akino.

A successor to the once-popular Wii´s console, the Wii U, is expected to be on sale by the holiday season for 2012, but with cloud-based gaming emerging as a potential threat, Nintendo may have trouble generating excitement about its new product, some analysts say.

Google TV and a probable Apple TV could be the blow that kills off traditional gaming console systems, reports Yoshiyuki Osada and Isabel Reynolds for Reuters. “We think we need to consider the possibility that home consoles could become a thing of the past,” Citigroup analyst Soichiro Fukuda wrote in a recent report.

“We think the direction taken by marketing trendsetter Apple will be very important and we will be watching the company´s announcements at future events with interest.”

Apple offers more than 100,000 game and entertainment titles for its mobile devices, many at little, or no cost at all and reported sales of 37 million iPhones in the quarter ending Dec. 31, helping its profit surge to $13.1 billion in the period.


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