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Strong Yen, Weak Sales Lead Nintendo To Huge Losses

Nintedo Co is having some problems, and there are likely worries spreading through the gaming industry that this could be an indicator of a second collapse such as occurred after the release of the infamous ET Video Game for Atari back in the 1980′s. Of course, it could also be just an indicator of a problem with console games given the fact that many people are weighing the expense of a computer versus a console, which is often the same price as a computer but you cannot do as much on it.

Nintedo has tripled its full-year loss forecast to a full out ¥65 billion. Originally, they had projected about ¥20 billion. The forecast is more than double what analysts had expected. They were ertain of a ¥29 billion for the year.

There are a variety of factors involved in the loss, including a lackluster gaming field, a shift to more MMO and internet based gaming, as well as Apple’s share of the market when it comes to simpler games has grown over the last year. Many more complex games are starting to be placed on servers with clients running the game on people’s computers, as well. The recent Blizzard title Starcraft II required an internet connection to play even in single player or campaign mode. The upcoming Diablo III is the same way. This kind of set up is more difficult to do with consoles.

This is the first annual loss for Nintendo in 30 years.

Mitsushige Akino of the Ichiyoshi Investment Management Co in Tokyo stated “The company faces a structural problem . . . people are opting for their smartphones and tablet PCs to kill their time. I can’t see Nintendo’s next strategy. There will probably be a discussion about how much worse it can get.”

Also problematic for Nintendo is the rise of the yen, which has been gaining strength against other currencies. Tomoaki Kawasaki of Cosmo Securities Co stated “Nintendo’s profitability may get lower in the long term because people are starting to stay away from video game consoles,. The yen’s gain is a burden for Nintendo as it hasn’t taken sufficient measures to deal with the impact of the strong currency.”

With 80% of their revenue coming from non-Japanese sources, a stronger yen reduces the profits that they make from overseas sales.

According to Japan Times “Sales of titles for the 3DS may total 38 million units this fiscal year, down 24 percent from the company’s previous estimate, Nintendo said Jan. 3. Iwata said he is confident the company will turn profitable next year and added that Nintendo will “soon” start charging users for downloading additional content to a software title.”

It should also be noted that the MMO market continues very strong with two subscription titles pulling in passed 1 million subscribers, and one pulling in $10 million. Additionally, the number of free to play MMO’s are growing, including Star Trek Online, which made their move earlier this month.

It seems Nintendo is just a touch behind the times on this.