Nintendo's most recent financial report, covering the first three quarters of the financial year, certainly qualifies as one of the most contradictory the company has issued. On the one hand there have been increases in 3DS sales across both hardware and software, while on the flipside overall sales revenues are terribly low. Yet revenues from sources that have never been a factor in the past have helped matters, even emboldening Nintendo to boost its projected profits.

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Contrasting Fortunes

To start with a key figure that's concerning, net sales fell 26.9% compared to the equivalent period last year, coming out at 311,121 million Yen. If you want an idea of just how bad that figure is, the equivalents for the past five years are below, with consecutive drops.

  • 2012/2013 - 543,033 million Yen
  • 2013/2014 - 499,120 million Yen
  • 2014/2015 - 442,920 million Yen
  • 2015/2016 - 425,664 million Yen
  • 2016/2017 - 311,121 million Yen

Importantly, though, Nintendo is holding firm on its prediction that the year end net sales will be 470,000 million Yen, with the Nintendo Switch launch undoubtedly being a primary driving force in that; that's still lower than last year, though, so don't break out the bunting. In keeping the same net sales projection, though, it does make us wonder whether many extra Switch systems that'll supposedly get manufactured will be targeting that launch month - the financial year ends on 31st March, while Nintendo may be anticipating a second post-launch boost in demand for the system with titles like Mario Kart 8 Deluxe, ARMS and Splatoon 2 in April and beyond into Summer.

Another area down on the equivalent period from last year is operating profit, and the end of year projection for that has actually fallen, meaning Nintendo will make less money than it previously thought in the core business of making and selling goods. Yet it's predicting far higher net profit at the end of the year than before - its estimate has changed from 40,000 million Yen to 90,000 million Yen, more than doubling the previous projection. If that comes true at the end of the year it'd be a 445.3% increase on the profit of 2015/2016 - to break it down, Nintendo now thinks it'll make a profit of about $790 million, instead of roughly $350 million.

That's terrific news for the company, of course, though quite how that's happened is both a one-off and conceivably part of the big N's broader strategy. The one-off, acknowledged as a key factor by Nintendo, is the sale of a stake in the Seattle Mariners baseball team. Another driver has been Nintendo's share in revenue from Pokémon GO, with the app still performing reasonably according to various metrics. As for Super Mario Run, it's now hit 78 million downloads, with the percentage then buying it being at around 5%, so let's say four million to take the positive angle. The revenues from this aren't to be sniffed at, but aren't exactly setting the house on fire.

With Super Mario Run it could have been better in terms of paid numbers, it's fair to say, and it'll be interesting to see whether the same in-app upgrade tactics are taken with the Android version.

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Pokémon Powering 3DS and the End of Wii U

The excellent year for Pokémon Sun and Moon, meanwhile, was a huge factor for the 3DS, with the Summer release of GO also bringing increases in sales of older series entries before that. In Nintendo's breakdown of million-sellers in the first nine months of the year, for example, there's an extraordinary gap between Sun / Moon and everything else.

What's interesting here, beyond the importance of Pokémon, is the gulf in sales of older titles in Japan and elsewhere. While the Japanese market has limited capacity to find late adopters to games, it's very different in the 'West', where older Pokémon games flourished off the back of GO and Mario Kart 7 kept flying off shelves. Bundles are a factor, of course, and it all adds up to show that audiences flock to familiar brands when dipping in late with a system. It's tempting to also wonder whether the global 3DS sales for the last nine months of 6.45 million systems could have been higher with better stock management. In North America, in particular, supply of budget 'Black Friday' New 3DS models was evidently below demand, while there was a spell of general low stock of the hardware as newcomers or upgraders rushed to pick up the ageing portable.

We should mention Wii U, of course, which was predictably grim. There were no million-seller Wii U games over the last nine months, and just 760,000 hardware units were shipped; Nintendo is sticking to its estimate of 800,000 for the financial year, meaning only another 40,000 are expected to go out of the door. It's a system that is, sadly, stumbling over the finish line after just over four years on the market.

Another area that needs a pick-me-up is amiibo, while Nintendo's download revenues were also modest:

amiibo sales remained limited to 6.5 million units for figure-type and 6.6 million units for card-type. In addition, there were relatively fewer offerings of downloadable content during this period, so digital sales were also down to a large extent on the same period last year.

As for The Nintendo Entertainment System: NES Classic Edition, the financial report mentions the popularity of the system but dodges referencing the stock problems that frustrated consumers.

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The Big Picture

So, what's the big picture? Nintendo's sales for the year have been poor, and would have been absolutely dreadful were it not for the extraordinary selling power and appeal of the Pokémon series. The Wii U is finished, whether we like it or not, but the Switch is on track to deliver a late boost to Nintendo's coffers in March.

Thanks to those Pokémon revenues, the boost from Super Mario Run and the one-off sale of Seattle Mariners stock, though, Nintendo is even more cash rich than before. That boost in projected profit should keep shareholders happy (as their dividends are expected to go up), while the company's total assets have also climbed. Its 'cash and deposits' climbed from 570,448 million Yen to 660,476 million Yen. As we've pointed out repeatedly in the past, Nintendo is a company not only with plenty of tangible assets, but also a lot of actual cash in the bank. On top of that the past couple of years have shown profits squeezed out of falling revenues, so the company has also streamlined effectively. It has enough resources to get past failures, as it's had to with Wii U, and in theory has the money to invest big to revive projects if it needs to.

Nintendo keeps broadening its outlook, too. More mobile releases, theme park attractions, talk of movies and TV - some of these plans are solid, others are speculated, but the big N is evidently looking beyond simply making and selling games and consoles for its revenues.

The most recent financial reports can fit whatever agenda you want. They can be construed as worrying and a sign of a company in difficult times, or interpreted as a demonstration of Nintendo's strength and positive prospects. There are numbers to support both sides of the argument - the reality is that they represent a company still in transition, modernising its approach, utilising and boosting successes, while also dealing with mistakes and failures. The 3DS thrives, the Wii U dies, revenues comes from an app in which Nintendo had limited involvement, and all of this with Switch and more mobile games to come.

It's a rollercoaster ride for Nintendo, well ahead of the Universal attractions even opening.

[source nintendo.co.jp]