news The Australian division of Japanese video gaming giant Nintendo has taken another staggering hit to its finances for the second year in a row, losing a further 36 percent of its overall revenue over the past year as its flagship Wii U console has flopped with consumers due to what is perceived to be a lack of quality games.
The company’s finances have been suffering for some time. For example, for the year to 31 March 2011, Nintendo Australia booked $339.7 million in revenues, capping off a strong growth period for the company in Australia. The company’s Australian revenues had grown strongly over the preceding five years as it made money hand over fist from its successful Wii console. To illustrate how strong that growth has been, in 2006, Nintendo Australia made just $71 million in revenue from Australia.
However, financial results filed in August 2012 with the Australian Securities and Investments Commission reveal the company’s revenues to 31 March 2012 sank to $200.1 million — a drop of 41 percent in just one year. For that period, Nintendo Australia said it made an $11.4 million net loss, compared with a $3.6 million net profit the year previously. It also spent dramatically less on marketing — $28.5 million compared with $43.4 million the year previously.
This month, Nintendo has revealed a new set of devastating financial results. In financial results filed with ASIC this month, the company revealed it had made just $127.37 million in revenue from Australia over the 12 months to 31 March this year — down 36.3 percent on the preceding year. The company also made a larger net loss of $15.1 million, and once again it cut its marketing budget, down by about $10 million, to reach a total of $18.4 million for the year to 31 March. The company had 80 Australian staff as at 31 March.
The news is particularly striking for Nintendo, as during the financial period measured in the report, Nintendo had a major console launch — its Wii U console, which hit Australia in late November last year. Major hardware launches typically substantially raise the revenues of consoel manufacturers such as Nintendo, Microsoft and Sony for a period after they launch, due to the capital investment (between $350 and $430 for the Wii U) which consumers are required to pay to buy in to a certain ecosystem.
In addition, marketing spend is typically substantially raised during a console launch period, as console manufacturers attempt to persuade consumers of the benefits of upgrading from the previous generation of consoles to a new generation; typically through promises of new features, better graphics, enhanced gameplay and so on.
The fact that Nintendo Australia’s marketing spend and revenues both decreased substantially in a year in which it launched a new console in the Australian market is likely to indicate that the company did not sell, and perhaps did not even expect to sell, many Wii U units — meaning the company was attempting to cut its losses in the area by keeping marketing spend small.
Nintendo revealed last week that it had sold only 3.6 million Wii Us in total since the console launched last year. In fact, its original Wii unit is outselling the Wii U in some areas. Its 3DS handheld console line is doing better. The company is globally making a substantial financial loss at the moment.
Industry speculation about the cause of Nintendo’s financial problems has focused around several key areas. Firstly, the popularity of Apple’s iPhone and similar smartphones running Google’s Android platform has shifted the emphasis of mobile video gaming away from traditional powerhouses such as Nintendo (with its DS and 3DS systems) and Sony (with its handheld PlayStation line) and towards these new players, with major third-party studios now devoting resources to the smartphone platforms.
Secondly, although Nintendo’s own games continue to be popular — for example, the Mario and Zelda franchises — the company has sometimes struggled to get new titles in the series on to new platforms — for example, it launched the Wii U without a new Zelda title to extend the series. Nintendo has also struggled to attract third-party developers to its Wii, Wii U and 3DS platforms, due to a substantially different development environment compared with major industry players Sony and Microsoft. It is believed that many developers find it a much easier matter to develop platforms jointly for the PlayStation and XBox 360 platforms, and even for Windows PCs, than for Nintendo’s Wii platform.
In Australia, Nintendo does have a strong existing install base for its consoles, with several million Wiis having been sold, and hundreds of thousands of 3DS units still being used. The issue for many Australian gamers has been a lack of fresh content for the Wii since it launched in 2006 — while rival platforms have continually launched new games. The Wii U is expected to get a boost over the next year through the release of substantial first-party titles by Nintendo. However, it will also face increased competition, with both Sony and Microsoft looking to launch their next-generation consoles for the Christmas buying season at the end of 2013.
Image credit: Screenshot of Super Mario Bros
I reckon with the start of Pikmin 3 sales will start to pick up.
Coming next month is The Wonderful 101. Then a bit after that is Wind Waker HD.
Then the next Donkey Kong game and for xmas 3D Mario World.
Not to mention the 3rd party releases like CoD and Watch Dogs.
But I will say, Nintendo has failed immensely on the marketing side! Where are the Wii U ads?? People are still confused about Wii U, thinking the GamePad is just a new accessory for the Wii. Also I think the Wii U name is kinda bad. The U is hardly noticeable (and again, causes confusion). Personally I reckon they should’ve called it Super Wii ;) hehe
I have a Wii U and I really like it. I think it has some neat features and the GamePad is great. I’m optimistic that it will pick up and Nintendo can do it, but they really need to increase their marketing and promotion of the Wii U so that people can actually understand what its about.
Nintendo Australia have marketed the WiiU very poorly. the phase out of the Wii has been equally poor. the ‘old’ ‘new super mario bros’ game for the wii is still $80 to $90 at all of my local retailers, the new wiiU version is less expensive – what is that sayign to the consumer? stick with the Wii because its better?
Im left wondering what the point of upgrading to the WiiU is… aside form a great looking zombie game i cant see it getting more use then our Wii and its starting to collect dust as the kids move on to tablets and other devices.
Well you can transfer your eShop to the Wii mode inside the Wii U. The Wii mode in the Wii U looks pretty good. Wii games look sharper/clearer.
Pikmin is a great game. The upcoming Wonderful 101 is a pikmin like action game. Then of course Wind Waker HD.
There are also the great downloadable games in the eShop and the VC games (like Super Metroid or Earthbound which never came out in Australia back in the 90s).
One of the features I really like and have used, is being able to play the games on the GamePad while the TV is used for something else.
Also don’t dismiss Nintendo Land! Sure it’s just a bunch of mini games, but they are quite good! My favourite would have to be the Pikmin Adventure. Give it a go :)
Now I’m sounding like some sort of PR bot for Nintendo LOL but yes Nintendo marketing is a massive failure this “gen”. I don’t understand why they aren’t pushing the Wii U. I see a fair bit of 3DS ads but hardly any Wii U.
I think the “smartphones kill portables” argument is pretty much proven wrong at this point. The 3DS is doing pretty damn well indeed and is a large part of the reason why Nintendo only made an operating loss rather than a net loss last quarter. Let’s also not forget that the 3DS is yet to get their biggest money spinner, Pokemon.
The Wii U on the other hand isn’t doing that well right now. Yes, most of the has to do with lacking software. If we’re measuring the performance only upto April then it’s going to look very dire. As an owner of this allegedly dead console I know this very well. There was the launch and then there has been nothing ’till Pikmin 3 a couple of weeks ago.
Also if we’re only going upto April we are also excluding the 3DS’ second golden age. Animal Crossing New Leaf has sold 4.5mill units globally, Luigi’s Mansion 2 has sold 2.3mill units globally. Both of these games are some of the most successful on the platform to date.
TL;DR
It looks bad and is bad but it’s not *that* bad
Yea I’m getting tired of the “smartphone games will kill Nintendo” type stories out there. Pretty much stupid.
Also the other stupid stories out there with so called analysts saying Nintendo should ditch hardware and release games on other systems and mobiles – what a joke.
Nintendo has a huge cash reserve to help them when needed. It’s Sony that will be in big trouble with PS4 doesn’t go well. If anyone is going to disappear from the gaming world its Sony or MS.
Sure the first half of this year has been terrible, but from Pikmin onwards I reckon it will pick up.
Also I think Nintendo is changing the console release. Looks like they may just have the one premium type, but give black and white option. I think they may decrease the price too, especially leading up to the new console releases (xbone/ps4).
Won’t kill, will change.
Nintendo has a very big family market. They market strongly amongst kids. But they also used to market strongly amongst adults. That is where they will take the hit. As more and more adults use their smart phones, more and more of the non nintendo exclusives will make their way to the other platforms. Which may well see a return to the “its for kids” attitude of the past. (I don’t subscribe to that attitude by the way).
It is of course never as cut and dry as that. But what is :-)
I don’t know if it holds true today, but Nintendo never used to make a loss on their devices. As in when you bought one you paid for the manufacturing cost. Most console makers didn’t do that. So for them lost console sales were a double hit of less games sold and a selling at a loss.
If that is still the case Nintendo can afford to do what they always do, and they will still build a decent base of users. But that doesn’t mean they won’t hurt, and you can only go so long with lacklustre sales. They could be well served partnering with a “phone” manufacturer or similar. I’d be tempted by something like that, as I always loved my DS. But phones are getting powerful enough to be dedicated games machines now.
Even though overall sales were low, I believe they still made a profit on those sales.
And even though smartphones/tablets get more powerful etc they still can’t replace the full experience of gaming on an actual console (be it portable or otherwise). I still prefer physical buttons over virtual on screen buttons. Also I don’t find a lot of the games on mobile platform that interesting. Too many throwaway games that have very little substance.
These are not insurmountable issues.
Imagine if Nintendo partnered with someone, allowing them to produce phones with Nintendo games, and Nintendo to build a console that is also a phone?
Its all pie in the sky anyway. Nintendo have never had an issue with being 2nd or 3rd place. They still make a profit and they still survive to innovate. The Wii showed that.
I know I’m late to reply and you probably won’t see this but I’d just like to make one point. The iPhone launched in 2007 right smack bang in the middle of the previous portable console generation. Since that day people have been predicting the demise of portable consoles because of smartphones. However since then there have been about 100mill DS’, 50mill PSPs, 32mill 3DS and 5mill PSVs sold.
The GBA had no competition and was considered a success but sold “only” 81mill units lifetime sales. Six years before the iPhone the portable console market sold ~160mill units, the six years after it has sold closer to ~190mill units. I think it’s pretty clear that the “portables are being killed by smartphones and tablets” idea is one of those ideas that sounds like it’s true…. but doesn’t really have any hard evidence to back it.
I put little stock in predictions of the demise of any platform.
The PC gaming platform was supposed to have died as well. It is rubbish. The PC market never actually reduced in all the time that console was “killing it”. The market details actually show that it grew as well, just nowhere near as much.
As I said, it won’t kill the market, but it will likely change it.
“the company has sometimes struggled to get new titles in the series on to new platforms — for example, it launched the Wii U without a new Zelda title to extend the series.”
This isn’t a good example, because it was only 1 YEAR after Skyward Sword. Kirby, Metroid, Star Fox, and F-Zero would have been better examples.
Advertise the Wii U and it might sell, fail to advertise it and it definitely won’t sell. Nintendo are too conservative for their own good. Hopefully word of mouth will sell the console with all the games coming out this year, but word of mouth will likely be about PS4 and Xbox One. Even if they sell out as predicted, Nintendo still need to advertise to let people know there is a great alternative or ‘second console’ out there.
Eh, Nintendo could drop off a cliff and I wouldn’t care. They’re no longer relevant to me when it comes to gaming.
The N64 was the last decent Nintendo console and only because it had some truly great games both first and 3rd party to support it.
I admit I do have the Wii, but it was only to be able to get virtual console games from the N64 era. Typically, Nintendo completely dropped the ball with the virtual console. It doesn’t look like much effort is going into the Wii U virtual console either so until the Wii dies there’s definitely no reason to invest in a Wii U.
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