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Nintendo Financial Results Briefing Global Video Game Market breakdown
Posted on April 27, 2012 by

This past Wednesday CST (Thursday in Japan standard time) Nintendo officially released their earnings report for the last fiscal year that ended March 31th 2012. As it was predicted back in October/November of 2011, Nintendo posted their first profit lost ever in the company’s long history. The net loss was reported to be 43 billion yen ($528.9 million) double the about that was predicted last year. Nintendo attributes this loss to price slashing the Wii and the 3DS and a very strong yen. Yesterday Thursday CST/ Friday JST, President Satoru Iwata held investors’ financial results briefing to explain what went wrong during the fiscal 2012 year and how they plan to turn a profit this new fiscal year. His presentation focused on four main items: the global market breakdown of their products compared to their competitors by region, prospects they have for the new fiscal year, maintaining the momentum of the 3DS through this fiscal year and their expansion into the digital business i.e. digital distribution of retail titles. The first item we are going to look at is Nintendo’s global market breakdown of their products, starting with Japan.

As we all know, Nintendo is king of the consoles in Japan. From the Wii to the DS and to the new 3DS, Nintendo consoles always outsell both the Xbox 360 and Sony’s suite of consoles combined. As you can see in the graphic that Iwata provided, at the beginning of the year the 3DS starts off strong and starts to stable out in week 3 (January 16 to January 22)at 80,000 units and maintained a steady momentum till week 12(March 19 to March 25). 3DS sales in Japan on this week jumped up about 130K units due to the anticipated release of Kid Icarus: Uprising, the cobalt blue 3DS and two 3DS bundles with Super Mario 3D Land. Sales stabilized once again on the following week dropping back to between 60,000 and 80,000 units. However in the home console division the Wii, while starting off strong, drops dramatically from about 50,000 units at the start of the year to almost under 10,000 by week 16. In comparison Sony’s PS3 starts off the year with 80,000 units sold and stables out at 30,000 units on week 2 (January 9 to January 15). They see a surge of sales on week 9 (February 27 to March 4) due to the release of their anticipated title based on the most popular anime at the moment, One Piece: Kaizoku Musou. PS3 sales stabilize back to 30,000 units on the following week.

It’s odd (at least in my opinion) to see the console that is carrying Nintendo at the moment in terms of sales is the 3DS and not the Wii. However, around this same time in 2011, the DS was the one making the most sales instead of the Wii. The cause of this trend could be attributed to many factors. Such as Japanese gamers wanting full experience while on the go and not having enough time to stay at home to play a 50+hour game. With Nintendo’s portable systems, Japanese gamers can have that 50+hour experience and take it with them. Another factor could also be the lack of new 1st and 3rd party titles on the Wii. The next chart can back this claim up.

The chart above is the software top 20, showing who has sold the most games between January 2 and April 22, 2012. Topping the list is the PS3 exclusive One Piece, which isn’t surprising due to the extreme popularity of the anime and manga. Highlighted in pink are 12 3DS titles that take up the majority of the rankings. Following close behind is Sony with six games spread between the PSP and the PS3. And lastly are the Wii with Just Dance and the DS with Pokémon + Nobunaga. As you can see the Wii only has one title in the top 20, which is Just Dance. I’m sure I’m not the only one that finds it odd that the Wii’s biggest game of 2011 and of the 2012 fiscal year, Legend of Zelda Skyward Sword isn’t in the top 20. If you refer to the financial results briefing for the nine month period that ended in December, Skyward Sword only managed to move 380K units in Japan. Now you may be saying “Well this was last year’s figures, I’m sure sales would have picked up”. True, but if you take a look at the current ranking that Japanese firm  Media Create, has posted up, Skyward Sword is not in the top 50. Super Mario Land 3D, a game that was release much earlier in November is still on the charts and is currently ranked at number 3, thanks to the two new bundles. As to why Mario top Zelda in sales and popularity is a different article all together. Now let’s look at the US figures and see how drastically different the two markets are.

When compared to the Japanese market, the US video game market is a different beast altogether. Here Microsoft and its Xbox 360 hold a commanding lead, often being the home console of choice for the US gamer. The following hardware figures chart will look different compared to the Japanese one due to market research company, NPD Group, releasing figures once a month instead of every week like Media Create:

As you take a look at the hardware sales chart over a three month period (January to March), you can clearly see that the 360 has an overwhelming lead and presence in the American market. This is a complete reversal compared to the Japanese market, where Nintendo and the 3DS are on top. The only constant that can be seen in both the American and Japanese markets is Sony often taking the second position in sales. We can also see that the American gamer has a different attitude towards Nintendo, compared to the Japanese gamer. In Japan, both the Wii and the DS have almost both dropped off the charts due to waning interest. However the American gamer still have slight interest in both the Wii and the DS, despite the limited games that have come out for the systems.

Though if you look at the US software top 20 chart, it shows a drastic contrast compared to the Japanese top 20. Where Nintendo held 15 different spots with the Wii, DS and 3DS, in the US chart there are only three Wii games, one DS game and two 3DS games. Out of those six games two of them are 3rd party games and the rest are Nintendo games staring Mario. Again no signs of Skyward Sword, but this is due not because of low sales, but due to the fact that the fiscal year 2012 had seen the release of games like Modern Warfare 3, Skyrim, Battlefield 3 in the winter; Kingdoms of Amalur and Mass Effect 3 in the spring and many other high profile high selling games.  It should also be noted that some games, such as CoD, are counted twice, each one representing the 360 and the PS3. By looking at the US top 20 chart, we can see that American gamers are more inclined to stay at home and play on either the 360 or PS3. With the advent of services like Xbox Live and PSN, gamers can interact and play with their friends online without having to leave home and meet up. This brings to attention Nintendo’s major flaw that everyone one can agree to: Nintendo’s lack of effort in their online service i.e.online multiplayer. I can’t speak for international gamers, nor do I know their position on the matter. But in the US, a majority of gamers do agree that Nintendo’s handling of online multiplayer, for a lack of a better term, sucks big time. Couple that with a lackluster 3DS launch lineup, the eShop not being available at launch, the poor scheduling of major 3DS and Wii titles all contribute to Nintendo’s net loss. But the major eye opener for them should be this:In 2011 Nintendo only had two major 1st party Wii game (Kirby and Skyward Sword) that people wanted, yet two 3rd party games (Just Dance 3 and Zumba Fitness 2) made it on the top 20, with Just Dance 3 taking the second place spot. And the rest of the games of 2011 (save for a couple like Skylanders) were shovelware. Nintendo knew that when they gave their presentation at E3 2011 on the Wii U, this drives the point home and hard. If they want to see a gain in net profit, they need to come in strong in the US with the Wii U. Nintendo knows where they stand in the US and Japan, but what about Europe? Where does the big N stand in the “Old World”? Oddly enough they don’t have a clue. So let’s take a look across the pond.

Europe is somewhat of a complicated market for Nintendo to understand and get a foothold on. And that’s understandable. Europe is divided into 50 different sovereign nations, each with their own governing body and individual market research groups. This proves difficult for Nintendo to get an accurate reading of their hardware sales on Europe as a whole, so they take the data that each individual country takes and use that to get this hardware sales chart:

What you see here in the chart is somewhat surprising. Europe seems to favor Sony’s products, with the PS3 being the home console of choice. Both the 360 and the Wii seem to be struggling for the second spot, with the difference between them being only a few thousand from each other. As for portable consoles, it seems to be that all four portable systems are within a few thousand of each other, even though the Vita experienced a hike in sales during the first week of its release. Like I mentioned earlier, with 50 different countries reporting different sales figures, it’s hard for Nintendo to gauge their software sales. That being said, Iwata shows off four of the biggest powers in Europe (UK, Spain, Germany, France) software top 20 charts. Let’s look at Germany first.

Germany’s top 20 software chart is dominated by Sony, with the PS3 taking 8 spots on the charts, most notably the top three spots. Microsoft only has two 360 games on the chart. As for Nintendo, it’s surprising to see that there are 8 Wii games on the chart and 2 3DS games. As to the reason why there are this many Wii games on Germany’s top 20 chart, your guess is as good as mine. Four of the games are from Nintendo and star Mario in some form; the other four are 3rd party titles. I’m not sure even Nintendo knows why there are this many Wii games in a top 20 chart. But Germany isn’t the only country to show this trend though. France’s top 20 also sports a similar look to Germany’s chart.

As you can see in France’s top 20 chart, Nintendo has six Wii games and three 3DS, totaling to 9 games placing on the charts. The top game for the Wii, is of course Just Dance 3 at the number one spot, with five of the Mario games taking spots three to seven and the rest of the games fielding out the bottom ten. Though Nintendo does have a presence in France, Sony yet dominates the charts with ten PS3 games and one Vita game. The 360 is boxed between Sony and Nintendo with only one game on the chart.

As for Spain, their 20 chart somewhat mimics Germany’s chart, by having two 3DS games, one DS game, five Wii games, eight PS3 games, one PSP game, one Vita game and one 360 game. Since I don’t know much about this and the two markets, I can’t really comment as to why Wii games are popular in these regions. As for the last country, the United Kingdom, its market is a big contrast to the other European countries and is similar to the US market.

As you can see with the UK’s top 20 chart, it closely resembles the US top 20 chart with the only difference being that there are four Wiigames, three which are dance games, and two 3DS games.  The rest of the chart is dominated by the 360 with nine games and the PS3 with five games.  One difference between the UK chart and the other European charts is that the UK only has three Mario games and has the smallest presence in Europe. To Nintendo, this is worrisome since Mario is an internationally known character that everyone loves. The fact that he’s only represented in three games in the UK warrants changes to their tactic in promoting the games.

After reading the first part of Nintendo’s financial results briefing, it really interesting to see how truly different each of the company’s target markets are. In regards to Japan, I only knew that Nintendo ruled that market with the DS, Wii and the 3DS. I didn’t realize that with the advent of the 3DS, the DS is slowly fading into the background letting the new generation step up. I was truly surprised however to see the Japanese almost lose interest in Wii. It shouldn’t have surprised me though, since the Japanese are notoriously known for buying into the latest model as soon as it gets announced and released. A perfect example of this is the DS and how almost immediately sales drop as the 3DS released. This will also happen with the Wii U, and continue to dominate their home country.

As for Europe, it was strange to see Nintendo’s number one mascot have a real small presence in the four main markets. It was also strange to see a high number of Wii games make it on to each top 20 list, when the 3DS make up the most in sales. If they can continue to support Europe, I can see them slowly rising up in the ranks.

Now for the US market. What can I say that hasn’t been said before about Nintendo? In the first three months of the New Year, only six games made it on the top 20 list, a record low according to Iwata. Three of those games were Mario games and one of them was from 2006. There were only two 1st party games that fans wanted in 2011, while a majority of the rest of the games was shovelware. The 3DS launch lineup was lacking and the eShop wasn’t up at launch. Not to mention that while trying to court the core gamers back to Nintendo, they introduced the most ridiculous sounding name for a system, and were trying to pass off trailers as what games will look like on the Wii U, when in truth they were from other consoles. Nintendo is quickly learning that they can’t get by on the casual market anymore. They realize that they need to release games that they know will increase sales of consoles and games in a timely matter instead of having spread too far apart. They need to really focus on getting quality games into the hands of Wii and 3DS owners before they start to focus on the Wii U. This is true for all markets and not just in the US. In the next section of the financial results briefing, we will take a look at what Nintendo has planned to increase their profits and keeping the momentum of the 3DS rolling into the holiday 2012 season. Will it be enough to bring them back into the black or will it be a prelude of even more losses? 

 

Source(s): Nintendo April 27 2012, Nintendo January 27 2012, Andriasang, Media Create

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