Posted Fri Jan 17, 2014 at 10:30 AM PST by Brian Hoss
"We were ultimately unable to achieve our goal."
Nintendo continues to struggle with the Wii U, and the system's sales reflect that it has not managed to capture enough of the market to prevent a loss annual operating loss for Nintendo. The 3DS, in comparison, had incredible sales this past year, but still fell well short of Nintendo's projections.
Nintendo had projected that the Wii U would sell 9 million units this year, but now projects only 2.8 million. The 3DS forecast had been for 18 million units, but now is expected to be 13.5 million units. (The Wii sold 1.2 million units, which fell within projections.) These severe sales shortages mean that Nintendo's projected 55 billion yen in net profit is now projected to be 25 billion yen ($240 million) in net loss.
Nintendo launched multiple products and sales incentives (bundles, price-drops, etc.) for both platforms and thereby managed sales increases in the crucial holiday period, but still fell well short of success.
Yen fluctuation could have allowed Nintendo to cover the loss in operating income, but the company has chosen to address its tax carryover situation, which stems from losses in prior years.
While Nintendo won't be closing its doors ahead of a sale-off anytime soon, the company has a daunting task of reversing the loss trend this year. In terms of the Wii U, this is certainly tricky. If the company (as it seems to be planning) sinks money into advertising for the Wii U without a corresponding sales increases, the results could be disastrous for the company's share price and leadership. President Satoru Iwata remains in charge at Nintendo, but the clock is ticking.
Those unfamiliar with the Wii U still likely have an idea of its problems. Its close association to the Wii has been cause for confusion, and has defused interest in the older brand. At the same time, the console is closer in features and functionality to the 360 and PS3 than the next-gen consoles whose sales momentum dwarf the Wii U. More fundamental though, is the console's lack of a killer app with global appeal, and the console's launch problems reflect a product that seemed rushed to market. Nintendo's ecosystem is shy on product, and the price point has been hard to swallow even with the price drop.
Still, Nintendo has thrived by staying in control of its own IPs and their platforms. The company may be in a situation where the Wii U needs to be viable for the next three years. Software droughts seem fairly regular for past Nintendo consoles (N64, GameCube, Wii), and the Wii U's first two holiday periods suggest that the company's first HD console is on shaky ground.
Author: Brian Hoss
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