If Bad News Barrett been at Nintendo headquarters last week, he might have banged his gavel before using his trademark catchphrase, “I’m afraid I’ve got some bad news!” Nintendo announced last Friday, May 2 that the company is forecasting a net loss for this year due to the poor sales of the Wii U console. The gaming company announced that they expect a loss of 25 billion yen ($240 million) for the year, through March 2014. This was a reversal of their previous forecast of a 55 billion yen profit forecast, with an expected annual revenue drop of about 36 percent.
The significant downgrade for Nintendo shows a huge contrast to its competitors, Sony and Microsoft, which have had much greater success with the recent launches of their new consoles–the PlayStation 4 from Sony and the Xbox One from Microsoft. Both consoles for Nintendo’s rival companies launched last November. The sector of home game consoles is approximated to have an annual financial worth of $44 billion.
Nintendo also announced that they expect to sell about 2.8 million units for the Wii U worldwide this year. This is a third of their earlier prediction of a sales mark of 9 million consoles. In comparison, Sony’s PlayStation 4 console had already sold more than 4.2 million units by the start of the year, after being launched on Nov. 15, 2013. The Wii U launched in late 2012.
Nintendo President Satoru Iwata said at the press briefing, “During the year-end shopping season, we weren’t able to lift sales momentum for the Wii U.” He continued, “The decrease in-game software sales is having the biggest impact.” In addition, Iwata offered an apology to shareholders, explaining that demand for the Wii U console was weak in the ever-important European and US marketplaces. Iwata went on, “My duty, more than anything else, is to revive our business momentum.”
Nintendo’s stock shares in Tokyo were down 2.75 percent at 14,645 yen as of last Friday. This was the stock price before Nintendo’s announcement was made. In addition, the news comes after Nintendo already had weakened profitability last year. Nintendo’s net losses due to the poor Wii U sales were blamed on the high development and marketing costs for the console. However, sales of the Nintendo 3DS handheld console and its game titles have done better sales-wise.
One of the biggest issues the Nintendo Wii U has faced is a lack of quality and competitive game titles. Analysts also believe Nintendo is facing tough economic issues in the US and Europe due to the rise of cheap and free downloadable game titles for smartphones and tablets. In May 2013, Electronic Arts spokesperson, Jeff Brown, stated that the game publishing giant would not be developing any new games for the Wii U.
With the Electronic Entertainment Expo (E3) right around the corner, the gaming world waits to see what Nintendo’s next move will be. For E3 this year, Nintendo will forgo a traditional live keynote media briefing in favor of a Nintendo Digital Event. With the recent news of the company’s continued struggles and net loss in profits due to the poor Wii U sales, it will be interesting to see what Nintendo has in store for gamers at the conference.
By Jeffrey Harris