Nintendo Q3 Results Bring Net Profit, But Warnings of Projected Losses Remain

Guys.... can you explain me how the hell is possible that despite the colossal sales of the 3ds and its titles in 2013 (expecially compared to all the others consoles in sale) Nintendo registered a loss.... for the second time in a row?

@Volke93 Yeah I don't get it either, Nintendo 3DS made a big sale but Nintendo is still losing money, something doesn't add up?

What I dont understand is that wii has sold nearly 6 million consoles in just over a year,yet is considered a flop? Okay I understand 6 mil is no way near as high as any of the competition,but thats still a huge number! Its like if I ran a 4 mile race yet everyone else ran a 26 mile marathon. Does that make me a failiure? NO! I ran 4 miles and thats still a huge achievement.
Peoples viewpoints are very strange when it comes to sales...

@kereke12 it could be because of that 3DS camera infringement thing i guess?

But What does this mean? Is Nintendo making profit or losing a lot?!?

There are two misconceptions people have about the current Nintendo products. The first is that the 3DS is 'printing money'. The 3DS is not making as much money as people think. People used the term 'prints money' for the DS and Wii, but 3DS is nowhere near that. It's doing well, around the same level as PSP and GBA did, and I don't remember anyone ever saying the PSP printed money. The second misconception is that the Wii U is doing 'a bit poorly', when it's actually tracking behind the Gamecube and Dreamcast. It could all turn around, but right now it is one huge flop of a console from a sales perspective. Add these two together and it's not hard to see why they're making a loss.

It's also quite worrying that these are only shipped numbers. The fact Nintendo is keeping the sold through to customers figure to themselves is probably a bad sign. In 6 weeks, Sony shipped 4.2 million PS4s and sold 4.2 million. In 5 weeks, Microsoft shipped 3.9 million Xbones and sold 3 million, and in 36 weeks, Nintendo shipped 2.4 million Wii Us and sold... ???

They've also announced everyone at Nintendo is taking a pay cut because of this. Not good news at all

@kereke12 @Volke93 @ThomasBW84
They're also expecting the Yen to increase in value which means the Dollar and Euro sales will make them less Yen per sale. They managed to reduce the impact of 3DS and Wii U losses in the last few years because the value of the Yen went the other way and they made lots of money from something to do with deferred tax assets which hid poor performance in 2011 or 2012.
@Peach64
Bit of a negative spin for something that is effectively ancient news. Wii U has at least 5 million owners after a year and a decent proportion have bought the major releases. They are not going to pull all support like Sega so I'd expect it to beat Dreamcast numbers and their detailed financials show that they are spending more on marketing between now and the end of Q4 so they're not doing what they did with the Gamecube just yet. The way I see it is they've blagged a nice install base with no advertising, a huge PR problem and nearly a year of no games. They're only a few bribes away from being popular with the mainstream sites again so I think they'll get to N64 numbers by 2018

@Nintenjoe I agree they're not going to drop support, and definitely not going to go third party, but it's still not good to be behind the two consoles that are thought of as the biggest flops in home consoles (in terms of sales, both consoles and their game libraries are pretty well thought of!)

I think they've got themselves into an unfortunate situation now where the bad sales are effecting people's decision wether to buy or not. On another forum I visit, people have been saying for a while if the Wii U hit the Wii launch price of £180, they'd snap one up, but it did hit that last week, and a lot of people suddenly realised they still weren't biting. 6 months ago, it was an attractive price, but now you see how bad it's selling and it becomes awfully hard to commit to a console that's almost certainly going to see more price drops soon.

As someone who owned an Atari Jaguar (I think the lifetime installed base was 200,000-250,000) the term "flop" seems to be getting used a little too liberally with regards to the Wii U's sales. The real problem for Nintendo is not just sales compared to PSBONE, but the fact that the machine is being sold at a loss and they've built up a business which requires bigger numbers than that to sustain itself. It could be that there's a lot of fence-sitters out there waiting for a price drop to £199, it could be the software on offer isn't enticing enough for many.

One thing I think they could try re: selling to the Wii installed base without offering an outright price cut is to have a trade-in offer: bring in your old Wii and get fifty bucks (pick your currency) off the new machine. I think that would give the message of

A) this is an upgrade to the machine you currently have
B) it's a better price than you'll get selling it on eBay

If it was a Nintendo shop I'd say they should also be doing the system transfer for you. Simply trying to convince people to buy the new console when they might never have had one before they got a Wii via an ad campaign might not be enough. Frankly they should have done the same thing with the 3DS when it first came out.

It might seem a bit extreme, but I'd honestly approach this like trying to sell someone a new car - Nintendo makes more money selling software, but you cannot sell someone software unless they have the kit to play it on. They've grown a new userbase around the Wii and DS, but they cannot assume that everyone is automatically going to be clued into the idea of console upgrades. I think giving them a material incentive to swap seems like a pretty good idea, either via mail (they have the new online shop) or in partnership with key retailers. The old Wiis can be refurbed and sold online or simply recycled. Seems like something worth trying to capture as many of the existing Wii owners as possible, doesn't it?

@Volke93 They are probably investing a lot of money to recover the Wii U. Let's find out where that money is going in the next few months.

Nintendo, stop manufacturing and selling the Wii already!

Those 1 million sales are potential sales out of Wii U.

@Peach64 Executives are the only ones taking pay cuts.

Your partially wrong about the sales, if you look at the last few reports you will see a lot of actual profit from sales. The net gain however is diminished by the increasingly large operating costs. This suggests Nintendo are spending a lot more on making new games, r&d for new & current hardware, marketing, workspace, digital services, staff etc.

The fact that Nintendo are already saying they will end the fiscal year with a net loss dispite recent profits suggests they are investing heavily in future projects and intend to continue heavy investment into the next fiscal year. To what end only Nintendo knows.

@Sean_Aaron
They are still selling Wii consoles, though. It wouldn't really make sense to allow a trade of something that's still currently on sale. Unless they plan on making those trade in consoles as products for China, it won't really work. They basically can't resell that stuff here, if they allow it to be traded in. That's my take.

I think adding cross-buy/play would probably give 3DS and Wii U owners incentive to buy the Nintendo system they don't already have(if they don't already have one or the other).

There needs to be more software, and they need to make buying a Wii U as stress and risk free as possible. Find a way to make Wii owners want to upgrade, and get new Nintendo system owners on board by offering more system features.

Wii Street U or Art Academy may not seem like killer apps, but if Nintendo fills the screen with apps like that as system standard apps(like Weather Channel, News Channel, Check Mii Out, etc), I think it would make the system look valuable, even if you don't buy any software at all.

For those who are curious, the loss in sales could be due to the Wii U's troubles right now. I would guess the Wii U's R &D had not been paid off yet, and unlike most Nintendo hardware, I don't think it had made profit out of the gate.

So, the Wii U is likely the culprit that is dragging Nintendo down, despite the great 3DS sales.

And its not uncommon to see this. The PS3's early troubles ate away at all the money that they had made off the PS1 and PS2, and other platforms often incur losses in the first few years.

Now, Nintendo systems are usually designed to make profit out of the gate, which is the reverse of the rest of the market where the hardware maker generally takes a loss on the hardware, and recoups their money from third-party licensing, game sales, sales of accessories and memberships, and other ways of bringing in revenue.

Most hardware does not turn a profit on its own, and it will often take years for a company to recoup their losses that they took during development of a system. It took Microsoft years to finally turn a profit on the Xbox 360 despite its success, and the PS3 only turned a profit in the last couple of years. The Xbox never turned a profit during its lifespan, despite being a fairly popular system during its generation(Microsoft did not recoup their losses with the first Xbox until several years into the Xbox 360's lifespan)

The Wii U is Nintendo's first system that seems to buck the trend, and I'm assuming is part of their problem right now. The Wii U Gamepad can't be cheap, and I think they had to drop the price of the Wii U sooner than they thought. Plus, third-party support has been sluggish, and many major developers are skipping the platform, which results in lost third-party licensing revenue(this is why third-party support is so important!)

Right now, the Wii U is the only Nintendo system where the hardware is being sold at a loss. In fact, its pretty much the only Nintendo system that has been sold at a loss from the start.

Even the 3DS' hardware is pure profit at this point. I read that it costs Nintendo about $103 to manufacture a 3DS system which means the hardware itself turns a profit, even before we consider games.

So, I think the Wii U is what is dragging down Nintendo's profits right now. And the only other viable console the have right now to make up for those losses is the 3DS. Both the DSi and Wii are older systems that are past their prime, and unlikely to sell in any meaningful numbers that would really help Nintendo recoup their losses on the Wii U.

@SCAR392 they should stop selling it in territories where it's moving low numbers then and focus on the Wii U exclusively, but I see no inherent problem with selling the Wii Mini whilst also offering a trade-in towards a Wii U. Unless the number of Wiis and Wii software being sold is offsetting losses due to Wii U development it's not relevant.

5.86 million Wii U's sold from launch to the end of 2013? a bit higher than I expected.

@Emblem thank you for your level headed post... If Nintendo was just staying pat last year with all the software currently in development they would have made a profit. But realizing current Wii U sales weren't good enough they are investing a ton of money in getting more titles developed advertising and R&D.

This is a good sign. This shows Nintendo is doing something behind the scenes that they are not revealing publically (I always knew this was the case, but people on message boards were in full lament meltdown mode "why isn't Nintendo developing more Wii U games, why isn't Nintendo advertising, not hearing anything means they are not doing anything, wahhhh")

@WebHead
Same here. I don't think it's consumer sales, though. There probably is 5 million consoles or so out there... Given the situation, I wouldn't consider it that bad. Financially, it isn't that great(obviously), but the quality and support will continue to grow, and that can only make things better.

@element187
Yup. People act like Nintendo doesn't have a plan, and everything they've seen is all there is, and will be.

All it takes is a bit of logic. I shouldn't expect so much from the internet, so all I have to blame, is myself...

@kereke12 aside from what everyone else is saying, also remember that the Wii u is sold at a loss. Even at its original price. So each Wii u sale actually represents negative money for them

@Frapp yeah I know, I'm an accountant but I couldn't describe it without getting too wordy!

Would people be talking of doom if Nintendo had sold 25 Million Wii Us and made a bigger cumulative loss on the hardware?

They don't lose money on each sale. They lose the money manufacturing the console, and then make part of it back upon sale. The idea of low sales being helpful is kind of silly. For all we know Nintendo made 9 million Wii Us this year based on their projections. They had to pay for every single one they made and the vast majority are sitting in warehouses, which they also have to pay for. You can bet they're not thinking 'damn, another machine sold, better knock another $30 off our balance sheet'.

@Peach64 - except there is value in inventory. So depending on the accounting rules in Japan, they would pay for the manufacturing but that would be offset by the value of product on hand. The warehouse space maybe an additional cost....and if they don't move the warehouse supply then eventually it would have to be written off as a loss

@Gerbwmu "written off as a loss"? Surely you don't mean this:
http://en.wikipedia.org/wiki/Atari_video_game_burial

@StarDust - ohhhhh poor Atari......I hope it doesn't come to that but yes.....throwing the Wii U's into the sea thus desturbing Godzilla's slumber and causing the destruction of Tokyo would force Nintendo to write off the inventory I suppose.

@Tritonus Yeah Nintendo! Stop making a console that people is still buying so they will be tricked and forced to buy th econsole they dont want to buy and keep having even more losses!

rolls eyes

I honestly can't think of a company with products as good as Nintendo's that performs so horribly. A combination of dire mismanagement, poor strategy, archaic policies, ineffectual/non-existent marketing campaigns campaigns and disgraceful inefficiency are running this once-great company into the ground. Nintendo needs a shake up, fast.

Projected losses and a pay cut. Whatever Iwata thinking about restructuring nintendo could take a bit longer or shorter without paying off some damages first.

@Tritonus Hard to tell from how Nintendo breaks it down, but judging by this — http://www.nintendo.co.jp/ir/pdf/2014/140129e.pdf — Nintendo sold all of 40,000 Wiis in Japan in 2013. I would assume a lot of the 1 million units sold were in emerging markets, places where the Wii is an affordable proposition and the Wii U just isn't going to be for a few more years.

I'd like to point out that the situation could be much worse. Nintendo's inefficiency with Wii U games is their own fault - they really screwed up the 3DS launch.

Yes, the 3DS is partially to blame for the Wii U's shortcomings. Why? Because Nintendo made the mistake of not having enough games in development for 3DS before its launch in an effort to give 3rd parties growing room. The 3DS launched, had an awful lineup and was selling abysmally - worse than the Wii U was at the lowest point of its poor sales. Nintendo then shifted all of their resources towards 3DS game development to save it, sacrificing the Wii U in the process. That's why 2013 had so many 3DS games come out while the Wii U seemed to be ignored. Wii U game development was delayed in an effort to turn around the 3DS's bad situation.

If Nintendo hadn't done what they did and had decided to focus on Wii U games at that time, then its very likely that BOTH systems would be failing right now.

Also, the biggest reason why Nintendo is taking a loss this year is due to operating costs. This means that Nintendo is investing heavily into marketing, R&D, production, workspace, etc. We know that Nintendo has been investing in new development buildings for their 1st party developers like Intelligent Systems and Retro Studios. Nintendo's biggest worry seems to be the ability to juggle the 3DS and Wii U at one time. Their studios are too small to do so right now.

@Marshi I think it because the Wii U dragged through 2013 with little advertising, few releases, and low sales, being out sold by 7-8 year consoles that should be past their prime is not good. That and it is sold at a loss at the moment, as mentioned aboved, eating into Nintendo's profits. The Wii U is a good console, all it needs is more games (first AND third party), better marketing, and those killer first party titles.

Someone mentioned it before (not on this article) and it made me think: what if Nintendo launched this year along side the others, with launch titles like SM3DW, Pikmin 3, LEGO City, Monster Hunter 4 Ultimate (I can dream can't I), and Mario Kart (or something)? I think that could have made it a very desirable console, maybe even a best seller this year. That's something I always think about, knogwin what Nintendo had to release (sparingly) in all of 2013.

@Peach64

Good points, although I would argue that of course Sony and MS sold what they shipped- it's a new launch and they're hot items at the moment. Give it a year or so- I think people forget that most consoles don't just start with a boom and keep the momentum.

As for what Nintendo sold, I think it's very close to what they shipped. We know they sold around 2 million Wii U's in the last couple months of the year over the holiday season, and VG Charts has Wii U listed at 5.3 million units. Games like Windwaker HD are confirmed to have sold at least 800,000 units not counting digital sales, Wii Party U has sold 1 million, NSMBU has sold 3.5 million, New Super Luigi U has sold 1.2 million, and Super Mario 3D World has sold 1.7 million. So yes, they're selling most of what they ship.