Seeking a new high score: Nintendo vows to fight back

After dominating the games console sector for several years, Nintendo's Wii is running out of steam

In Playing to Wiin, author Daniel Sloan described Nintendo's rebirth as the leading player for video game console sales in the past five years as "the video game industry's greatest comeback". Yet as the technology for the best-selling Wii and DS consoles has aged, sales have slowed; against a background of increasing competition, the company is being forced to bet heavily that the Wii's successor can keep it on top.

In a presentation to games developers earlier this year, Nintendo president and chief executive Satoru Iwata warned there was much uncertainty in the industry, adding: "Our world is changing."

How right he was. Nintendo's sales peaked in the 12 months to the end of March 2009 at Y1,800bn with a profit of Y279bn. The company's latest full-year results, published on Monday, showed declines for a second year in a row with sales of Y1,000bn and profits down to Y77.6bn.

While the popularity of its consoles struggled to match its earlier popularity, and software has become cheaper, the company has also been hit by the appreciation of the yen. The earthquake did not affect production but it fears consumer spending could slow as a result.

The numbers were "fairly expected from the trends we have been seeing in the market", says Piers Harding-Rolls, senior analyst and head of games at Screen Digest. "The console business is very cyclical. There is an investment period as it designs the new platform. Nintendo is ramping up that investment at the moment."

Sales of the Wii were down almost a third to 15 million in 2010. "That's a hefty decline in anyone's book," Mr Harding-Rolls says, "but it is still outselling its rivals." Sony's PlayStation 3 sold 12.5 million during the year and Microsoft's Xbox 360 sold 11.8 million.

Nintendo admits the Wii is coming to the end of its natural life. The industry tends to work on five- to six-year cycles, a spokesman for Nintendo says. The Wii was first launched in 2006 and the company president has admitted that developers are beginning to struggle with the old platform. "It is difficult to surprise people with the current model," the spokesman adds.

Mr Harding-Rolls said: "It is the nature of the business: sales ramp up until they get to a peak phase of spending on hardware and software. The console sales tail off and while software normally holds up, the price often comes down."

He added: "You get these waves of adoption and then transition. Nintendo is in the latter stage now: investing heavily and not making the profits they did before."

The Nintendo console had stolen a march on its rivals, Sony PlayStation 3 and Microsoft's Xbox 360, with its motion gaming. Its real success lay in the ability to extend the appeal of video games to demographics beyond that of the traditional gamer. Not only have its rivals caught up with motion gaming themselves, they have now left Nintendo trailing.

Jia Wu, senior analyst for Strategy Analytics, says: "The Wii, PlayStation 3 and Xbox 360 are all of the same generation but in terms of specs [specifications], the Wii was lagging. That's why it has had to move to introduce new hardware earlier. The others have extended the life cycles with new motion products."

Last year, Sony released the Move motion controller for the PlayStation 3, and has shipped eight million devices so far. The Xbox Kinect, which requires no controller at all, has become the fastest-selling consumer electronics device on record, according to Guinness World Records. The hardware sold an average of 133,333 units per day for its first 60 days after its launch in November, outstripping both the iPhone and the iPad over the equivalent period.

Nintendo plans to launch its follow-up to the Wii in 2012, it said yesterday. It will show off a playable model of the new system at the industry's showpiece event, the Electronic Entertainment Expo, or E3, in Los Angeles in June. Analysts believe the specs will have to outstrip all of its current console rivals.

Mr Harding-Rolls says: "Motion control is an accepted standard now, so the successor to the Wii will have to bring something totally new to the table. Their planning will be fairly advanced."

However, it is not just competition from its console rivals that will be worrying Nintendo's senior management. "There is more competition in the market now, and there are more platforms to play games on," Mr Harding-Rolls warns.

The rise of smartphones has taken some of the casual-gaming market, while another games platform gaining traction is those played on social networks. This includes popular titles such as FarmVille. Phones especially could hit sales of Nintendo's 3DS. The follow-up to its extraordinarily successful DS brings glasses-free 3D to handhelds for the first time, yet the company revealed this week it had missed sales targets.

The 3DS went on sale in February in Japan and a month later in the US and has so far sold 3.6 million devices. Over the same period, it sold 17.5 million of the original DS, bringing total sales of the device to 146.4 million. Mr Iwata said: "Sales of the 3DS have been weaker than expected," adding: "There aren't yet so many people who are absolutely sure that now is the time to buy it. Some people may be waiting, thinking that there aren't yet enough software titles that they want to play."

Nintendo believes that sales of the 3DS will pick up throughout the year, saying its customers did not tend to be early adopters who queue to snap up the device on launch day.

Mr Harding-Rolls warns that despite increased competition, it would be foolish to write Nintendo off. "This is a very innovative company and it is hard to bet against them," he says. "But it will be harder to develop something completely disruptive."

Not everyone is so sure. Mr Wu of Strategy Analytics says that the original Wii had turned around the fortunes of a company whose sales were flagging badly in 2006. "If this new console doesn't perform, the company will be in trouble. It is betting a lot on this," he added.

In Playing to Wiin, Mr Sloan said Nintendo's recent history was of a "company in an existential crisis that has not only found its way but regained the mantle of an industry leader". It may be facing more challenges before too long.

world cup 2014A history of the third-place play-offs
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer Tommy was last surviving member of seminal band
Life and Style
Swimsuit, £245, by Agent Provocateur

Diving in at the deep end is no excuse for shirking the style stakes

The Mexico chief finally lets rip as his emotions get the better of him
world cup 2014
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
Life and Style
Several male celebrities have confessed to being on a diet, including, from left to right, Hugh Grant, Benedict Cumberbatch and Ryan Reynolds
...and the weight loss industry is rubbing its hands in glee
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Yaya Touré has defended his posturing over his future at Manchester City
Detail of the dress made entirely of loom bands
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
There were mass celebrations across Argentina as the country's national team reached their first World Cup final for 24 years
transfersOne of the men to suffer cardiac arrest was 16 years old
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice