TOKYO -- After years of videogaming success, Nintendo Co. is beginning to look vulnerable.

Sales of its Wii console were eclipsed by a rival game system in the key Japanese market in March for the first time in 16 months. Meanwhile, sales of Nintendo games, which have long been top sellers in Japan, have fallen behind new titles targeted at hard-core gamers in recent months.

The shifts mark a new, worrisome trend for Nintendo, whose profit and sales have surged in recent years. Its success has been largely driven by the 2006 release of the Wii, which expanded the game market to casual players with a motion-sensing controller that ushered in a selection of games such as bowling and tennis.

But analysts say there are signs that the enthusiasm of casual Japanese videogame players who underpinned Wii's growth is starting to wane. Casual players aren't stocking up on extra games, at least not at the pace that hard-core gamers do, because casual players often are content to play the same titles over and over.

"The Japanese market is not very strong right now overall. So we need to do something to re-energize it," Nintendo President Satoru Iwata said in an interview. Earlier this year, he said recent casual games such as Wii Music and Animal Crossing, a social simulation game aimed at casual players, had failed to revive the Wii market in Japan and didn't live up to expectations.

Japan is crucial for Nintendo and rivals Sony Corp. and Microsoft Corp. It is the world's second-largest game market after the U.S., accounting for about $5.5 billion in sales in the 12 months ended March 29, according to Enterbrain, a research firm and magazine publisher.

What's more, Japan tends to be an early indicator for global consumer trends. Japanese consumers were at the forefront of the shift to casual games. Unconventional titles for Nintendo's handheld DS machine, such as Brain Age and Nintendogs, first became hits in Japan and the market is still seen as an early testing ground for new concepts.

"The usual idea is that whatever you see happening in Japan, you tend to see overseas two to three years later," said Hiroshi Kamide, an analyst at KBC Securities in Tokyo.

Sachiyo Kaneda, a 43-year-old housewife in Tokyo, bought a Wii for her two sons nearly three years ago. Her boys, now 12 and 7 years old, played the Wii often at first and constantly asked for new games. However, in recent months, the boys have stopped asking for new games. The younger boy still plays with the Wii, but the elder son is now asking for Sony's PlayStation Portable, a handheld with games geared toward more traditional gaming fans.

"Maybe the Wii's software, designed for families, is not as exciting," said Ms. Kaneda about her elder son's request for a PSP.

Ms. Kaneda herself isn't much into the Wii either. She tried Wii Sports a few times, but then stopped playing. She said she now prefers the free games that she downloads onto her Apple Inc. iPhone.

While Nintendo's Wii has far outsold rivals and continues to be the top seller outside Japan, sales of Sony's PlayStation 3 surpassed those of the Wii in Japan last month. Sony sold 146,948 PS3 consoles for the month, while 99,335 Wii units were sold, according to Enterbrain. Microsoft sold 43,172 Xbox 360 consoles.

Overall, the Japanese game market has been in a slump, with sales dropping 18% in the fiscal year ended in March. Soft domestic demand prompted Nintendo in January to lower its sales forecasts for Wii consoles and software for the fiscal year.

Nintendo also cut its sales forecast for DS games, but raised its outlook for the device because of the introduction of a new model, the DSi. Thinner with a larger screen and a built-in camera, the DSi was released in November in Japan and came out this month in the U.S. and Europe.

Despite its lead in game consoles, Nintendo has had less success than rivals getting Wii owners to buy a large catalog of games for their machines.

Nintendo has sold roughly 6.9 games for every Wii console while Sony has sold 7.3 software titles per PlayStation 3 machine as of the end of December. Nintendo's figures would be even lower if not for the inclusion of Wii Sports, which comes free with the Wii console, and Wii Play, which is bundled with an additional controller.

Microsoft said in March that it had sold 8.2 games per Xbox 360 machine though it didn't specify over what time period. However, those figures are only for the U.S. and are helped by a one-year head start on the PS3 and Wii, allowing it more time to sell games.

Because of continued sales growth overseas and weakness at home, Japan now accounts for 13% of Nintendo's total sales compared with 32% two years ago.

Meanwhile, with more of its revenue generated in euros and U.S. dollars, Nintendo's earnings have grown more exposed to the negative impact of a stronger yen, which decreases revenue made overseas when converted back into the Japanese currency.
—Miho Inada contributed to this article.

http://online.wsj.com/article/SB123913066338097885.html

I wonder if the Journal might be lacking a bit of perspective, here - especially considering that the bolded figures come largely from the fact that

1. The Japanese market ain't what it used to be for consoles, and

2. The Wii's gotten a lot bigger in other territories, particularly this one

The fact that what basically amounts to "the casuals will lose interest eventually, and the core systems will gain ground again" is coming from the Wall Street Journal is rather sad. -4 Professionalism points for them, though it may come down to a sense of conservativism (small c, nothing to do with the Tories or the Republicans) and a lack of perspective, like Khuutra said.

Also, they definitely got a few other things wrong. Hasn't Britain surpassed Japan in terms of total industry revenue by now? Pretty sure it has.

Hmm looks like they forgot the word Japan in the headline...

The way I look at it is the period of rapid growth is over, but that doesn't mean Nintendo platforms are going to go back to doing ~80m-130m a year as they did from 1997 to 2004, and it doesn't mean Wii and DS are going to collapse.

Wii at a minimum should have two more fiscal years where hardware shipments are over 20m, and if Wii goes up this year its probably three, maybe four more years at over 20m. DS probably has three more fiscal years at over 20m.

The trick is software - so long as total number of Wii/DS owners in a fiscal year buy 1-5 games a year the figures will remain massive.

At 100m DS, and 193m DS games shipped in the year ending March 2009, the average DS owner is still buying two games. If that rate drops to 1.2 or games in the next fiscal year, it will be offset by the ~128m or whatever DS out there which would mean another 150m+ games sold.

Wii is the one to watch, because it may be that at 80m people buy three games or they buy two games. Its a huge difference and I think its the real determining factor for when the next Nintendo releases.

Didn't they say this last year when sales were cooling down in Japan for the Wii after the HUGE Christmas period?? Or am I mistaken?

Hmm now that you mention it it do sound a bit familiar.

Isn´t the UK now the second largest market for games?

Everything they say about Japan is true.
Now you can sure fault them for generalizing to the whole world but you can't fault the journalist for the news related to Japan itself.
The only troublesome part really is the diminishing part in Japan revenue in the overall Nintendo revenue as that revenue is not affected by currency rates so is fairly predictable years over years...

I'm pretty sure Japan is still ahead of Britain due to handhelds. Console wise Britain might be on top but the handheld market is a lot bigger in Japan...( mainly because PSP actually sells in Japan).

what relevant games were released for Wii since AC?