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.

Start your day with The Independent, sign up for daily news emails
Sport
Floyd Mayweather will relinquish his five world titles after beating Manny Pacquiao
boxing
Arts and Entertainment
tvGame of Thrones season 5 ep 4, review - WARNING: contains major spoiliers!
News
Tottenham legend Jimmy Greaves has defended fans use of the word 'Yid'
people
Life and Style
tech
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living