Entertainment Industry

Category: Nintendo

Nintendo posts first annual loss in at least three decades

Mario

Nintendo on Thursday posted losses of more than $500 million for its fiscal year -- its first annual loss since the Japanese gaming company began publicly reporting its financial results in 1981.

The maker of Mario and Zelda games in January telegraphed that it would post steep declines in sales and a substantial loss for the year ended March 31. Thursday's results were roughly in line with its grim forecasts, as both sales and losses came in slightly lower than expected.

The Kyoto company, which manufactures the Wii and DS game consoles, recorded a $534.6-million loss on $8 billion in revenue, compared with a $960.5-million profit on $12.6 billion in sales the year before. On Jan. 26, Nintendo warned investors that it would likely post a $804.3-million loss on $8.2 billion in sales.

While sales came in lower than expected, losses narrowed as a result of a weaker Japanese yen. 

Still, the rapid rise of inexpensive smartphone applications for mobile devices such as the iPhone, iPad and Android phones have weakened Nintendo's once-dominant grip on the portable games market. In addition, sales of its Wii console have slipped precipitously as players gravitate to the Xbox 360 and the PlayStation 3, both of which have higher graphical processing power and a more robust online entertainment offering than the Wii.

The 123-year-old company, which started in 1889 selling playing cards, is pinning its hopes on its upcoming Wii U, its next-generation console that is scheduled for launch later this year in time for Christmas.

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-- Alex Pham

Photo: Super Mario Galaxy 2. Credit: Smithsonian American Art Museum

Nintendo: Wii are sinking

Nintendo 3DS

Spurned by consumers who now favor tablets, smartphones and higher-definition consoles, Nintendo Co. posted a 31% sales drop and swung to a loss last year.

The Japanese video game company on Thursday said revenue fell to $7.2 billion in the nine months ended Dec. 31, down from $10.4 billion the same period a year earlier. As result of the steep sales decline, Nintendo suffered a $623.2 million loss for that nine months, compared with a $638.8 million gain for the same period in 2010. The company did not break out quarterly results.

Nintendo saw declines across all of its products. Hard-core gamers abandoned its Wii console for higher-definition machines, including Microsoft Corp.'s Xbox 360 and Sony Corp.'s PlayStation 3, which also plays Blu-ray movies. The company also lost many casual players, many of whom turned to free-to-play social games and games on their mobile phones or tablets. 

Sales of the Wii, which was once so popular that Nintendo had trouble manufacturing enough to meet demand, dropped by more than a third to 896,000 units between April 1 and Dec. 31 last year, down from 1.37 million a year earlier.

Game sales for the Wii, on which Nintendo makes most of its profit, plunged 41%, to 8.9 million copies, from just more than 15 million in 2010. Nintendo saw similar declines for its line of handheld DS consoles and games.

There's more bad news to come. Nintendo also revised its financial forecast, saying sales for its fiscal year ending March 31 would likely be 16.5% lower than it had previously projected in October. It now expects annual revenue to be $8.5 billion, down from its earlier projection of $10.1 billion. Losses are also likely to be wider, growing to $837.8 million. In October, the company said it expected a $257.8 million loss.

But the game is far from over for Nintendo. The company had a formidable war chest at the end of the year -- $2.3 billion in cash and short-term investments. It's also scheduled to begin selling its next-generation game console this year, the Wii U. Sporting a new controller and high-definition graphics, the new device is expected to be more competitive with the Xbox 360 and the PS3.

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Photo: Sales of Nintendo products, such as the handheld DS, fell last year. Credit: Everett Kennedy Brown / EPA

Nintendo bleeds profits, banks on strong holiday

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Nintendo Co., whose Wii and DS consoles fueled the video game industry's almost meteoric growth between 2006 and 2008, is rapidly falling back to earth.

The Japanese game company on Thursday posted a $925.6-million loss during the first six months of its fiscal year ended Sept. 30. That's up dramatically from last year, when Nintendo lost $26.5 million.

Sales were also down as demand for its games and consoles have cooled worldwide, leading to a 41% drop in revenue for the period. Nintendo had sales of $2.8 billion in the first half of its fiscal year compared with $4.8 billion the year before.

The company's newest product, the handheld 3DS console, has struggled to gain traction among consumers since its launch in March, leading Nintendo to drastically cut its price in August from $249.99 to $169.99.

As a result of the price cut and slowing sales of its games, Nintendo lowered its forecast for its fiscal year ending March 31, 2012. Instead of a $263-million gain the company had expected for the year, Nintendo now expects a $263-million loss. Revenue, meanwhile, is projected to hit $10.4 billion, down 12% from an earlier forecast of $11.8 billion that the company issued in July.

But the game's not completely over for Nintendo, analysts cautioned.

"There's no question that the Wii and the DS are at the end of their life cycles," said J.T. Taylor, an analyst with Arcadia Investment Corp. in Portland, Ore. "But there will be a flourish this holiday when Nintendo comes out with promotions and gift bundles. After that, Nintendo's long-term outlook depends on how successful their next console will be."

Even if Nintendo's next generation game console, dubbed Wii U, succeeds in bouncing back the company's market share, many question whether dedicated game consoles can compete with a plethora of connected devices that can funnel all sorts of entertainment options to consumers, from games and movies to television shows and music.

This is especially true of people who play games on a casual basis, the kind of audience on which Nintendo has traditionally thrived.

"Most people interested in playing games casually seem happy to play on their phones for free or close to free," Taylor said.

Still, Nintendo's ability to survive over the years has boiled down to the popularity of its game franchises, including Super Mario, Zelda, Pokemon and Metroid, all of which can only be played on Nintendo devices.

As a result, analysts believe that Nintendo has a solid future in the games business, just not one that will be as large as it once was.

"There is room for them in the market," said Michael Pachter, an analyst with Wedbush Securities, who estimated that Nintendo's business could shrink between 30% and 50%. "But the blue ocean just became very red."

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-- Alex Pham

Photo: Two Nintendo characters, Luigi and Toad. Credit: somegeekintn via Flickr

E3 2011: Nintendo's next game console to have touch-screen controller

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Nintendo Co. took the wraps off its next video game console, which will feature a touch-screen controller and better graphics than its current Wii device.

The Japanese game company showed off the new console at a news conference Tuesday morning in Los Angeles, the opening day of the E3 video game industry conference, saying it expects to begin selling the device sometime after April 1, 2012.


The console is called Wii U, "for unique, unifying," said Nintendo of America President, Reggie Fils-Aime at the company's news conference.

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Nintendo hopes the new console will rev up sales for its products, which have fallen off a cliff after enjoying three years of double-digit growth that was fueled by demand from a broad audience of female and older consumers who bought into its novel motion controller and fitness games.

While sales of Nintendo's Wii and portable DS game consoles were responsible for the lion's share of the industry's rapid growth between 2006, when it introduced the Wii, and 2009, its loss of momentum last year conversely became a drag on overall industry growth.

"As Nintendo goes, so went the market," said John Taylor, a longtime game industry analyst and managing director of Arcadia Investment Corp. in Portland, Ore.

The company is betting that its new console will reignite consumers' appetite for video games. The most visible difference is the new controller, which looks like a cross between a traditional video game controller and a touch-screen tablet. Equipped with an accelerometer and a gyroscope, the controller senses players' physical orientation and how they move, allowing for augmented reality games.

The controller's screen measures 6.2-inch diagonally, allowing the player holding it to potentially get a different view of the game than another player looking at the main television screen.

The new console will also support 1080p high-definition graphics, addressing a shortcoming of the Wii, whose standard-resolution graphics often seemed low-tech compared to its more high-powered rivals, the Xbox 360 and the PlayStation 3. To curb piracy, the device will use a proprietary, high-density optical disc for its games.

Nintendo did not disclose how much it plans to charge for its new console.

-- Alex Pham

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Photos: (Top) Todd Arostegui plays Shield Pose with the new Nintendo Wii U game console at E3. (Bottom) Nintendo's new look. Credit: Allen J. Schaben / Los Angeles Times

Nintendo, battered by slow Wii sales, to unveil new game console at E3

Wiiconsole Battered by declining sales of its Wii video-game console, Nintendo on Monday announced it would introduce a new console in 2012. The announcement came as Nintendo posted double-digit declines in both sales and profit for its fiscal year ended March 31.

The Japanese game company said its revenue slumped 29% to just over one trillion yen, or roughly $12.4 billion, last year. Profit slid 66% to 77.6 billion yen, or $948 million. Nintendo had forecast for the year, issued last May, for sales of 1.4 trillion yen and net income of 200 billion yen.

It was the second year that Nintendo's earnings took a beating. During the previous fiscal year ended March 2010, sales were down 22% while profit fell 18%.

Losses due to the strong yen, which meant sales outside of Japan converted to fewer yen, accounted for $604 million of Nintendo's annual loss.

But the company's core sales of consoles and games also were to blame. After enjoying a massive wave of popularity, sales of the Wii fell 25% to just over 15 million units last year, compared with 20.5 million the prior year.

Sales of its DS series of handheld consoles also took a nosedive. In the fiscal year just ended, DS sales dropped 22% to 21.1 million units, including 3.6 million units of Nintendo's new 3DS console, which was introduced toward the end of March. The year before, Nintendo sold 27.1 million DS consoles.

The waning popularity of the Wii has sparked rumors several weeks ago that Nintendo would introduce a successor console. The company on Monday issued a terse statement on its investor relations site confirming the rumors, saying it will show a playable model of its new console at the industry's E3 conference in Los Angeles in June and will start selling the device next year.

Nintendo declined to reveal details of its new console, code named "Project Café." But game analysts are expecting that the device will sport more powerful processors, making up for one of the key weaknesses of the Wii –- its lack of high-definition graphics, which has made Wii games appear old-fashioned compared to its beefier rivals, Sony Corp.’s PlayStation 3 and Microsoft Corp.’s Xbox 360.

In addition, similar to the PS3 and Xbox 360, Nintendo's new console is expected to have a bigger emphasis on online games than the Wii, said Edward Williams, analyst with BMO Capital Markets.

"The key will be figuring out what Nintendo’s vision for the next 5 years will be and how they plan to bridge a physical world of discs with a digital world" in which games are sold online, either as a streaming service or as downloads, Williams said.  

-- Alex Pham

Photo: The Nintendo Wii console will be getting an update. (Nintendo)

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Nintendo on Wednesday said it will launch a dedicated channel featuring short form 3-D videos and movie trailers for its 3DS handheld game console, set to hit stores later this month.

The announcement, made at the Game Developer Conference in San Francisco, was one of several new features Nintendo is layering onto the 3DS to help it compete against Apple's iPhone and iPad, which have made major inroads into the market for mobile games once dominated by Nintendo.

Reggie Fils-Aime, head of Nintendo's U.S. operations, said the 3DS will be able to support Netflix's instant streaming service and, by late May, be able to connect to the Web via 10,000 wireless Internet hot spots hosted by AT&T.

The Japanese game company also said it will launch eShop, an online marketplace similar to Apple's iTunes app store, to sell downloadable games for its 3DS.

Set to go on sale in the U.S. on March 27 for $250, the 3DS features two screens, one of which displays stereoscopic 3-D images that can be viewed without glasses. Nintendo said it will distribute a number of handpicked 3-D videos as well as 3-D movie trailers to the device beginning in late May.

But Fils-Aime emphasized that "the primary function of the 3DS is to play games." About 18 games, priced at $40 apiece, are slated to launch with the device later this month, including Lego Star Wars III: The Clone Wars, Ridge Racer 3D and Super Street Fighter IV 3D.

-- Alex Pham

Nintendo forecasts lower Wii and DS sales than previously thought as momentum slows

Satoru Iwata with 3DS Nintendo on Thursday gave further evidence that the momentum for its Wii and DS game consoles has slowed.

The Japanese gaming company now says it expects to sell 22.5 million DS portable devices and 16 million Wii consoles for its fiscal year ending March 31. It had previously expected to sell 23.5 million DS's and 17.5 million Wii's.

Offsetting the decline in device sales, however, is an expected increase in the sale of games sold for those systems. The company said it expected to sell 135 million games for DS, up from 125 million previously estimated, and 170 million Wii games, up from 138 million.

Nintendo in general makes a bigger profit on games than on consoles.

Overall, however, Nintendo's sales were down from a year earlier. Sales of the DS fell 33% during the first nine months of Nintendo's fiscal year, which started April 1. It sold 15.7 million DS consoles in that period, compared to 23.35 million a year earlier. Sales of DS games slumped 18% to 98.9 million copies, down from 121.4 million a year earlier.

The Wii also saw a significant downturn in sales. Sales of the console fell 20% to 13.7 million units from the previous year, while Wii game sales fell 4% to 150.5 million copies.

The decrease in sales, plus a sharply rising Japanese yen, clobbered Nintendo's earnings. For the first nine months of its fiscal year ended Dec. 31, revenue fell 32% to 808 billion yen, or $9.8 billion. Net income tumbled 74% to 49.6 billion yen, or $603.1 million. Nintendo estimated that it lost roughly $1 billion from foreign exchange losses due to the strong yen. A year earlier, a weaker yen led to a $121.7-million gain in income.

Nintendo is betting that a strong debut of its newest portable console, the 3DS, will help spark sales. The device, expected to be released March 27 for $249.99, will have competition for the Christmas holidays later this year, when Sony Corp. said it will release its latest portable console, code-named the NGP.

-- Alex Pham

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Photo: Satoru Iwata, Nintendo chief executive, holding a 3DS prototype at E3 in 2010. Credit: Alex Pham / Los Angeles Times

Video games suffer second slump in 2010 as players curtail spending

Kinect Adventures

If the video game industry were an arcade game, you would be hearing the disappointing bloops that signal the player to try again.

For the second year in a row, U.S. video game sales posted a decline, down 5.7% to $18.6 billion in 2010 from $19.7 billion in 2009 and $21.4 billion in 2008, according to a report released Thursday by the NPD Group.

Both consoles and games took a walloping for the full year as consumers curtailed spending in an uncertain economy. Console sales fell 12.5% to $6.3 billion in 2010, and software sales fell 5.6% to $9.4 billion.

"Hardware sales were down 12% in units for the year, likely due to no price cuts and the continuing recession," said Michael Pachter, an analyst with Wedbush Securities. "And the decline in hardware drove the decline in software sales."

One bright spot occurred in a category that is often overlooked -- video game accessories, which in years past included extra game controllers, dance pads or keyboards. This year, however, accessories took off, gaining 13% to $2.9 billion as Sony introduced its Move motion controller for its PlayStation 3 and as Microsoft began selling its Kinect controller for the Xbox 360.

Kinect also fueled sales of the Xbox 360 in December, some of which came bundled with the new motion-and-voice-sensing controller. Xbox 360 sales jumped 42% to 1.86 million units in December, from 1.31 million in December 2009.

Sales of Nintendo's Wii, however, suffered a 38% dive to just 2.36 million units in December, down from 3.81 million a year earlier. Sony's PS3 also declined, albeit less precipitously. It sold 1.21 million PS3s in December, down 11% from 1.36 million.

With the exception of the Xbox 360, declining console sales will put pressure on manufacturers to lower the price, particularly for the Wii, which sells for $199.99 and is rapidly losing steam, analysts said.

"The Nintendo Wii business looks increasingly like a gift purchase business, which means they will have to have a price cut in order to sustain it during non-gift-giving seasons," said John Taylor, managing director of Arcadia Investments.

-- Alex Pham

Photo: A screen shot of Kinect Adventures for Xbox 360. Credit: Microsoft.

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