Nintendo posts first annual financial loss, iPhone continues leading portable gaming

Mario shrugging in failure

Nintendo recently posted their full-year financial results, which included their first operating loss amounting to a deficit of $458 million. Over the whole year, Nintendo sold 13.5 million 3DS portable systems worldwide; to put that in perspective, Apple sold about 9 million iPhones in the U.S. in the first quarter of 2012 alone. Nintendo is optimistically forecasting $247 million in net income by the end of 2012.

After hearing this news, all eyes drifted to the iPhone for hoarding the attention (and disposable income) of casual gamers who are prone to play on the Nintendo Wii system. Meanwhile more hardened players have been long-entrenched with PC, Xbox, and PS3 consoles. On more than one occasion, Nintendo has called out the smartphone world and Apple for devaluing games, and who can blame them with so many awesome free games available? Steve Jobs shot back that the iPod touch was more popular than the Nintendo DS and Sony PSP combined. One of Nintendo's top developers admitted that Angry Birds was actually one of his favorite games in the last year, but Nintendo itself isn't showing any signs of easing its stubbornness.

It's too bad that such a venerable gaming company isn't able to progress with the times. Microsoft and Sony are having a reasonable amount of success by supporting mobile initiatives alongside their gaming consoles; I can't imagine what's stopping Nintendo from jumping into the smartphone world head first, especially in light of a rough 2011. They're already digitally distributing classic gaming titles through the Wii's Virtual Console at a healthy margin - $5 for a 27-year-old game isn't bad mileage at all, and they could milk that even further on the App Store. Investors have pressured Nintendo to get its titles on mobile, and it's really just sensible; Penny Arcade really put it best.

As is, Nintendo's going to push a new console called the Wii U this year, which will highlight a new 6-inch tablet-style controller. Good luck with that, Nintendo - you'll need it.

Now where's out Super Mario for iOS?

Source: Nintendo

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Simon Sage

Editor-at-very-large at Mobile Nations, gamer, giant.

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Nintendo posts first annual financial loss, iPhone continues leading portable gaming

26 Comments

I have a 12 year old son with a 3DS and an iPhone 4S (he's a really good kid) and I can tell you that he wouldn't miss his 3DS if it broke. We also have a Wii that is barely used anymore. A new 3DS game, Kid Icarus, just came out and he's obsessed with it now, but I guarantee in a week it will be the 4S getting all of his gaming attention again. Note to Nintendo - if you created new and reissued classic Mario, Kirby, Zelda, etc. games for iPhone and iPad and priced them competitivly ($5-$15), we would be buying them.

Depends on who you are, I think. I do not think iPhone sales can be compared to game systems like Nintendo 3DS or PSP. They are different categories of tech. Even though iPhone contains many games on the App store for cheap price, those games are rather forgettable. Angry Birds, Fruit Ninja, Words with Friends only serve as social gaming. I don't find myself ever excited to play these games, rather, I only play them to pass time.
Nintendo games such as Zelda, Smash Bros, Mario are games that I am excited about. I value them more than Angry Birds. Sure, Angry birds and the low costs of games on iPhone are popular to the mass market, but Nintendo is right. Most of the games on iPhone are not that memorable. Apple shouldn't even be talking about gaming, because in my opinion, Apple is devaluing the gaming industry. They are not serious or dedicated to gaming. All they provided is "horsepower" or "latest graphic chips" onto their devices, but they do not innovation in gaming's perspective (I give credit to their innovation of iPhone, but not as a gaming device).
So for the person like me, comparing Apple to Nintendo is rather insulting. Sure, Apple has a success here because their iPhone/iPod appeal to much bigger market, but I do not think they have a respect for the gaming industry. They just want to money. And I don't think that's what it should be all about. I love games. Do you think Mario / Zelda will ever go away? No. Angry birds? Possibly will get old. It already has, actually.

Sorry for the grammar errors above. But to add: I do have an iPhone. A lot of the games on it have only been played once or twice. And even though you could download free games, you'd only have limited space. I only have 2GB left in my iPhone. I have to share this data with all other apps too. Such hassle. I'd rather have a dedicated gaming device like the 3DS than have to deal with this. Plus the thing that 3DS/PSP/Wii/other game systems will always have and the iphone will NEVER have: buttons.

Hate to tell u, but wether we're talking about Apple, Nintendo, Sony, or Microsoft, it's "all about the money!" No company is making games out of the goodness of their hearts, it's a business. Plain and simple.

I Agree. Dont get me wrong i love Apple. They are the best at what they do. I agree iPhone and ipad are amazing pick up and play games devices, but a true immersive game i have yet to play and actually like it. In the end its amazing iPhone and ipads can play games, but i wouldn't consider them gaming centric devices, and for that, is why i cant get my self to accept that they are the future of gaming yet. I hope one day Apple will make a gaming centric device, but i do have to admit, today Apple is indirectly hurting gaming experience as a whole. (This is my opinion. Not trying to impose mine on others.)
On another note i do feel Nintendo has to change its strategy to survive, the current way is not going to cut it, and it wouldn't be Apple's fault if they dont succeed. They do need to adapt as i am sure Apple will have to some day.

For me this doesn't mean much. iPhone USB just a gaming device...think about how many people don't even touch gaming on their iPhone. Compare it more to iPod touch sales if anything as that would be a better indicator. I hardly even touch gaming on my iPhone because it drains the battery an it's more important to have the phone part instead of the gaming part on me.

Hardcore gamer turned casual, with the exception of a good PC game like Skyrim. Anyway, I haven't touched my DS since the iPhone 3G.
The DS has far superior controls and battery life but my phone is always with me. Games don't cost $40 a pop. iOS games are (for the most part) backwards compatible with older hardware. I can't say the same is true with Nintendo.
Nintendo has failed to keep up with the continuing shift in the gaming market. The "best" platform doesn't always win.

I still prefer my true gaming on Nintendo/Sony/MS devices :)
Nintendo can afford to use 500 millions a year and still be around in 20 years .
They will be right back on top with the profit they make before end of this year.

Nintendo back on top? I wouldn't bet on it any more than I'd bet on Atari at this point with their refusal to accept the world as it is.

Care to explain!?
They brought motion-control to this world and everyone started copying them .
They brought touch screen playing long before iPhone and iPad. and everyone copied them
They brought a true 3D without glasses and eventually others will copy them.
And just wait till Wii U is officially announced and the new ideas they have with it. It will be THE gaming console of this Christmas and outsell the competition.
So yep, by next year this time, Nintendo will have the 2012 best selling Console and handheld system under their belt ;)

I find many of the conclusions posited by the author to be misinformed or speculation.
I'm not convinced Nintendo has lost all that much market share to Apple. Nintendo has not, until the Wii, tried to appeal in such a broad manner to untapped markets. This brought many new customers and first time gamers into the Nintendo fold, but many, it turns out, were interested in the gimmick and not for the long haul. Apple, and to a lesser extent Android and others, have reached a similar untapped market in the mobile space. These are largely new customers to the market, having bought a device for different purpose and then subsequently discovering that it also plays games.
I don't think many hardcore gamers are being lured away by the siren song of casual games (they're being serviced by a different product entirely as hardcore games are almost non-existent on mobile devices)
Nintendo hasn't been losing customers to Apple. It's been losing customers to its own decision making. The Wii has really started to show it's age(evidenced by how painful some Wii-Ware games look on HDTV's) and its larger market hasn't stuck around. Skyward Sword has been the only playable first party title for 6+ months on the Wii.
The 3DS has had a disappointing start, but lest anyone forget, the DS had an abysmal start as well. It wasn't until the system was refreshed with the DS Lite and people started paying attention and it began literally printing money for Nintendo. Now, the price drop was drastic and severe, but it has caused the 3DS to sell more quickly than the DS did at the same period following it's own launch. Nintendo stumbled with the 3DS putting it's weight behind what could be perceived as another product gimmick and the sooner they stop insisting every game support or tout 3D, the better.
There has been a lot of doomsaying speculation since this is the first annual loss posted in 30 years. They've been doing quite well with the DS and the Wii and I have no doubt they can turn the 3DS around in a year or so. The world, however, will have to see if the Wii-U can look good enough and bring enough hardcore gamers back into the fold to attract the bigger third party developer support it desperately needs.
The author made a final point, however, that I must mention specifically, which I think may betray his naivety. Nintendo would sooner close its doors than bring Nintendo games to mobile devices. Ponder this: Nintendo has traditionally had weak third-party developer support compared to its direct competitors. Nintendo sells its systems and peddles its wares solely on the back of its own intellectual property. People show up, plunk down money and buy their consoles to enjoy the AAA experiences offered by their own IP's. Not only would Nintendo be treading on their own brand by branching out, but they would be compromising those IP's to stick them on devices with inadequate controls. If you're satisfied playing games with a tilt sensor and one button, by all means, enjoy. I don't think anyone will come out in defense of the d-pad/ buttons overlay scheme in any capacity that isn't an apologetic shrug of compromise. Even Nintendo games that feature motion controls (ie: the new StarFox for 3DS) still require a non-insignificant # of buttons to actually work. Any version of Mario Bros that could be ported to an iDevice or Android would be so hollowed out that I can't imagine customers not recognizing it for what it really was: a shill to sell some well known IP's for quick bucks.

Another thought: I've bought dozens of cellphone games over the last year and, with the singular exception of Osmos (which was better on PC anyway), all of them were forgettable. Most felt like work. Many were overly ambitious with embarrassingly bad or awkward controls. The ones that were fun to begin with were betrayed by how little testing went into development before the games shipped and rapidly felt unbalanced or dumb.
Compare the sum of those experiences to a $30-40 DS/3DS game like Zelda: Phantom Hourglass, Advanced Wars: Dual Strike, or Kid Icarus. You're paying $40 for a game and you're getting all that that entails: a large development team, lots of testing, polished engaging experiences, and a storyline with more depth than "we better go get our eggs back from those damnable swine". 99 cent games are great for passing time in a waiting room waiting to be called, but they're throw-away experiences. Your $40 game dances to a different beat and provides a different product altogether.

Completely disagree with the author, and agree with most of the comments.
Nintendo, like Apple, is primarily in the hardware business. Unlike Microsoft and Sony, they make a profit from Wii, DS and 3DS sales. There is no way they will port anything to another platform whilst they have one available. Especially one available that does a better job. Any company in the same position would take the same strategy with a "competitor", and not push some of their most valuable intellectual properties to a place where it could hurt their hardware sales.
Don't get me wrong, the iPhone is great, but not for heavy gaming. Being a huge Zelda fan, I purchased Zenonia under the promise that it was similar, and it is. But I played Zenonia for all of half an hour. Mobile gaming for me (and a large portion of Nintendo fans) is killing five minutes whilst waiting for a train, and not something that I heavily invest time in.
iPhone sales cannibalizing the handheld market? That's a joke. 3DS is the fastest selling dedicated handheld console ever. Sold more than the Gameboy (3rd), and the DS (2nd). That's an upward trend, not a downward one. If it's cannibalizing anything, it's more likely PSVita sales (which are now less than 10,000 per week in Japan).
A price cut and downward revision in earnings looks bad, but Nintendo has plenty of money to spare, and even if the Wii U doesn't do so well (I'm not yet convinced, although I can see the market segment they're aiming for, I think they needed to do it two years ago, and now the touch screen needs to be excellent), they'll have more consoles and handhelds afterwards, especially handhelds.

To follow up; http://www.gamesradar.com/nintendo-doomed-not-likely-just-take-look-how-...
"Buried in reams of financial data is the revelation that Nintendo have 812.8 billion Yen (£6.7/$10.5 billion) in the bank - enough for it to take a 20 billion Yen loss (£163/$257 million) every year until 2052. Then there's almost 469 billion Yen (£3.8/$6.0 billion) held in premises, equipment and investments. When that runs out - we're in the year 2075 by this point - they've got some of the most valuable intellectual property in gaming to sell off before the company goes out of business."
They aren't going anywhere anytime soon.

Simon,
horrible article!
First of, Nintendo is smart for focusing what its best at : pure gaming with massive fun factor.
Second to answer your question with a typo "Now where’s out Super Mario for iOS?" Dream on! You will never see Nintendo give in and release their products on any other platforms than their own.
I think after over 100 years in business they know what theyre doin.
The Wii U will be setting standards for other systems coming out in 2013-2014...

Not one mention of the PS Vita? I know it might not be a huge success because mobile phones (not just the iPhone) are more convenient but if i were looking at a dedicated mobile gaming device i sure as hell wouldn't pick the outdated DS over a Vita. The DS isn't even competitive anymore in its own class. If apple didn't come out with a new iPhone for the next 3 years I'm betting sales would drop too, nobody wants outdated tech.

Wanted to add that iMore is getting a little pathetic with their bias for the iPhone, do they really think the iPhone is the DS's only competition? What about all the other smartphones on the market? When I had android I always had an emulator loaded up with old school Nintendo, Super Nintendo and Sega games, but I'm sure that has nothing to do with it.

The new game boy, folds in half, has two screens and requires a pen... It's a device that will only attract little kids.