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Nintendo lowers forecast from ¥55B profit to ¥25B loss [3DS 18M->13.5; WiiU 9M->2.8M]
- Thread starter mackaveli
- Start date
The MS board isnt happy with the Xbox project. Some of them want to sell it off. They cant make a profit.
Laughing Banana
Weeping Pickle
This is a very good slap in the face for Nintendo.
Hopefully they don't treat this slap as something that they just can ignore. It would be an extremely sad day if by some tragedy Nintendo flails and collapses from the video game industry. One might say this is an exaggeration from my part, but... well, it's not like we don't have stories like Blackberry.
Consolidate, Nintendo, and move forward!
Hopefully they don't treat this slap as something that they just can ignore. It would be an extremely sad day if by some tragedy Nintendo flails and collapses from the video game industry. One might say this is an exaggeration from my part, but... well, it's not like we don't have stories like Blackberry.
Consolidate, Nintendo, and move forward!
Platformers online is a bad idea due to latency.
Lol they dont even put the games on WiiU/3DS, why would they put them on Smart phones? Putting games on phones is not gonna do anything.
They need to sale hardware, their own hardware, smart phones would hurt the 3DS and its the one thats selling the best.
And those would probably be the only three games Nintendo ever develops afterwards.
Hydrogen Bluebird
Member
This is just me, but man, as someone who doesn't buy Nintendo hardware, it would be pretty great if Nintendo went third party. I'll finally have a chance to play all those Mario games and other Nintendo exclusives.
7DollarHagane
Banned
Everytime i think about ways to fix Nintendo I just want them to be more like Valve.
Just partner with Valve, Nintendo. You're both in Seattle anyway. Nintendo+Valve would fix everything
Just partner with Valve, Nintendo. You're both in Seattle anyway. Nintendo+Valve would fix everything
SloaneRangerSW1
Banned
I keep saying it... the MS/Nintendo tie-up looks less crazy each day.
Aaron Strife
Banned
Nintendo only makes Mario and Zelda!
Clearly if they go third party this problem will not exacerbate in any way.
They are far away from gettin 3rd Party.
MisterHero
Super Member
You mean like early gaming ? Ton of crap with few diamonds in it ? When devs will move to mobiles they will adapt to landscape and they will still create games. Just no Vanquish like games...
Basically Sega just with games that will sell millions because their audience doesn't care about platform on which they play their games.
Uncle Rupee
Banned
Except that Nintendo has lost less than half what Microsoft has on the Xbone? They're $2B in the hole, if anyone is going away it's MS in the games business. PS4 is crushing them and will continue to do so as time goes by. Then Valve's Steam Machine. Occulus Rift. Xbone is going to lose marketshare to all of them.
It'd be incorrect to say that the board as a whole is unhappy with it. Some investors are unhappy with it and would prefer to spin it off and focus on Microsoft's profit centers: Windows & Office. Most of the board and most investors realize that the Xbox division is now profitable (and has been for about 6 years now) and serves an important function in aiding the Microsoft ecosystem to help drive smartphone and tablet sales, which Microsoft desperately needs in order to maintain their current profit level over the coming decade.
PREACH
Nintendo under Iwata has been more conservative, more risk-adverse, more isolated, and now more irrelevant than it has ever been in its history as a video games company.
Iwata's vision for the company is not going to see them through to the future. That much is clear now. Nor is he the authority on what Nintendo is, was, or ought to be.
Nintendo was great before Iwata, and it can be great after him.
Rather see Nintendo shut down and take all their IPs down with them
It might depend on who owns Yamauchi's shares. Iwata should be allowed to answer that question this time.
If Iwata inherited Yamauchi's shares (like in The Hudsucker Proxy) then he can stay as long as he wants.
7DollarHagane
Banned
People always forget that the need and ability to develop various, unique, and risky software comes from being a 1st party with your own hardware to push.
Just like with Sega, once that hardware doesn't exist and you aren't there to push it out to as many people as possible, you focus on your most popular franchises and try to push them out with as much frequency as possible.
Everytime i think about ways to fix Nintendo I just want them to be more like Valve.
Just partner with Valve, Nintendo. You're both in Seattle anyway. Nintendo+Valve would fix everything
valve and nintendo seem to have similar approaches to design. it's marketing that's really different. iwata believes in having one game stay one price forever. valve will eventually give it away for free and make money off community stuff.
probably the only appealing thing for nintendo would be having a platform that wouldn't die.
Everytime i think about ways to fix Nintendo I just want them to be more like Valve.
Just partner with Valve, Nintendo. You're both in Seattle anyway. Nintendo+Valve would fix everything
Nintendo and Valve are on opposite sides of the gaming company spectrum, without discrediting either.
You can't play multiplayer in Mario. MP in Dota 2 is everything it is.
megamerican
Member
Everytime i think about ways to fix Nintendo I just want them to be more like Valve.
Just partner with Valve, Nintendo. You're both in Seattle anyway. Nintendo+Valve would fix everything
They couldn't be more different. Nintendo is rigid to a fault and Valve's structure is so open and ethereal its practically nonexistant.
Or you could play them now instead of hoping for something that will never happen.
I'm going to let you in on a secret... either God doesn't exist or he hates you because you're never going to get that wish.
The Abominable Snowman
Member
Despite 3DS' best efforts, its just doing better than the PSP. Handheld market has seemingly dried up. Sad times...
Well that's certainly a response I didn't expect in this thread lol
Sakura
Member
Just because you say these things, does not make it true. You don't think it is at all possible for the Wii U to sell more in 14/15 than 2.8 million (assuming they hit their forecast)? Even with a much stronger software lineup, possibilities in the way of bundles, price cuts, etc?
And besides, all I was saying, is that I don't see the comparisons with BlackBerry. If you want to say they are in a bit of trouble with their market at the moment, then sure. But if you want to say they are heading down the same path as RIM, then I disagree. A couple years ago RIM was already laying off thousands of employees was it not? I don't think Nintendo has laid off any body yet (correct me if I'm wrong). Nintendo has revenue streams in the way of 3DS, merchandise, console space, etc. Let's say they just outright decided not to make consoles any more. They could just shift all their focus and resources to the 3DS and its successors to make it even more of a healthy platform. Could RIM just cut their mobile devices and keep going?
Aaron Strife
Banned
Can't wait for my PC version of Zelda, it'll go well with my PC version of GTA 5
(Next Zelda is actually just a Skyrim mod)
7DollarHagane
Banned
Right, and games can be adapted to fit Motion controlled gaming and Kinect gaming and gaming on facebook but i don't support that either.
Dark_castle
Junior Member
This is what they get for their stubborn decision to regionlocking. No SMT IV for Europeans.
I despise region lock but it's so not why Nintendo is underperforming, lol.
They're not going to dump a business that's consistently profitable now simply because it was unprofitable from 2001-06. Newcomers in established markets that rely upon installed customer bases often take significant losses in order to build up their base.
I feel like I shouldn't have to type such obvious things because you don't need to have taken Econ 101 to understand them, it's simple logic.
The Abominable Snowman
Member
Nintendo gave you that cup of Kool Aid during the OG Xbox days to explain why online was bad. You shouldn't still be drinking it.
PCs have seen tons of online platformers. XBLA/PSN has as well. Fighting games require tighter timing than any platformer. Maybe Nintendo doesn't know how to assess netcode.
If frame specific fighting games can be done well online, platformers are no issue. This is just a common excuse to shield Nintendo from criticism.
I'm not sure the audience for Nintendo games is even on other systems. Course I could be wrong and they are there just waiting on them to come.
Neff
Member
I agree to a point. Nintendo's extremely Japanese-centric stance is what's working against them, more than ever in a Western-centric games industry fed by Western currency. They need to put a stopper in the "We're Nintendo" hubris and adopt more flexibility and awareness. Reinstating NoA's independence and maneuverability is crucial to that, I think. Western gamers do want the Nintendo experience, but not for its own sake, at least not in significant number. However, I don't think we've really seen what Wii U can do with regard to market penetration yet. It still only has one high-profile killer app, and has yet to receive a high-profile online multiplayer exclusive. The current lineup is excellent, but it's not grabbing headlines like Mario 3D World did. If Wii U struggles after Mario Kart, Smash and Zelda U (which I wouldn't be at all surprised to see launch this year), then there will certainly be permanent problems for the console.
I also wouldn't yet point to PS4 as an example of 'doing it right' yet, either. Rather more a case of doing nothing terribly wrong and conveniently capitalising on goodwill due to Microsoft's lack of foresight.
The Nintendo audience is very old and very diverse and spread across a whole range of demographics and formats.
tehrik-e-insaaf
Member
Horrible numbers. Simply horrible. This misses everyone's most pessimistic expectations for operating income expectations by $400M+ USD and baseline estimates by over $650M+ USD. No one seriously thought they were going to hit $1 B USD in operating profits. Most people were seeing Nintendo hitting 30% of the target as a baseline. That they are expecting a loss for the year of $350M USD is mind-boggling.
Only four things can explain these losses IMHO:
1. Nintendo's gross margins on software must have shrunk dramatically. Meaning that they are barely making any money on their own software much less third party software which has all dramatically dried up on both of their platforms globally. This bodes very badly for Nintendo in general - even if they were able to go third-party and hypothetically sell 2-3X the number of games (which I very much doubt) - what this shows is that Nintendo has lost its pricing power at retail - people aren't ready and willing to pay the Nintendo premium.
2. Nintendo bled money at retail trying to push hardware - far more than anyone expected - they must be eating close to a $100+ loss per Wii U sold right now or more - not just because of manufacturing cost - but because they are literally having to compensate retailers to provide them with shelf space and having to eat the price drop at the same time. This is horrible - because even if they take that much of a loss - the low gross margins on their own first-party games isn't sufficient to help them break even.
3. Nintendo isn't going to get Mario Kart or Smash out by early April - otherwise they would have been able to book orders under the current fiscal year. It looks like both games are going to be delayed well into the summer or into the Fall now. I am almost 100% positive that if it were even possible to get the games out by April or May - Nintendo would have done everything in their power to do so. It looks like Nintendo still hasn't effectively transitioned to HD development - not because of capability - but because they want to preserve gross margin based on their lower expected revenue numbers - and it's compromising their ability to get projects out the door on-time.
4. Nintendo is playing shell games with their accounting - booking contractual payments to Intelligent Systems and their other closely related entities as operating losses for tax purposes but which are effectively asset purchases - it means that they are dramatically restructuring their teams and it's going to be far more expensive than we thought.
If these estimates hold up - Nintendo will have generated a $1 B+ operating loss over the past three years. Here's the kicker though: Nintendo is still sitting on over $1 B+ in inventory that they haven't impaired yet (the IR report makes no mention of it). There is a good chance that over 80% of that is Wii U hardware which means that it's going to continue to be a drag on earnings over the next twelve months.
In any case, I don't foresee any major changes for Q3 happening. Nintendo is still going to engage in a buyback of 5% - which is going to drain their cash by another $1 B USD.
That means in three years Nintendo's war chest will have been depleted close to $2.5 billion USD from inventory impairment, operating losses, and share repurchases. Another $500M USD is going to be gone for asset / real estate purchases and capital investments. Their next hardware projects are going to require about ~$1.5 B USD in capital reserves at a minimum that are going to be tied up in the next two years as they wind down their existing platforms, and I don't see third-party licensing revenue coming back in a big way to offset declining gross margins on their first-party software.
Basically that means Nintendo could burn through ~$4 B in cash throughout this entire cycle and in anticipation of the next, with a very high cost structure intact. Like Sony, they will have effectively wiped out cumulative years of profit.
If we assume that Nintendo keeps building up human resources this coming year to meet their hiring targets, they are probably going to break-even in terms of operating profit for the next fiscal year or make a slight profit - but I'm even second guessing my own ability to understand Nintendo's gross margins now - someone at NOA or NOE is effectively writing giant checks to retailers to keep the channel alive - and that's really not good at all - Apple was in this same position in the late 90s and had to create their own retail stores to stop bleeding money to major retailers. Nintendo isn't going to have the investor support to launch a giant retail project in the US and EU, particularly when they no longer have proven pricing power which would be the primary argument to go that route.
Difficult time to be a Nintendo shareholder.
Only four things can explain these losses IMHO:
1. Nintendo's gross margins on software must have shrunk dramatically. Meaning that they are barely making any money on their own software much less third party software which has all dramatically dried up on both of their platforms globally. This bodes very badly for Nintendo in general - even if they were able to go third-party and hypothetically sell 2-3X the number of games (which I very much doubt) - what this shows is that Nintendo has lost its pricing power at retail - people aren't ready and willing to pay the Nintendo premium.
2. Nintendo bled money at retail trying to push hardware - far more than anyone expected - they must be eating close to a $100+ loss per Wii U sold right now or more - not just because of manufacturing cost - but because they are literally having to compensate retailers to provide them with shelf space and having to eat the price drop at the same time. This is horrible - because even if they take that much of a loss - the low gross margins on their own first-party games isn't sufficient to help them break even.
3. Nintendo isn't going to get Mario Kart or Smash out by early April - otherwise they would have been able to book orders under the current fiscal year. It looks like both games are going to be delayed well into the summer or into the Fall now. I am almost 100% positive that if it were even possible to get the games out by April or May - Nintendo would have done everything in their power to do so. It looks like Nintendo still hasn't effectively transitioned to HD development - not because of capability - but because they want to preserve gross margin based on their lower expected revenue numbers - and it's compromising their ability to get projects out the door on-time.
4. Nintendo is playing shell games with their accounting - booking contractual payments to Intelligent Systems and their other closely related entities as operating losses for tax purposes but which are effectively asset purchases - it means that they are dramatically restructuring their teams and it's going to be far more expensive than we thought.
If these estimates hold up - Nintendo will have generated a $1 B+ operating loss over the past three years. Here's the kicker though: Nintendo is still sitting on over $1 B+ in inventory that they haven't impaired yet (the IR report makes no mention of it). There is a good chance that over 80% of that is Wii U hardware which means that it's going to continue to be a drag on earnings over the next twelve months.
In any case, I don't foresee any major changes for Q3 happening. Nintendo is still going to engage in a buyback of 5% - which is going to drain their cash by another $1 B USD.
That means in three years Nintendo's war chest will have been depleted close to $2.5 billion USD from inventory impairment, operating losses, and share repurchases. Another $500M USD is going to be gone for asset / real estate purchases and capital investments. Their next hardware projects are going to require about ~$1.5 B USD in capital reserves at a minimum that are going to be tied up in the next two years as they wind down their existing platforms, and I don't see third-party licensing revenue coming back in a big way to offset declining gross margins on their first-party software.
Basically that means Nintendo could burn through ~$4 B in cash throughout this entire cycle and in anticipation of the next, with a very high cost structure intact. Like Sony, they will have effectively wiped out cumulative years of profit.
If we assume that Nintendo keeps building up human resources this coming year to meet their hiring targets, they are probably going to break-even in terms of operating profit for the next fiscal year or make a slight profit - but I'm even second guessing my own ability to understand Nintendo's gross margins now - someone at NOA or NOE is effectively writing giant checks to retailers to keep the channel alive - and that's really not good at all - Apple was in this same position in the late 90s and had to create their own retail stores to stop bleeding money to major retailers. Nintendo isn't going to have the investor support to launch a giant retail project in the US and EU, particularly when they no longer have proven pricing power which would be the primary argument to go that route.
Difficult time to be a Nintendo shareholder.
I don't really like Valve's current investments in the long term.
TheGreatMightyPoo
Banned
Nor Ubisoft I guess.
7DollarHagane
Banned
Well yes that is why I would say that Valve working with Nintendo would help them with lot of the areas they struggle with.
In a similar way Nintendo would be a fucking unstoppable name to have backing their steam machines concept for the living room. Valve has almost no familiarity with the console/living room customer, Nintendo could really help them push into the living room.
Anticitizen One
Banned
Absolutely. Every so often I think to myself like why did the SNES and n64 seem like it had way more games and why does nintendo just keep making mario/mario kart/zelda/smash bros now? and then I remember that they lost all the RARE IPs. That wiped out half of there library and then for whatever reason Nintendo stopped creating new Ips and phased out IPs that didn't sell as well as Mario/Zelda like Star Fox, Metroid, Wave Race, F-Zero, Earthbound, 1080 Snowboarding, etc. I can't comprehend how Nintendo thought it was going to stay afloat with just 2 real IPs. Nintendo also used to be good at getting long term exclusives like getting exclusive Star Wars and Resident Evil games for the longest time why did they stop doing stuff like that? Signing up with Platinum Games (an extremely niche company that has yet to make a hit game) is nowhere near the same thing.
InsaneLuchador
Member
Can't sympathize much. NSMB as a pack in instead of 3D World over the holiday was a complete joke.
Define "well."
Little Green Yoda
Member
Wait, when did we get the profitability numbers on the Xbone?
On topic, it was nice knowing you, Iwata.
Sakura
Member
It was only unprofitable for 2001-2006? I thought it was more than that.
is there any actual documentation of this?