Nintendo's Lowered Expectations

Financial Concerns"Nintendo has reported total lifetime sales of 96 million DS consoles as well as 45 million Wii consoles, two records which have driven the company’s sales rise up 16.7 percent for the nine-month period ending December 2008."

Then why is the company reigning in their sales expectations for 2009? According to Edge magazine, Nintendo has lowered DS software sales projections by seven percent and Wii software and hardware sales by three percent for the 2009 fiscal year.

Yet the company expects sales to take a turn for the worst in the remaining fiscal year. Though it has revised forecasts of DS sales up, expecting additional growth of 3 percent, Nintendo expects software for the handheld to drop seven percent below previous expectations. Wii hardware, too, has seen a revision in sales projections, with Nintendo trimming its expectations for both software and hardware figures down by three percent.

Three percent doesn’t sound like that big of a difference, but when Nintendo is raking in billions of dollars per cycle, a three percent dip in sales is pretty significant. There are a few likely reasons for this incredibly successful company to foresee a gloomier future in 2009.

Theory one: Nintendo is just taunting Sony and Microsoft. Nothing says "take that" like mocking the measly earnings of all your competitors. Nintendo could lower their expectations by another three percent and still smother Sony and Microsoft’s projected sales numbers. Alright, I admit spite may not be Nintendo’s primary motivation, but it is feasible they are artificially lowering projections to boost shareholder confidence when they surpass those same projections later this year.

Theory Two: The global financial crisis is slowly taking its toll. I don’t know if you have seen the news lately, but the economy isn’t doing too well. People around the world are tightening their budgets, and all the studio layoffs in the past six months have proven the videogame industry is not recession-proof. With consumers still on shaky ground, Nintendo may be lowering expectations that were established when people still had hope the economy would bounce right back. If we keep this in mind, maybe three percent is nothing after all.

Theory Three: Nintendo has tapped their market dry. This is my favorite theory because it vindicates all my preconceived notions regarding Nintendo’s dip into the casual market. Despite the fact the Wii has been flying off shelves, there is a decent number of vocal "hardcore" gamers who haven’t been satisfied with available titles. There is also a fear the casual market Nintendo has tapped into has no drive to continue purchasing software, especially if it isn’t a Wii Sports iteration. Thus far Nintendo has maintained a decent Tie-Ratio (the number of games to hardware sales), but I am not confident they can keep up software sales if the number of hardware sales goes down. Then again, there are still plenty of non-presidential families without aWii.

I do not doubt Nintendo will maintain their market dominance through 2009, but could lowered expectations signal Nintendo’s onslaught is slowing? If so, someone tell Sony and Microsoft to jump on the opportunity and ramp up their marketing, the console war may not be over yet.


EDIT: An alternative economic explanation for the drop – "(Sony also has a problem in common with Nintendo: the devastating impact of the strong Japanese Yen on earnings. That’s one of several reasons why struggling Sony has had to cut earnings forecasts, but the only reason why otherwise prospering Nintendo did the same.)"via Variety


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Author: Jorge Albor View all posts by

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