3 Reasons Why Nintendo Took A Financial Downturn [MUO Gaming]

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gaming   3 Reasons Why Nintendo Took A Financial Downturn [MUO Gaming]It was not long ago that Nintendo was setting the video game world on fire with the two most popular gaming systems on the market. Sony and Microsoft were in an epic battle for second place, because there was no point in even trying to beat the Wii in console sales. Nintendo was literally outselling the Xbox 360 and PlayStation 3 combined without even breaking a sweat and on top of it, their system was actually profitable, whereas Sony and Microsoft were initially posting losses on every unit sold. The Nintendo DS could have easily been the only handheld gaming system on the market, because the PlayStation Portable was selling like a lead balloon.

All this leads me to one question – what the heck happened? Nintendo announced their earnings, or lack thereof, for the 6 months leading up to September 2011, and they posted a $926 million (70.3 billion yen) loss. That number is staggering. The company which seemingly could do no wrong two years ago is losing almost a billion dollars in a period of only 6 months. This obviously is not a matter of luck, or unfortunate timing. There has to be a reason Nintendo is taking a financial beating.

They Entered the Fad Market

How many people do you see riding around town on a Razor scooter? Do you still see little kids walking down the street playing with their Tamagochi? Do you remember when Tickle Me Elmo was not available in any store because every kid had to have one? This is exactly the market Nintendo entered with the Wii. They tried to capture the interest of the casual gamer, and left the hardcore gamers behind. At the time, you could not argue with the results. Their system was selling gangbusters, and the money was coming in huge in a way that Nintendo had not seen in a long time.

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razor   3 Reasons Why Nintendo Took A Financial Downturn [MUO Gaming]

Things were looking great for Nintendo, but slowly console sales slowed down, which is pretty standard in the console business, as Microsoft and Sony were not moving anywhere near the units they used to. The difference between their situations is that the Wii was a fad for all these “casual” gamers. They bought their Wii, played Wii Sports and never went to the store to purchase another game again. This meant that once the initial sale of the console was complete, Nintendo and third-party developers were not seeing another cent from those customers.

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The fact is, fads are great for a short time but it is the “hardcore” gamers, who support a company for the long haul by purchasing software, downloadable content and accessories for their console, and with the Wii, Nintendo did not capture much of that market, and they are taking a financial beating because of it.

The 3DS Price Fiasco

The Nintendo DS has sold an insane amount of units throughout its life. Part of the reason for this was innovative dual screen design, and the awesome touch screen interface. A huge part of this was also the fact that the system was affordable for pretty much anyone. For gamers, being able to take all their favorite Nintendo games like Mario, Zelda and Pokémon with them on the go for a reasonable price was a winning proposition.

nintendo ds lite   3 Reasons Why Nintendo Took A Financial Downturn [MUO Gaming]

Flash forward a few years and along comes the Nintendo 3DS. It stole the show at E3, the first year the press could actually play with the device. Members of the media (myself included) waited in line for half a day at E3 just to get our hands on the device for a few minutes. We were blown away. The graphics looked great for a portable system, and the 3D actually worked. It looked like another big win for Nintendo.

dsvs3ds   3 Reasons Why Nintendo Took A Financial Downturn [MUO Gaming]

After a time of happiness, Nintendo announced the price. $250 for a portable system sounded like an absolute formula for disaster. To put in perspective, an Xbox 360 starts at $199, a PlayStation 3 starts at $249, a Wii starts at $139, and a Sony PSP starts at $139. It seems hard for me to accept purchasing a portable system for the same or more than an Xbox 360 or PlayStation 3 (although I bought one for the full 250, go figure).

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Of course, Nintendo lowered the price of the 3DS to $169, and gave people who bought the system at full price 20 free downloadable games, but the damage had been done already.

Apple

This one might sound a little crazy, but it is hard to ignore the power of iOS as a gaming platform. The recently launched iPhone 4S sold over 4 million units in the first weekend. All of those people, plus the millions of other iPhone and iPod Touch users are potential customers for Apple’s app store. Each one of them could become a gamer, even if they only spend a dollar on Angry Birds or Words With Friends.

infinity blade 2   3 Reasons Why Nintendo Took A Financial Downturn [MUO Gaming]

I will admit that I prefer to do my portable gaming on my iPhone because I do not have to carry an extra piece of hardware with me, and I am sure there are other people who feel the same way. Nintendo’s President has even said that the iPhone is hurting gaming because their prices for games are too low, and they devalue games in general. If Satoru Iwata is taking notice of the iPhone, we know it has to be more than just a small blip on Nintendo’s radar.

nokiasnake   3 Reasons Why Nintendo Took A Financial Downturn [MUO Gaming]

There was a time when gaming on a phone meant nothing to a company like Nintendo. Playing snake on a phone just could not compare to playing games like Mario Kart and Zelda on a handheld gaming system, but times have changed, and some iPhone games look better than DS and 3DS games. It is hard for Nintendo to sell a system for $169 and games for $30 when you can get an iPod Touch for $199, and quality games for around a dollar.

Conclusion

Nintendo is releasing a new Wii, which will have much improved graphics and another completely new and creative controller design. I hope that the Wii U, along with the price reduction on the 3DS will pull them out of this slump. Only time will tell, but Nintendo has a track record of correcting the ship when it seems like they are dead in the water.

What do you think are the reasons Nintendo is suffering financially now? What could they do to get back on track? Let us know in the comments!

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13 Comments - Write a Comment

Reply

DpwnShift

The first point also applies to Nintendo’s 3DS: ¬†3D is neat and works okay on the device, but it is also 100% a gimmick. ¬†I don’t think that even several years down the road people will be putting on goggles to watch TV, or playing games that require an exact immovable viewing angle. ¬†And while the initial pricing may have been a “fiasco”, people forget about that after it is over. ¬†The lack of quality games is what is really holding the portable console back- The 3DS launched in March of this year, and in those eight months, only a single 3DS title (The Legend of Zelda: Ocarina of Time 3D) has been rated an average of 9.0 or above by reviewers! ¬†GAMES make or break a console, and 3DS owners have seen few worth buying…

Octopop

Many game reviewers just don’t like the 3DS, and are grading harder and from the reviews they seem to have not even played the games.

Reply

M.S. Smith

Nintendo’s mistake with the Wii is that they built a mass market consumer product, then sold it and treated it like a console for gamers.¬†

If you’re going to be behind the curve in hardware, that’s okay, but you need to update it rapidly to maintain excitement and keep up with competition. And you also need to make sure you have quality content that’s easily accessible, but in stores and digitally. Otherwise, consumers will buy it, then forget about it.¬†

Hopefully Nintendo will learn, but the new console tells me they haven’t.

Dave LeClair

The new console looks like another gimmick that will quickly be forgotten by the casual gamer. 

The fact that you can only use one of the controllers with a screen tells me Nintendo just doesn’t “get it.”

Reply

Suhel

I still love Wii, it doesnt hurt to have two gaming consoles. Wii+Xbox=Fun filled hours..  ^^.

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Austin Beatty

The problem with the Wii is that in my opinion, there are NO good 3rd party games. There are a handfull of good games, Mario Galaxy 1+2, Twilight Princess and soon Skyward Sword, Brawl, Mario Kart, etc. But 90% of the games are complete crap in my opinion. Just go to Gamestop and look at the Wii games, most of them are just a complete joke. The ones that are actually good don’t make much use of the motion controls, because motion controls just aren’t very practical for any “real” games. Sure, games like Wii sports are cool…for like an hour, but then you never play it again. It’s the games like the ones I listed that keep you coming back, and those simply don’t need motion controls very much (yeah, they use it a little, but it’s not significant)

Reply

Fly Smasher HD

Many games are coming with 3Ds which i dont like cant play comfortable with the 3D pictures, Truly Apple is the best all these in the list.

Reply

Dave LeClair

So your chart that refutes my claim shows Microsoft with 3 more games per system attach rate, looks like my claim is valid. I hate to tell you, but your “hard facts” do nothing to shoot down my¬†argument, unless of course you spin them to show that one other console is doing equally poorly, and leave out the fact that they are getting crushed by another one.¬†

As far as Apple is¬†concerned, I think the President of Nintendo is better at judging a threat than any of us, and if he thinks they are threat, then they are a threat. And the reason I didn’t mention anything about Sony are twofold, 1. This article isn’t about Sony, and 2. No one buys PSPs as it is, so Apple makes no difference there, PSPs don’t sell, and they will continue to not sell.

Please, don’t take offence, I am not insulting Nintendo, just posing reasons why they might be doing so poorly.

sirroman

Last time I checked, 1,42 isn’t 3. Unless you didn’t really read the chart.

Also, your point was: “Wii is a fad > so it has low attach rates. > So it should address only the hardcore gamers”.

My point is: 1) “addressing the hardcore” isn’t enough, otherwise Wii should have an attach rate lower than both PS3 and X360. 2) is a 1,42 lower attach rate really a problem when you sell 54% more HW?

(Besides, attach rate is a useless metric for your argument, since it takes into account the entire lifetime of the console, while you should be looking at numbers of 2011).

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About Apple: there isn’t anything that shows that Apple is responsible to the SUDDEN financial problem. What Apple branded product is responsible to this sudden problem? Was it iPad? Was it Iphone 4S? Is iOS gaming in 2011 much stronger than it was in the previous years?

Please, read again, I SAID that Nintendo should watch out for Apple, but you didn’t bring any fact to support it. My quarrel with your argument is exactly this.

—-

Also, you didn’t take into account currency, which is one of the biggest problem Nintendo is facing (along with the fact that they are losing money with each 3DS, which I forgot to say in my previous post).

Dave LeClair

Wordwide attach rate for 360 is 10.90, for Wii is 7.98, that is almost 3 exactly.

Check out these stats if you don’t believe Apple is suddenly a problem, it proves my point one hundred percent.¬†http://www.macrumors.com/2011/11/09/ios-and-android-grab-58-of-u-s-portable-gaming-revenue/

sirroman

1) 10.9 is for Xbox… Last time I checked Xbox isn’t Xbox360.

2) Again, i said REPEATEDLY that Apple IS a problem (right now, 3 times), but that you didn’t bring anything to prove that Apple is a problem RIGHT NOW. Aren’t you happy that I made you look for evidence? Was it that hard?

Now look for evidence supporting your first argument. I’ll be here waiting.

Like I said, you don’t sound that much like a fanboy, but your article is full of holes.

Harry

it sounds like you are a the fanboy…. the in-denial-fanboy.¬†
Nintendo became a sell out company with the Wii and they got lucky with the timing during the recession. It was a safe bet and lucky shot at the same time.Its was a smart desperation move but a sell-out move to keep them in business none the less. Its good but I am not really impressed because I knew until the fad fades they were living on borrowed time against the PlayStation & M$.
I don’t want Nintendo to fail but to know their place in the world and not be too greedy and arrogant. I hope they learn their lesson before its too late because I wouldn’t mind if I can play Mario & Luigi on my PlayStation, Apple iOS & Android devices.

sirroman

Think of me as whatever you want. It doesn’t change the fact that this article is very, very poor. The author tries to explain something he clearly doesn’t know anything about: economy.

With that said, I would love to see this article rewritten. Right now it is rubbish.

Besides, deny my points with arguments. I would be glad to discuss this topic with you.

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