Nintendo expects first loss ever

The video game giant is getting whacked by a strong Japanese yen and by flagging sales of hardware and software.

By Kim Peterson Oct 27, 2011 2:45PM
What a blow for Mario.

Nintendo (NTDOY), the biggest video game company in the world, is set to post its first annual loss ever. The company had previously expected to make a profit of about 20 billion yen, or $264 million, for the year ending next March.

But on Thursday, Nintendo delivered the crushing news: Instead of a profit, the company could see a net loss of about 20 billion yen. That was a surprise to analysts, who had expected to see a profit of about 12.2 billion yen, Bloomberg reports.

It's the second time in six months that Nintendo has cut its outlook.

How could this happen? Blame the surging yen -- disastrous for a company like Nintendo, which gets nearly 80% of its sales from overseas. In just the six months ended Sept. 30, Nintendo's losses from the exchange rate alone totaled nearly $700 million.

A downturn in Nintendo's business is also a factor. The company made a killing by appealing to non-gamer types. The Wii was a smash with younger children, parents and even grandparents, and children also adored the portable DS handheld.

But in the past few years, games have flourished on smartphones like the iPhone. Farmville and Angry Birds are all the rage. People are playing on Facebook and other online sites.

The very crowd that Nintendo built a fortune on suddenly has dozens of other options.

"Nintendo faces a very harsh time now," one Japanese portfolio manager told Bloomberg. "Competition in the video game industry is getting severe, and Nintendo must fight for customers who are using smartphones and tablets."

On top of that, Nintendo is in that squishy period between major console releases. The Wii is 5 years old -- a lifetime in video game years. Last holiday season, the Wii's share of the console market fell to 42% from 55% the year before. Nintendo is putting the finishing touches on the Wii U, due out next year.

But can the Wii U achieve the same success? Nintendo had high hopes for the 3DS handheld it launched earlier this year, but that device hasn't seemed to excite consumers. In response, Nintendo cut the price of the 3DS by 40% in August. The company cut its full-year sales forecast to 790 billion yen from 900 billion.

The company heads into the crucial holiday period, then, with no new console and a handheld that isn't a knockout. Now is the time when video game sales should kick in, but Nintendo said its games haven't been selling as well as it expected. The company is counting on the next game in its popular Zelda franchise and some new Mario titles to increase sales.

Nintendo is now six months into its current fiscal year, and those six months have been worrisome. The company's net loss grew to $925 million for the first half of the year. Sales fell more than 40% to $2.8 billion.

"They're still in the transition phase," a JP Morgan analyst told The Wall Street Journal. "I can't find much salvation in the numbers."


31Comments
Oct 27, 2011 4:18PM
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The reason Nintendo is flagging is because they've turned thier backs on regular gamers.  There are no quality games coming out.  Just party game shovelware.  We need Nintendo's GOOD games.  Star Fox, F Zero, Earthbound (Mother), Metroid, Kirby.  Thankfully there's a decent Zelda and Kirby game coming out.  If they can get out another good "Smash Bros." sequel with decent online capabilities we'll see Nintendo on top again.  If they get squaresoft to put out a Final Fantasy for the Wii it'll be unstoppable. 

 

Untill that happens I'll be content to play the classic games for download.   Hurry up and put out Earthbound!

Oct 27, 2011 3:38PM
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Wonder if Nintendo will go the way of Sega? Unless Nintendo delivers a product that can compete with Sony and Microsoft their development department better start learning how to code games for those two consoles.
Oct 27, 2011 3:40PM
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No mention at all of the earthquake and tsunami that completely rattled the country and surely had much to do with this loss.

Still though, a couple of great first party games are on the horizon.  Things will turn around.

Don't get too excited Sony fanboys. 

Oct 27, 2011 4:41PM
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such a shame...and yet in my opinion Zelda: Ocarina of Time is the best game ever created (N64)...they really need to come out of the rut they've stuck themselves in with the DS and Wii and what not...go back to the glory days when they catered for gamers..profits will come naturally...i was such a loyal fan of nintendo..i still have my N64 collecting dust somewhere...but to me now it's xbox and ps3 all the way...remember Turok? Kirby? Mario 64? real games? sigh*
Oct 27, 2011 4:17PM
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Not surprising.  The Wii, which was always sold more on the gimick than the games, is in its twilight, holding on to relevancy due to one killer app that's taking forever to get here.  The 3DS, flubbed due to again, a gimicky idea, on top of a poor launch lineup.  I'm sure that will correct next year, but it'l hurt this one.  But hey, if Nintendo can survive the Virtual Boy, it'll get through this.
Oct 27, 2011 3:44PM
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Xbox who? Sony what? ZELDA BABY!!!!!!
Oct 27, 2011 4:14PM
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I do not feel sorry for Nintendo in the slightest. They used to be the only video game company I cared about, I was one of the most loyal fans they could ever hope for. But when they started to sell out & produce gimmicky products like the Wii  & 3DS, I stopped losing interest because the best games just weren't there. Instead of appeasing the loyal fan base that basically MADE Nintendo, they tried to expand too far out & appeal to non-gamers whose loyalties lie elsewhere. Nintendo is failing because they have totally forgotten where they came from, & instead of making awesome memorable hardcore games, they'd rather make a quick buck off of non-quality kiddie games & mini games. The only good game exceptions I can think of are Nintendo's own bread n' butter titles, Super Mario, Zelda, Metroid, & Smash Brothers. Other than that, I can't think of any games on the Wii that I would ever like to purchase.

Oct 27, 2011 5:08PM
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@JHellsing

iPhone SUCKS for gaming. Nothing but stupid cheap $1 expendable games that aren't even worth anything. Nintendo lost it with the Wii, but the 3DS is going to be sold a lot more come Black Friday pretty much. Although I love my Xbox 360, the PC is the way to go. Once you play Battlefield 3 on PC and compare it to a console, there is no comparison.

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aviewaskew....are you mental?!? They LOST 20 billlion yen which is equivalent to 264 million dollars. They didn't EARN that much. That was their PROJECTED earnings. Learn to read.
Oct 27, 2011 4:44PM
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@MALCOME NOYES

i totally agree with you

also,seriously,im am a total earthbound fan.if they ever re-released for any of their new consoles(mr.itoi,why can't you continue the series?),or traslated and released mother 3(i don't say mother 1 cuz they were going to release it before but never did.man,i won't ever see loid again)i would buy a 3ds or wii just to play the game again.

i just hope nintendo won't wind up like sega...

Oct 27, 2011 5:35PM
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I haven't had the desire to buy a Nintendo Wii game since Super Mario Galaxy 2. And I didn't buy that one because I spent all my money on extremely awesome Xbox 360 games that came out at the same time. I will eventually pick it up, but as for the Wii itself, I was very disappointed overall. It was almost as if Nintendo lacked the proper foresight, or they were looking so far ahead that they neglected to appreciate the current trends in modern gaming: online interactions, adequate hard drive space, downloadable games actually worth buying.

I will say this though: the original Nintendo DS is my favorite handheld gaming system of all time. Castlevania FOR THE WIN!
Oct 27, 2011 3:40PM
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I'm surprised this article doesn't mention the Xbox's Kinect.  I don't see tablets and smartphones as much competition because that's a completely different type of gaming.  I would guess that the Kinect is having a huge impact, however.  If someone doesn't have either system and is presented with a choice between having to use a controller, or not having to use a controller (plus having access to hundreds of additional non-motion based games), the choice seems pretty clear to me.  I used to have a Wii, but sold it as soon as the Kinect came out.
Oct 27, 2011 4:13PM
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it's not the yen. there is no innovation at nintendo. the nintendo wii is nothing but a toy-and lackluster at best. zelda and mario?!  hoohumm. the darned console has no hdmi port. wii u? what's up with that? what the heck is it? i'm disappointed.
\

Oct 27, 2011 5:28PM
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in the last 5 years with the wii  only one Zelda and you think you will keep sale up with game that only kids enjoy wow Wii
Oct 27, 2011 4:35PM
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@ cam the cat

The 3DS is hardly "gimmicky".  Granted, it's not for everyone, but I've have loads of fun with mine.  Although, I do admit it took the price drop for me to take the leap.

It's a great little system and I've had a blast playing older Gameboy games that I would have otherwise missed out on.

I do hope to see more first party titles though...
Oct 27, 2011 4:54PM
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I love my 3DS, but unfortunately everyone things it's just a "DS with 3D slapped on" due to bad marketing. Had mine since launch day. Shigeru Miyamoto however made an excelent port of Ocarina of Time 3D, and Super Mario 3D Land looks awesome, as well as Mario Kart 7. Super Street Fighter IV: 3D Edition is exactly like the console port with dumbed down graphics and reduced online features, however the game is exactly the same besides that with streetpass features.

With the PS Vita going to be released in Feburary which I also preordered, Nintendo is going to face a large battle. Remember back in 2004 and 2005 when the DS was struggling before Mario Kart DS released?

Oct 27, 2011 4:16PM
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Obviously no one at Nintendo is intelligent enough to figure out to port some of their games to other phone OS's.

Well Nintendo makes the bulk of its profit from hardware sales, not software, so porting games to other hardware might put them at another disadvantage. And the ported games would be severely crippled versions of the originals, given that most smartphones do not have yet the powerful GPUs and full capabilities of the console.

 

Oct 27, 2011 6:32PM
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As a big gamer since my 40's I'm very sorry for Nintendo but. at the same time, I know I can no longer afford to buy new games for any of my consoles.. The only games now that I buy new are the Final Fantasy games and I save up for those.. It wasn't even that easy when I was working to buy a game at $50-$65 a pop but now that I'm retired it's pretty much impossible to buy more then one or two a year..
Sony, in particular, has made it more then difficult to purchase their consoles and games.. I waited and waited for the PS3 to come down in price but finally ended up buying a used one because it never did come down to a more affordable cost..
The big game designers are going to be hit hard during these times because parents and grandparents simply have more important things to buy then games.. EBay and other used game places will do alright..
Maybe Song and Nintendo, etc, should think about bringing the price of games down, they ARE a little on the outrageous side and always have been..

Oct 27, 2011 4:34PM
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Nintendo has always put out top rate first party games. They were 3rd behind microsoft and sony doing this and depending on those 'gamers' to help sell their systems. They didnt get on top again until they zeroed in on 'nongamers'. That is called good business. New, easily played portable games are hurting them first because of their market demographic but they'll be fine like they always are.
Oct 27, 2011 6:40PM
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The problem with Nintendo is not the games them selves but the controllers they have always had goofy controllers all but the snes and the original Nintendo. I seen a few posters note the system is more of an activity device for mom and dad your sir are correct it has become more of a fancy interactive way for the whole family to get exercise and have fun doing it. i personally use it for that since i cant pay to go to a gym and can use it for rehabilitation therapy. I still believe though Nintendo is a great product.

Edit: my favorite hand held of all time would be the sega game gear i had one till the screen started burning out and hurting my eyes
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