The new issue of Nintendo Gamer is on sale now.
Late last year, Nintendo sent shockwaves through the games industry by saying they were expecting their first annual loss in their 30 years in the business. There were outpourings of words we didn't quite understand as people we'd never heard of declared that it was the beginning of the end for Nintendo. Just look at the balance sheet, they said. Was that a Wii Fit reference? We weren't sure, so we set about finding out.
Dig a little deeper and the picture becomes even bleaker. Of that 70 billion, 25.5 billion was lost in the first three months of the financial year; Nintendo lost even more money in the second quarter than it did in the first, despite the 3DS price cut in August and hardware sales tripling.
EXCHANGE EVERYTHING
What caused the loss? It's tempting to put it down to research and development costs; Nintendo are, after all, beavering away on Wii U ahead of its launch later this year. Unfortunately, R&D spend rose less than 2% from 2010, when Nintendo were putting the finishing touches to 3DS and, no doubt, also working on their Wii successor. Marketing, then? They had the 3DS to promote, after all. Nope: advertising spend actually fell by almost 10%.
The reality: it's mostly down to sales.
Nintendo were worst hit in the US, where revenue fell by 85.9 billion (£708.9 million) - a drop of more than 50%. Exchange rates also played their part. The actual value of currencies changes on a minute-to-minute basis, according to what's going on in the world. With much of the West trying to pull itself out of a financial crisis, and most European governments scrabbling down the back of the sofa to pay their bills, the euro, the US dollar and our pound are all struggling. The Japanese yen, however, is fine. This means that the £40 you spend on a Nintendo game is worth a lot less in Japan than it was a year ago.
This is something that's not just hitting Nintendo but all Japanese companies that are big exporters, and Nintendo said their losses due to foreign exchange rates alone came to 52.4 billion (£432.4 million). All of this led Nintendo to adjust their forecast for the full financial year and predict an annual loss, for the first time in 30 years, of 20 billion (£165 million).
Just as it had after the Wii U announcement at E3 in June, Nintendo's share price tanked. Investors saw the company as a relic, unwilling or unable to adjust to a gaming landscape vastly changed by 69p smartphone apps. They sold Nintendo stock in droves, and when there's a plentiful supply of shares on the market, demand for them goes down, and so does the price.
Comments
41 comments so far...
roll3rtoast3r on 26 Feb '12 said:
Ha!
Balladeer on 26 Feb '12 said:
Sorry chaps, but the company isn't dead. They're suffering, but far from gone. And if they have to up their games to up their profits, is there anyone who wouldn't be happy?
If they go down the iPhone route, now... Well that's more problematic. But I think we're a good decade of poor performance (and does anyone remember 1996-2006?) away from that.
Darkwun on 26 Feb '12 said:
*snigger* Nintendoomed. I see what you Nintendid there. /snark
Don't get up. I'll show myself Nintendout.
TOKEN on 26 Feb '12 said:
Ill admit,i sometimes doubt if ninty can pull it off.And i think deep down they will,the wii u pad has get potenial for games,DlC,?(3D media ?)and even if the wii u has 1GB ram built in games will look better and more polished than anything out their at the moment.With that said ninty need to plow money into the games being new or old even get in another 1st party dev besides retro...
Cocopander on 26 Feb '12 said:
Nintendo can't fail! Granted I haven't purchased anything from them since GameCube... but Nintendo is what got most of us into videogames. Yeah my want for Nintendo to succeed is based in nostalgia... and if I gotta buy a 3DS then so be it.
Spirit6666 on 26 Feb '12 said:
The article got it right, it's all about dumb investor.
I mean look back at the Gamecube era. They were making money even if the GC sold only about 22 millions units worldwide. Now, it is a different situation. They are losing money not because the sales number are bad, but only because some investors are scared. But the bottom line is the sales numbers are great.
Darkwun on 26 Feb '12 said:
This. I'm both excited and apprehensive about the future. I goddamn love Ninty, and although notoriously middle-fencey in forums, I always back them. Probably because they have the harshest backlash from people it makes me even more defensive. But at the same time I do worry they'll rest on their laurels a bit. I know they're going nowhere, but I have high hopes for them and do hope they truly up their game and not just stubbornly edge into the scene as usual, or listen to fans but say "Yeah, we're gonna listen, but wait, this way is slightly better."
N64: Cartridges. But we get more mature games, powerhouse machine.
Gamecube: Control pad could have had a few tweaks and more buttons, proprietry disc too small, poor support for third party, but good power (despite so many I see in forums thinking th GC was the inferior of the three technically)
Wii: Well, can't really argue with it from a business standpoint. megabucks is megabucks. but for the sake of my point... considerably inferior specs, motion plus should have been a day one investment... Wii codes. Never again. Seriously.
I'll actually find grounds to sue. Terrible shovelware. That seal of approval used to mean so much. Better online support in general.
Sounds like a negative post, but like I said I'm a massive Nintendo fan. It's just I'd like a SOLID machine where I don't feel slightly disheartened at times having to defend perceptions based on some stubborn decisions they make when so many other aspects of Nintendo are damned solid. The Wii U's entering into a pretty hard climate, so it's gonna need to be a really solid machine, and they will have to actually listen this time. We have Iwata now, not Yamauchi. Please Ninty, don't hurt me again! I love you, and I'll stay with you forever, but I can see us sleeping in seperate beds if this carries on :'(
Coldcuts on 26 Feb '12 said:
The gaming industry is a volitile market that goes up and down as much as a heart rate monitor. Nintendo will be fine. They are specailists in the gaming world. Plus the japanese are smart:)
me4pd on 26 Feb '12 said:
Apart from anything else, if Japanese corporation tax is anything like it is here then the loss reliefs will be pretty generous and they'll be able to set this loss against profits in the future and actually get a tax rebate. So basically when big companies like this say they have a loss they mean they just aren't going to be paying tax on upcoming profits. Bad, you might say. But when the good times come back the tax man will get it all back so he's happy too.
Of course, they do actually have to make the profit in the future...
As for investors being idiots. Well, Nintendo is a private company meaning it (more or less) chose its investors so they've only got themselves to blame in that regard. Although they do seem to be listed.
Lastly, Pachter strikes again!
http://www.tmrzoo.com/2012/32651
Darkwun on 26 Feb '12 said:
Below his analaysis:
I was saying something about notoriously backing Nintendo... lol
He quite freely admits he's being objective. I won't deny a large portion of Wii's market share is the 'Casuals' but we can't possibly know where the handheld market has gone. Dedicated portable machines still have their place, usually for control interface alone. I wouldn't go as far as to say a large percentage of handheld gamers simply just upped and left for iphones and Androids. The handheld market saw a decline before they came along. the iphones et al are just a shiny bit of kit that are good for impulse buys and you can go "Ooh, that game looks good, I'm gonna buy it!" rather than "Man I can't wait for Uncharted/Kid icarus to come out!" the only thing that infuriates me is the guy's ego.
of course, that's just opinion. Much like the man himself said. So, Pachter, if you're reading this and the above context infuriates you, I shagged your Mom.
Imaduck on 26 Feb '12 said:
This years being rough on Japan, there were obviously going to be bumps. Nintendo will be fine.
Balladeer on 26 Feb '12 said:
Thanks for being the twerp who had to bring the console war into this.
NB: Sarcasm.
El Mag on 26 Feb '12 said:
SEGA FO' LIFE
And stuff.
rivalz on 26 Feb '12 said:
damn this is very bad
hixxy4 on 26 Feb '12 said:
Wii U really needs a good launch price, or i think most will wait till next xbox and ps4
Mattoto on 26 Feb '12 said:
Nintendo have always focused on younger audience family since DS / Wii , with colorful games like mario etc.... in terms of sale , if they fall , well , they won't fall alone...
Addct on 27 Feb '12 said:
I'm surprised to see such a well-loved company like Nintendo be in so much trouble. It goes to show that in the current age of video games, the social aspect of gaming, in general, has taken over. And seeing Nintendo failing in that particular category pains me to really see them missing out. Wii online needs to be on par with the PSN netwrk and Xbox live to really succeed in the competitive console market.
Aer0Smith360 on 27 Feb '12 said:
I too very much doubt Nintendo will go the way SEGA did! Even if they are having trouble but everyone knows, even if folk don't want to, the Wii U will sell! Maybe not like how Wii did but could be close. 3DS is selling fine! All Nintendo need to do is get on board with Online gaming, have a decent marketplace and prove why they have lasted for so long! I haven't bought Nintendo branded items since the Gamecube era, Wii wasn't my thing...also with Nintendo not having anything to "Fall" back on like MS & SONY what ever happened to the rumour Nintendo were to head in the film industry? I heard if Nintendo ever went out the gaming industry they were to concider making CGI films of their mascots? anyone know?
Xenohort on 27 Feb '12 said:
I'd cry if they ever shut down lol
stealth on 27 Feb '12 said:
The 3ds is doing far more impressively than they say
16+ million sales worldwide
Records broken in the US, japan, europe
the original ds only sold around 13 million during the same time frame.
toaplan on 27 Feb '12 said:
Microsoft can absorb possible losses resulting from unprofitable hardware, because of their still insanely profitable PC-Windows / Office monopoly. They have tens of billions of dollars of cash in the bank.
Sony is in a much more precarious position, even with their diversification into other consumer electronics branches. They have just been bleeding money ever since the financial crisis of 2008 and the entire market valuation of the company has shrunk to just over 20 billion dollars - not even a tenth of Microsoft's 260 billion dollars market valuation.
http://www.newsdaily.com/stories/tre811 ... y-results/
Nintendo is also racking up huge losses every quarter, but they still have a big cash reserve as a cushion against all the recent operating losses. Still, so much depends on the WiiU, as the 3DS isn't contributing hugely to bottom line profits, because of the deep price cut. Due to their complete dependence on the ailing and declining (financially, not in terms of quality) console games market, I'm predicting that Nintendo will be the first to exit the console hardware business, if the WiiU sales-wise performs more like the Dreamcast or the Gamecube and can't repeat the Wii-mania of 2007...
Oh, and EA's 15-in-a-row quarterly losses are mostly accounting trickery. Their unofficial (non-GAAP) financial results and cash-flow are almost always positive...
cheesedoodless on 27 Feb '12 said:
nintendo surely to fail when the new system comes out. i mean seriously a controller with a touchpad and plus you can have only ONE per console...
Deathwar on 27 Feb '12 said:
Lets face it guys your beloved Zelda and Mario games are past there glory days and Nintendo has nothing else to make a ton of money off of.
rhyfel on 27 Feb '12 said:
i huge chunk of nintendo's success was due to the wii's casual games market "ie, not proper gamers" now those wii's are probably gathering dust under the TV's also owning a nintendo wii was also a fashion thing even 80 year old grannies where buying them also nintendo's own lack of support for the wii and the economic downturn, all have had a knock on effect then thay go and release a expensive handheld in the form of the 3Ds and i wouldn't be surprised if next years financial loss will be even greater than this years, i bet all the nintendo's bigwigs have got everything crossed hoping the WII U is a success, if it isn't nintendo could possibly go out of business or at least a heavily revised company.
SunStart on 27 Feb '12 said:
pure,clear...
SunStart on 27 Feb '12 said:
agree with you
illage2 on 27 Feb '12 said:
I am not surprised Nintendo are failing. They failed to realise what gamers want and instead don't produce true game consoles, nor do they have any AAA games other than Mario and Sonic (which have also become s**t and stale).
The Wii U is going to fail also, as Nintendo are pushing people to use a controller that gamers do not want.
Nintendo need to learn that just because something is popular in Japan, it doesn't mean it's going to be popular everywhere else.
Oh yeah and everyone saying the Wii sold well because of casual games is bulls**tting, the wii only sold well because at launch it was the cheapest console on the market at only £180, it is now only £130, but regardless it failed because of nintendo's stupid kiddies games.
richomack360 on 27 Feb '12 said:
I would love to see a (this may sound strange) less revolutionary device and more of a back to basics machine. Something like a next generation console with no faffing motion controllers (they are a fad) no screens on joypads, no strange name - just a hardcore console with beefy innards capable of pushing games like Zelda, Metroid (and please make a sequel to Cybernator) into the next gen.
Innovation is good, but Nintendo needs to get back to basics, the last few times I got excited about something on a Nintendo console were Street Fighter 2 on the SNES and Goldenye on the N64 (although Last Story looks good, but its on the wrong console)..........and that was a long time ago
me4pd on 27 Feb '12 said:
like the GC? Yeah, that sold brilliantly. So well that Nintendo thought they'd just go in for the same old basics again.
Bah. I'm sounding like a fanboy...
Look what you've done to me.......
MD1500 on 27 Feb '12 said:
The 3DS is doing well now. In fact, it's selling faster than the GBA, DS and the Wii....
Plus, 2 new Pokemon games out this year....
Nintendo will be fine.
And I'm convinced the Wii U will sell like hot cakes.
toaplan on 27 Feb '12 said:
from Wikipedia:
NES - 62 million
SNES - 49 million units sold globally
N64 - 33 million
Gamecube - 22 million
Wii - 95 million
http://en.wikipedia.org/wiki/List_of_be ... e_consoles
The Gamecube struggled against the PS2 and even ended up selling fewer units than the first XBox. Fortunately, the fantastic sales of the Wii and DS have left the company in a fairly secure state financially. Financially Nintendo would withstand even worst-case sales of the new console, but considering the problems with the 3ds, motivation to stay in the hardware race may be lacking by then.
richomack360 on 27 Feb '12 said:
SNES sold fine, because it had brilliant solid games. (and not a lot of competition) I don't really want to spend my hard earned cash on Zumba 6 for the wii....more stuff like Xenoblade and Last Story will do.
Striffe on 27 Feb '12 said:
I truly hate this path they are taking I love nintendos games but hate the controllers. They make a fun games bad, I know they were trying to get something fun a different with it but it ended up just being tedious and unfun. This new idea doesn't look any better.
porkchopz on 28 Feb '12 said:
Nintendoomed?
I'd say they're more Nintendone for...
me4pd on 28 Feb '12 said:
Like you are sort of suggesting. There isn't one reason why consoles succeed or fail. So why you can write off Wiiu already I've no idea. Or is that even what you were saying? I can't remember. Let's not fight. Let's be friends.
porkchopz on 29 Feb '12 said:
Reported for this comment! WTF! Really?!!
To whichever little crybaby reported me I would say: "Nintendon't throw your dolly out the pram next time please."
Balladeer on 29 Feb '12 said:
That would be me, although the report was less for the comment and more for the fact that you're a tedious little Sony fanboy troll.
porkchopz on 29 Feb '12 said:
Not one for rehabilitation then, eh?
I was doing fine under my new username till the mods started stirring it. That was obviously a joke, especially if u read the puns at the start of the thread.
...and how the feck can Paradaz get away with his tricks yet I get trolled by a mod for trying to post normally. Is there an expression for getting trolled by a mod - "trod on" perhaps, lol?
ricflair on 29 Feb '12 said:
I don't think I've ever seen you make a post that isn't trolling/trying to wind someone up/purposely over exaggerating your love for Sony! There are loads of dicks writing off Nintendo before we've seen a finished Wii U anyway, so you'll probably just disappear into the crowd!
At least paradaz mixes genuine opinion and discussion, and sometimes even help in the PC forum, with his anti Sony stuff!
porkchopz on 29 Feb '12 said:
Well, maybe you should take a look at my history of recent posts then!
I've never had a problem with Ninty at all and may even buy a Wii U tbh.
Sure, I've been a wind-up merchant in the past but Daz is just plain nasty at times, trying to get a rise out of people by mocking their unemployment, obesity problems, etc. Whatever he can to get a reaction...
I'm just a borderline Sony fanboy and not ashamed of it!
Balladeer on 29 Feb '12 said:
I'm not saying Daz was perfect either - we had a few jousts in my time as mod. But you admit you're winding people up. You're clever enough to know the effect your posts are having. And that's worse than just being fick.
I'm all for giving second chances, but you've spent a lot. So if you want to make the most of this one, I'd keep the jokes to a minimum until you can prove that you're not a troll.