Satoru Iwata Talks Down Wii U Price Cut Prospects, 3DS to Drive Profits in 2014
Posted by Thomas Whitehead
"We will try to turn around Wii U and enrich the value of the GamePad"
Profit is one of many keywords in the recently translated investor Q & A, in which Nintendo's President fielded a number of questions from investors. Naturally, considering the audience, the issue of returning to the sizeable profits of past years was raised in a variety of ways.
It was highlighted that the current momentum of the Wii U would make profits difficult, with the questioner enquiring whether further steps can be taken — by which they meant cost-cutting — to deliver profits despite sales being down. While the move towards engaging with users on smart devices was cited as a means of being more economical in marketing costs, Iwata-san acknowledged that the balance hadn't been found in sustaining a variety of costs with the level of sales. Nevertheless, the Nintendo President talked up the role of the 3DS in driving profits in the coming financial year, while emphasizing that based on a "premise" of no further Wii U price cuts in the coming year, the home console can have less of a negative impact on the performance of the business.
Regarding Nintendo 3DS, we did not sell as much as we expected in the last year-end sales season. Since we expected the sales volume of Nintendo 3DS to increase rapidly in the year-end sales season and saw signs that it would happen at the end of October last year, I mentioned at the second quarter Financial Results Briefing that we would aspire to deliver great results in the year-end sales season, but we are now reflecting on the fact that we could not achieve it. On the other hand, since Nintendo 3DS has an installed base of more than 40 million units globally as I mentioned earlier, we are now getting to the point where it is impossible not to turn a profit with our software business. We have many key titles to be released in this calendar year and we will strive to drive profits from these titles. Seen in this light, I believe the key profit-driver for the next fiscal year will be Nintendo 3DS. Regarding Wii U, it is not easy to make a significant profit with the current units sold. The price reduction of the hardware in the overseas markets represents a large amount of our total expenditure for this fiscal year, but based on the premise that we will not make such a reduction in the next fiscal year, I think our business can operate without such a negative effect on our profitability.
Also, in this calendar year, we will release “Mario Kart 8” and “Super Smash Bros.” which are kinds of games that Nintendo has been particularly strong with in encouraging players to invite each other to play. Therefore, with these two titles as our main drivers, we would like to make sure that the markets will thoroughly acknowledge the value of Wii U, including the titles that we have released to date. Also, we will try to turn around Wii U and enrich the value of the GamePad, a point I mentioned earlier in my presentation. With regard to Wii U, it is not realistic to hope that it will sell 100 million units in the same product cycle as Wii. On the other hand, I believe it is never too late and it is possible to achieve a certain level of sales volume and a certain level of results with Wii U depending on how we write its scenario. Therefore, we would like to come up with a realistic scenario and turn Wii U into a platform that generates as much profit as possible.
It's no surprise that, once again, the 3DS will likely be a major driver for Nintendo's potential profits, yet this is another clear indication that Nintendo's not currently plotting an additional wholesale price cut on the Wii U. With major releases such as Mario Kart 8 and Super Smash Bros. one the way, along with plans to boost the image and desirability of the GamePad, the company seems keen at this stage to back its product; there's also acknowledgement, not that it was needed, that the goals of the Wii U aren't to match up with the Wii's success, but to target levels that sustain it through a solid lifespan.
Are you confident that the Wii U will begin its bounce back this year, even without a further price cut, and that the 3DS will enjoy another bumper year to boost Nintendo's coffers? Let us know your thoughts in the comments below.