Posted by Chris Scott Barr on Jan 30, 2013

Poor Wii U Sales Lead To $220 Million Operating Loss For Nintendo

Things aren’t looking so great for the house that Mario built. Despite being the first console out in the new generation, the Wii U hasn’t exactly been selling like hotcakes. Or, at least not as well as Nintendo had hoped. In fact, the company says that for the second year in a row, it will be posting an operating loss.

While this may seem somewhat surprising to the average gamer, the the company’s investors are bound to be nothing short of shocked. Nintendo had originally estimated that they would be posting a profit of over $100 million. Instead, they will be posting an operating loss of around $220 million. But the question is “why?”

It’s easy to point out that the Wii U hasn’t been selling like its predecessor. However, the hardware hasn’t been selling terribly, either. The real problem seems to lie in the lack of game titles. This is the same problem that Nintendo faced with the 3DS. Without a strong lineup of games, they face a difficult challenge of moving product. What’s worse, console makers traditionally make very little off of hardware, and depend on game sales to earn the real profits.

While Nintendo certainly does appear to be in a financial slump, I wouldn’t count them down and out by any means. Last week they showed a strong lineup of games that they are working on, which is exactly what they needed to do. Last week’s announcement and today’s seem curious in timing, and I wouldn’t call it a coincidence. I wouldn’t be surprised if it was planned in order to soften the blow of today’s news.

This brings up an interesting topic. This is two major console releases in a row where Nintendo has stumbled, due to a shortage of big-name launch titles. This makes you wonder, would they have been better off to push back the release of their consoles until they had better launch titles? Or would the stagnation of their previous hardware cause a further loss? I’d say in the case of the 3DS, it would have been a good idea. However, Nintendo really needed to get the jump on Microsoft and Sony with this new generation. I think their timing will work out to their advantage, in the end.

EDIT: There is some confusion about Nintendo’s actually losses and profits. As stated in the report released this morning, Nintendo is predicting to have an operating loss, as we stated above. The company will still turn a profit, due to the depreciation of the Yen. Essentially, the company has made money off of currency exchange, but poor sales of the Wii U forced them to report an operating loss. It’s a bit confusing, as most corporate finance matters are. But that’s what accountants are for.



Post a Comment
Powered by WordPress | Designed by Elegant Themes