Nintendo risks everything this winter

There will sure be maximum pressure in Kyoto from now on to March 2013. Nintendo just posted worse than expected losses for first the first half 2012-2013, reducing by the same occasion the target for the full year. As always, Nintendo’s CEO Satoru Iwata was in at Nintendo HQ to share his plans for the future.

Nintendo still doesn’t meet its targets for 3DS in the west despite the price cut last year and the new model three months ago. We can see here that in Europe, 3DS is already back to its pre-new model levels, which were already unsatisfying  in a period when console sales are traditionally weak. Iwata sees a “firm foundation” from where sales can “accelerate”.

The situation is even worse in the US, where 3DS is selling even less than a year ago, at comparable level as PS3 and 360, consoles nearing the end of their lives. Nintendo still expect to further develop the sales.

But with which games? The investors must have been horrified by the third party games list he showed : nothing on it besides Monster Hunter has the ability to drive the hardware significantly up.

In his comparative quarterly DS vs 3DS sales comparison, we can see that 3DS indeed outperforms DS in the fourth quarter after release, but loses ground immediately after. And remember that DS peaked in its 3rd, 4th and 5th year, so if 3DS is stagnating like this longer Nintendo may never retrieve the level of profits it enjoyed back then. Nevertheless, Iwata still says that the situation is under control.

WiiU was a delicate part too, because he had to admit that the system will be sold at a loss to ensure an “reasonable” price for the consumer. It the first time Nintendo has been ever doing this. I knew that this 300-350€ didn’t feel natural : investment to build the Nintendo Network and design/manufacture the GamePad are enormous. The controller alone costs is retailed around 140€, half the price of the system! Nintendo will be losing money for every WiiU sold for some time, but there’s worse…

Iwata also admits supply isn’t likely to meet the demand because they only started producing this summer : “Our production capacity, rather than consumer demand, that will place limits on our Wii U prospects”, he says. Nintendo intends to sell every single of the 5.5 million WiiUs it will ship until March 31th. That means that WiiU would be permanently sold out at retailers for 4 months, and only available through reservation! Such thing has never happened, but Nintendo enters a race against time in which it needs to sell nearly 350’000 units each week in average over this period.

Not impossible, but surely difficult, because of too few exclusives, high defiance from core gamers, and stiff competition from cheaper PS3 and 360 that will welcome blockbusters like Tomb Raider, Metal Gear Rising Revengeance, The Last of Us, Tales of Xillia, Bioschock Infinite, Crysis 3, GTAV, Dead Space 3, Ni no Kuni, and I’ll stop because it would be cruel to continue. Their strategy around the first Wii isn’t going to help, because they will market new bundles (at reduced price in the US) that will drive casuals off the WiiU.

I don’t know how Nintendo intends to sell WiiU to core gamers alone (who hate the company and what it represents, the ad campaign will only make it worse) but Iwata is confident because he has a 250’000 waiting list at Gamestop. Which triggers a second problem, which is that WiiU could be heavily frontloaded, like 3DS was, like PSVita was. In these days when information is faster, communication is louder, the consumers’ needs are more pressing and they want the new thing immediately. WiiU early adopters aren’t likely to wait 2013 to acquire the system. The others already decided to wait & see, and there’s nothing susceptible to shake things since Bayonetta 2 is due for later in 2013. In other words, if there are available WiiUs at your local store, it will mean that Nintendo is digging its deficit, fast.


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