July 25, 2012

Nintendo Posts Losses, But Is it Game Over For Game Maker?

Peter Suciu for - Your Universe Online

Mario, Link, Pikachu and the rest of the Nintendo´s franchise characters have faced many a battle, but it could take all their combined powers — and some luck — to save the day for the world´s largest maker of video-game consoles. The company posted its first loss in three quarters, in part as the stronger yen reduced international earnings.

More worrisome for the company is that the 3DS handheld system, which is the latest in a long line of portable consoles, remained unprofitable. The company had already cut the price of the system less than six months after it was released — a surprising move but a necessary one as sales lagged behind estimates.

While sales of the 3DS have surpassed 5million units in the United States and 6million in Japan since it was released in February of 2011, sales have slowed.

As a result Kyoto-based Nintendo lost 17.23 billion yen or roughly $220 million. That is actually deeper than analyst forecasts of 16.4 billion-yen.

However, the 3DS will be finally be profitable — even with the price cuts — beginning this month the company announced.

This is a significant turn of events for the company, which had seen its Wii system become a world-wide breakout hit. But that system was released back in 2006, which is many, many lives ago in video game time. Nintendo´s Wii, which was the first system to offer motion control functionality, also faced competition from rivals Sony and Microsoft, which each added motion control to their respective systems two years ago.

Nintendo will have a leg up on its competition this fall, as the follow-up to the Wii is released for the holidays. The Wii U system is expected to arrive in time for the 2012 holidays — but pricing has not been announced, and if past trends are repeated the system will be in short supply and in hot demand.

However, a final wild card could be a greater threat for the House that Mario built — and it isn´t just Donkey Kong.

The video game industry as a whole is still in a prolonged real-sales slump, which has seen a significant shift to digital downloads along with a move to casual game offerings on social network sites such as Facebook.

Sales of packaged video games have fallen for nearly two years. This no doubt is a result of the systems showing their respective age. The leading selling console, Microsoft´s Xbox 360, was released in 2005 — a year before the Nintendo Wii — while Sony´s PlayStation 3 was released just days before the Nintendo system hit store shelves.

And while the Nintendo Wii was once hot — today it isn´t as much. According to NPD Group sales figures Nintendo sold 9.84 million Wii machines in the year ended March 31, compared with 13.9 million PlayStation 3 systems in the same period. Microsoft sold 14.9 million Xbox 360 consoles in 2011.

As more gamers also look to a device in their pocket — namely their smartphones — they aren´t jumping on the portable systems as they had done in the past with the GameBoy and its subsequent follow-up systems.

The question now is whether the Wii U will get the industry as a whole out of the rut it is in. The interesting part here is that way back in 1985 it was the original Nintendo Entertainment System (NES) that saved the video game industry following the great crash that saw the end of Atari and Intellivision as the dominant players in the game arena.

Can Nintendo save it again? Never rule out Mario and his friends.