Wow, that's shocking that they were selling it at a loss for that long.
NNID: FrequentFlyer54
You just have to look at why the DS sold so well to see why the 3DS isn't doing as well as expected. People were very hungry for a new 2D Mario game (it had been over 15 years since Super Mario World), so it sold like crazy (29+ million), not to mention that it was a great game. On top of that Nintendogs (24.5 m.) and Brain Age 1 and 2 (35 million) sold a ton of consoles to the casual market, many of which proceeded to pick up NSMB and Mario Kart. The DS also had Pokemon, Zelda, and a wide range of games that could appeal to the more hardcore (buys more then 5 games) market. The 3DS's entire library is sequels to all of those games, and all of the truely new stuff caters to the hardcore crowd. Nintendo never found a new Nintendogs and Brain Age, and that is exactly why they sold 5 million less then expected. Pokemon,Mario,Zelda, and all the other stuff can sell a bunch, but there is no doubt a limit of how far they can take Nintendo on their own.
Yes, well they haven't been making great margins like the Wii/DS years.
http://www.marketwatch.com/investing/stock/ntdoy/financials
You can see from looking at the Gross Income versus the Sales/Revenue. In 2009 Nintendo had a 43% gross margin on over $17B of sales. Since then not only sales have dropped year by year to around $6B but margins have also steadily shrunk to 21% in FY ending 2013.
The revised forecast for FY ending 2014 is below that of 2013, and it would't be too surprising if margins continued to shrink, since the cash-cow Wii/DS businesses continued to shrink, and 3DS/Wii U had more bundling and price cuts.
- - -
I wonder though if we can blame the 3DS because at the end of the day they are making a loss because SG&A > Gross Profit. SG&A includes R&D for both 3DS & Wii U so it's hard to point the finger which one is more to blame. Likely Wii U games are more expensive in terms of R&D so I think Wii U is more to blame for high development costs, and little revenue.
| ICStats said: Yes, well they haven't been making great margins like the Wii/DS years. http://www.marketwatch.com/investing/stock/ntdoy/financials You can see from looking at the Gross Income versus the Sales/Revenue. In 2009 Nintendo had a 43% gross margin on over $17B of sales. Since then not only sales have dropped year by year to around $6B but margins have also steadily shrunk to 21% in FY ending 2013. The revised forecast for FY ending 2014 is below that of 2013, and it would't be too surprising if margins continued to shrink, since the cash-cow Wii/DS businesses continued to shrink, and 3DS/Wii U had more bundling and price cuts. |
Interesting. I see that since 2009 they have significantly increased their R&D expenses, it seems like they have been increasing their capacity to produce new games (their new building for R&D seems to indicate that that plan on even more expansion).
magoghm said:
Interesting. I see that since 2009 they have significantly increased their R&D expenses, it seems like they have been increasing their capacity to produce new games (their new building for R&D seems to indicate that that plan on even more expansion). |
This is when 3DS & Wii U were in development, so we would have to look further back at when DS & Wii were in development to compare.
I think also Wii U games are more costly to develop than DS/3DS/Wii. Wii U is Nintendo's first dive into HD and modern graphics shaders. I remember hearing that Nintendo actually had a hard time adapting and getting their art to look the way they want on Wii U.
| superhippy420 said: You just have to look at why the DS sold so well to see why the 3DS isn't doing as well as expected. People were very hungry for a new 2D Mario game (it had been over 15 years since Super Mario World), so it sold like crazy (29+ million), not to mention that it was a great game. On top of that Nintendogs (24.5 m.) and Brain Age 1 and 2 (35 million) sold a ton of consoles to the casual market, many of which proceeded to pick up NSMB and Mario Kart. The DS also had Pokemon, Zelda, and a wide range of games that could appeal to the more hardcore (buys more then 5 games) market. The 3DS's entire library is sequels to all of those games, and all of the truely new stuff caters to the hardcore crowd. Nintendo never found a new Nintendogs and Brain Age, and that is exactly why they sold 5 million less then expected. Pokemon,Mario,Zelda, and all the other stuff can sell a bunch, but there is no doubt a limit of how far they can take Nintendo on their own. |
Finally, someone gets it!
| daredevil.shark said: The 3DS, in terms of pure numbers, also underperformed this fiscal year close to the same total numbers as the Wii U, except the 3DS did have a lot of games released in 2013. In fact, 2013 had a 45% increase in game sales compared to 2012. All of this sounds good on paper. Nintendo actually released 3 times as many games in 2013 on the 3DS than it did in 2012. Knowing all of that, a 45% increase isn't actually a good number after all, because Nintendo released significantly more games, but didn't even double the sales over the previous year which had a third of the games. They likely expected at least a 200% increase in software sales, if not more. ...My points about the 3DS are mostly to point out that despite the success sales wise, it's actually not that profitable to begin with, and is the larger cause of Nintendo not reaching their desired profitability numbers. The hardware is not traditionally profitable compared to Nintendo's past and the software is selling at sigificantly lower rates than Nintendo is accustomed to. Just think, that is on the platform Nintendo is having the most success with. The Wii U is obviously still a large factor, but given they have barely manufactured many this year, combined with the lack of game releases, it likely plays a much smaller role in why Nintendo is in the red than we really think. It's not helping, but Nintendo's projections clearly showed that it was the 3DS that was supposed to drive them this fiscal year, and it didn't. Whether it can moving forward is unknown, but hardware sales have actually decreased in 2013 compared to 2012 overall, and there are no signs pointing to that trend changing in the near future, let alone any suggestions that the profitability of the hardware is going to significantly increase. |
http://www.nintendo.co.jp/ir/pdf/2014/140117e.pdf
Nintendo's adjusted forecast doesn't quite agree with the points here. They did not "likely expect at least a 200% increase in software sales" for 3DS, since they only missed 3DS software targets by 17.5% (14,000,000 units).
They missed Wii U software targets by 50% (19,000,000 units), and I believe Wii U software is more valuable per unit, so if anything the Wii U software miss is a bigger surprise (50% vs 17.5%) and a bigger impact (19M*$60 vs 14M*$40) than the 3DS software miss.
In fact to take it further, Nintendo is missing it's initial expectations by about $1 Billion profit. If you assume gross profits of $30 per Wii U game, and $25 per 3DS game you have a miss of 19M*30 + 14M*25 = $0.92 Billion which is uncannily close to the $1 Billion miss (some more would be from 3rd party under performing too). So to quantify I'd say the blame for the miss is about 60% Wii U, 40% 3DS.
If the WiiU is making them a big loss, then I'm starting to wonder wether it's a good idea to sell MK8 in march or not :/
The Wii U isn't a flop, but the writing on the wall that it wouldn't be very popular came from being educated on the failures of the N64 and GC era. Nintendo cannot win if they don't find backdoor success. When I say success where they don't take their competition head on with third party titles. Nintendo targeted people who don't game and couldn't care less about anything but the latest fad. They will profit though, so I am not worried about that, but their market share is in serious trouble.
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