Nintendo reported its first operating loss ever for the financial year ending March 31. The company reported a deficit of ¥37.3 billion, or $460 million. The results were slightly better than analysts’ forecast of a ¥41.4 billion loss. David Gibson, an analyst for Macquarie bank in Tokyo said, “They have been beaten by smartphones and tablets, in particular, for consumers’ spending and, more importantly, time.”
The company has been hammered by a steep decrease in sales of the Wii, the Nintendo DS handheld console, and the newer 3DS console. Nintendo intended to sell 13 million Wii consoles in 2011, but ended up selling 9.8 million. The company is expected to release its successor to the Wii, the Wii U, later this year. The Wii U features a tablet controller.
Only half of the 11 million DS machines that the company wanted to sell were shipped. A target of 16 million 3DS units sold was set, but the company only sold 13.5 million in the past financial year. Weak demand resulted in a dramatic cut in the price of the 3DS about six months after the device had been introduced. For 2012, Nintendo has a target of 18.5 million 3DS units sold.
Nintendo’s chief, Satoru Iwata, acknowledged his company’s lackluster performance and forecasted a return to profit this financial year. he said, “Our target this year is not one I am satisfied with. Sales of the 3DS in Europe have not been as buoyant as those in Japan.” Mr. Iwata did not offer any plans for a shift in strategy, nor discuss possible changes in plans for the Wii U.
A fundamental shift in game-playing habits may require the company to shrink its hardware operations and seek profits for Super Mario and other game titles on devices built by other companies. Mr. Imazu said, “Nintendo has to deal with the change and let Mario games be played on non-Nintendo devices. I think it will take at least couple of years to see that.”
Mr. Imazu said Nintendo should benefit from the release of Mario Party 8, the latest Dragon Quest game, and other popular titles this year. A recent survey by MocoSpace asked 15,000 game players where they played games. 53% of respondents said they played in bed, 41% said in the living room, 72% played while commuting, and 5% played on the toilet.