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Nintendo seen missing target as Sony, Microsoft dwarf Wii U

by Takashi Amano and Cliff Edwards

Bloomberg

Nintendo Co.’s prospects for meeting its profit and sales forecasts for the year are diminishing after Sony Corp. and Microsoft Corp. each sold more game consoles in 24 hours than the Wii U maker did in nine months.

Nintendo’s family-focused content is losing its appeal as titles were delayed, casual gamers migrate to smartphones and tablets, and hard-core players opt for faster Sony and Microsoft machines.

The world’s biggest maker of game machines also refuses to offer games with its lineup of iconic characters such as Mario and Zelda on mobile devices, limiting its ability to profit from surging demand by online players.

President Satoru Iwata vowed in October he would meet a forecast for ¥100 billion in full-year operating profit and 9 million units in Wii U sales. Analysts are skeptical, with the average estimate for profit at ¥57 billion and for sales at 6.2 million units.

“They steadfastly refuse to consider that the product is not interesting to consumers,” Michael Pachter, a Los Angeles-based analyst with Wedbush Securities Inc., said in an email. “They will fail to hit 9 million, and they will likely miss their profit goals.”

Pachter forecasts sales of 6 million units.

The home of Pokemon and Donkey Kong is counting on new versions of “Super Mario Bros.” and “The Legend of Zelda” to bolster sales of the Wii U and portable 3DS during Christmas. It already cut the suggested price of the Wii U by $50 to $299.99 in the U.S., ramped up television and online advertising, and introduced an entry-level 2DS portable player for $129.99.

The company also partnered with Southwest Airlines Co. during the holiday season and distributed free Wii U machines to more than 100 passengers flying from New Orleans to Dallas on Nov. 26. Nintendo is setting up Wii U gaming lounges in some of the carrier’s most heavily trafficked airports.

Those moves may not be enough to make up lost ground, as the company sold just 460,000 Wii U machines in the six months that ended Sept. 30, about 5 percent of its target for the fiscal year. Nintendo reported a net loss of ¥8 billion in the quarter that ended Sept. 30, saying Wii U hardware “still has a negative impact on Nintendo’s profits.”

“Wii U has become a game console only for Nintendo fans,” said Eiji Maeda, an analyst at SMBC Nikko Securities Inc. “Wii U needs groundbreaking software to draw casual and hard-core gamers.”

The company will sell 6.5 million Wii U machines this fiscal year, Maeda said.

The Wii U features a tabletlike, 6.2-inch touchscreen controller that lets players connect wirelessly to the console and shift the display between the device and a television. In the nine months from January through September, the company sold 850,000 — fewer than Sony and Microsoft did during the first day their new consoles were released.

Wii U software isn’t faring much better. Nintendo sold 6.3 million console games from April through September, meaning it has to sell almost 32 million more during the second half of the fiscal year to meet its annual forecast.

Nintendo’s home console sales are stagnating even as U.S. demand for video games is increasing. U.S. sales of both physical and digitally delivered games grew 17 percent in the three months that ended in September, researcher NPD Group Inc. said Nov. 21.

“The launch of other video game systems is also good for us because they energize the video game industry as a whole,” Iwata told analysts and investors Oct. 31. “This year, what Nintendo is promoting is, conversely, to stand out in the game industry for individuality.”

Nintendo spokesman Yasuhiro Minagawa on Nov. 27 reiterated Iwata’s comments. He declined to detail Nintendo’s sales in the current quarter.

Microsoft said it sold more than 1 million Xbox One units during the first day the machine went on sale in 13 countries on Nov. 22. The company pitches the console’s motion-sensing Kinect camera as a controller for all forms of living-room entertainment.

Microsoft focused its message on applications and exclusive content, including the games “Ryse: Son of Rome” and “Dead Rising 3,” and an upcoming TV show from Steven Spielberg.

Sony is trying to differentiate its PS4 by offering a wider selection of franchise and eclectic titles, including “Octodad: Dadliest Catch” by the independent studio Young Horses Inc. The company sold more than 1 million consoles within 24 hours of release on Nov. 15 in North America on its way to a global total of 2.1 million as of Dec. 1.

Sony doubled the number of free development kits distributed to game makers and boosted funding for independent studios, said Brad Douglas, who works closely with game makers for Sony.

“The PS4 and Xbox One are more likely to collect software because third parties create them for core gamers,” said Yusuke Tsunoda, an analyst at Tokai Tokyo Securities Co. “It’s meaningless for third parties to take risks by developing games for the Wii U.”

Sony expects to sell 5 million units of the PS4 through March, or more than half of Nintendo’s annual forecast in less than five months. Hideki Yasuda, an analyst at Ace Research Institute in Tokyo, forecasts Wii U sales of 6 million this fiscal year.

Sony and Microsoft’s launches further erode Nintendo’s share of a market it once dominated. The company posted operating and net losses in the year that ended on March 31, 2012, for the first time since going public in 1962.