Nintendo Seen Missing Target as Sony-Microsoft Dwarf Wii UTakashi Amano and Cliff Edwards
Nintendo Co.’s prospects for meeting its profit and sales forecasts for this year are diminishing after Sony Corp. and Microsoft Corp. each sold more game consoles in 24 hours than the Wii U maker did in nine months.
Nintendo’s family-focused content is losing its appeal as titles were delayed, casual gamers migrate to smartphones and tablets, and hardcore players opt for faster Sony and Microsoft machines. The world’s biggest maker of video-game machines also refuses to offer games with its lineup of iconic characters such as Mario and Zelda on mobile devices, limiting its ability to profit from surging demand by online players.
President Satoru Iwata vowed in October he would meet a forecast for 100 billion yen ($974 million) in full-year operating profit and 9 million units in Wii U sales. Analysts are skeptical, with the average estimate for profit at 57 billion yen and for sales at 6.2 million units.
“They steadfastly refuse to consider that the product is not interesting to consumers,” Michael Pachter, a Los Angeles-based analyst with Wedbush Securities Inc., said in an e-mail. “They will fail to hit 9 million, and they will likely miss their profit goals.”
Pachter forecasts sales of 6 million units.
The Kyoto, Japan-based home of Pokemon and Donkey Kong is counting on new versions of “Super Mario Bros.” and “The Legend of Zelda” to bolster sales of the Wii U and portable 3DS during Christmas. It already cut the suggested price of the Wii U by $50 to $299.99 in the U.S., ramped up television and online advertising, and introduced an entry-level 2DS portable player for $129.99.
The company also partnered with Southwest Airlines Co. during the holiday season and distributed free Wii U machines to more than 100 passengers flying from New Orleans to Dallas on Nov. 26. Nintendo is setting up Wii U gaming lounges in some of the carrier’s most heavily trafficked airports.
Those moves may not be enough to make up lost ground, as the company sold just 460,000 Wii U machines in the six months ended Sept. 30, about 5 percent of its target for the fiscal year. Nintendo reported a net loss of 8 billion yen in the quarter ended Sept. 30, saying Wii U hardware “still has a negative impact on Nintendo’s profits.”
“Wii U has become a game console only for Nintendo fans,” Eiji Maeda, an analyst at SMBC Nikko Securities Inc. in Tokyo, said by phone. “Wii U needs groundbreaking software to draw casual and hardcore gamers.”
The company will sell 6.5 million Wii U machines this fiscal year, Maeda said.
Nintendo fell 2.4 percent to close at 12,820 yen in Tokyo. The stock has gained 41 percent this year, trailing the 47 percent rise in the Topix index.
Shares of Nintendo have lost 82 percent of their value since closing at 72,100 yen in November 2007, according to data compiled by Bloomberg.
The Wii U features a tablet-like, 6.2-inch touchscreen controller that lets players connect wirelessly to the console and shift the display between the device and a television. In the nine months from January through September, the company sold 850,000 -- fewer than Sony and Microsoft did during the first day their new consoles were released.
Wii U software isn’t faring much better. Nintendo sold 6.3 million console games from April through September, meaning it has to sell almost 32 million more during the second half of the fiscal year to meet its annual forecast.
Nintendo’s home-console sales are stagnating even as U.S. demand for video games is increasing. U.S. sales of both physical and digitally delivered games grew 17 percent in the three months ended in September, Port Washington, New York-based researcher NPD Group Inc. said on Nov. 21.
“The launch of other video-game systems is also good for us because they energize the video-game industry as a whole,” Iwata told analysts and investors Oct. 31. “This year, what Nintendo is promoting is, conversely, to stand out in the game industry for individuality.”
Yasuhiro Minagawa, a spokesman for Nintendo, reiterated Iwata’s comments in a Nov. 27 phone interview. He declined to detail Nintendo’s sales in the current quarter.
Microsoft said it sold more than 1 million Xbox One units during the first day the machine went on sale in 13 countries on Nov. 22. The Redmond, Washington-based company pitches the console’s motion-sensing Kinect camera as a controller for all forms of living-room entertainment.
Microsoft focused its message on applications and exclusive content, including the games “Ryse: Son of Rome” and “Dead Rising 3,” and an upcoming TV show from Steven Spielberg.
Sony is trying to differentiate its PS4 by offering a wider selection of franchise and eclectic titles, including “Octodad: Dadliest Catch” by the independent studio Young Horses Inc. The company sold more than 1 million consoles within 24 hours of release on Nov. 15 in North America on its way to a global total of 2.1 million as of Dec. 1.
The Tokyo-based company doubled the number of free development kits distributed to gamemakers and boosted funding for independent studios, said Brad Douglas, who works closely with gamemakers for Sony.
“The PS4 and Xbox One are more likely to collect software because third parties create them for core gamers,” Yusuke Tsunoda, an analyst at Tokai Tokyo Securities Co. in Tokyo, said by phone. “It’s meaningless for third parties to take risks by developing games for the Wii U.”
Sony expects to sell 5 million units of the PS4 through March, or more than half of Nintendo’s annual forecast in less than five months. Hideki Yasuda, an analyst at Ace Research Institute in Tokyo, forecasts Wii U sales of 6 million this fiscal year.
PlayStation and Xbox consoles are better for playing online games like “Call of Duty” and “Halo” and offer better links to Internet-based entertainment services, said Greg Woods, 50, of Grand Rapids, Michigan.
“The Wii U just doesn’t have the games the other boxes have,” Woods said by phone. “Until I can get a Wii U at a much lower price, my next purchase will be a PS4 or Xbox One for myself and my kids.”
Sony and Microsoft’s launches further erode Nintendo’s share of a market it once dominated. The company posted operating and net losses in the year ended March 31, 2012, for the first time since going public in 1962.
“It’s going to be difficult for Nintendo to sell 9 million Wii U consoles this fiscal year,” Maeda said. “Iwata needs to plan what to do next year if the performance this year isn’t good.”