2011: Great for Games, Disaster for Nintendo

Illustration by artist Bill Mudron

UPDATE: Literally minutes after this article was published, news broke that Shigeru Miyamoto will be stepping down from his position as head of Nintendo’s game design department to work on smaller projects. Though Miyamoto will continue working for Nintendo, it’s yet another bad headline for the video game giant.

By any conventional metric, 2011 has been a huge success for the video game industry. Modern Warfare 3 smashed retail records, pursued closely up the charts by other big-budget, big-selling blockbusters. Gamers witnessed the conclusion of beloved trilogies like Uncharted and Gears of War, and millions flocked to inventive new titles like L.A. Noire and Minecraft.

Amidst all this triumph, however, one company Nintendo, has been conspicuously quiet. Once thought invincible, it staggered through a disastrous 2011. While its competitors have been busy celebrating the best year in recent memory, the Japanese giant has been left wondering what went wrong.

Warning signs began to show this spring, when it became clear that Nintendo’s highly touted new handheld, the 3DS, would ship without a killer app. In fact, the list of launch titles was downright underwhelming, offering little incentive to fence-sitting customers trying to decide if a launch-day 3DS was really a prudent buy.

At E3, the gaming industry’s massive June expo, Nintendo planned to wow onlookers with the Wii-U, a brand-new console. Instead, they only managed to confuse expectant gamers, arriving on the show floor with a strange-looking device that offered neither playable games nor impressive technical specifications.

By the end of July, spring’s dire predictions about the 3DS had become a reality. The device sold slowly without a must-have game to play on it, and Nintendo posted its first-ever quarterly operating loss: $485 million. Overall hardware sales underperformed the company’s conspicuously cautious estimates, set in January in response to sluggish 2010 returns.

In August, facing a host of graphs with ugly red lines on them, Nintendo precipitously slashed the 3DS price, from $249.99 to $169.99. Angry consumers who had paid top dollar weeks or even days before were fobbed off with downloadable versions of outdated Nintendo stalwarts, and the company’s stock took a hit as outrage continued to percolate.

Fall brought even more bad news. On October 28th, Nintendo revealed a second consecutive quarterly operating loss: $258 million. Even more worrying, the company is expected to end the year with its first-ever yearly net loss, to the tune of 20 billion yen.

Net sales are down 40%. According to official Nintendo reports obtained by gaming forum NeoGAF, sales of the Nintendo DSi handheld in the first half of the 2011-2012 fiscal year fell to just 2.58 million units, in comparison to the 6.69 million units sold during the first half of FY 2010-2011. DSi software sales also slumped, from 54.84 million to 28.99 million.

Sales of the Wii were more resilient — 4.97 million in Q1/Q2 2010-2011, dropping to 3.35 million during Q1/Q2 2011-2012 — but with few desirable titles on offer, the console’s software was hit hard. After selling 65.21 million units in the first half of FY 2010-2011, it only managed 36.45 million sales during the comparable period of FY 2011-2012.

Defenders of the company will point to mitigating factors, like the yen’s rising value on international currency markets. Nintendo can also take some solace in their strong showing on Black Friday, when more than half a million Wiis were sold in just a single day.

Even the company’s fervent fans are beginning to feel frustrated, however. As this YouTube video hilariously demonstrates, consumers are ready and willing to hand over their cash in exchange for Nintendo software. Instead, they find themselves stymied by the company’s inexplicable refusal to release promising Japanese-market games in the U.S., despite the success of this tactic in the past.

2011 offered slim pickings when it came to Nintendo software. Most consumers found themselves waiting until late November, when they were finally able to purchase The Legend of Zelda: Skyward Sword. Though the game debuted to mostly positive reviews, critics were frustrated by its slow start, child-centric design, and inconsistent quality. Many complained about the aging technology that powers Nintendo’s Wii Motion Plus control scheme, which Skyward Sword relies on heavily.

Though the company’s lifelong devotees are now in their thirties, Nintendo never fails to demonstrate its firm commitment to making games for all ages. The design of the Wii-U underscores a stubborn emphasis on motion controls and obsolete graphics hardware, both perennial criticisms of the original Wii. By sticking to lofty, almost philosophical business principles, Nintendo has made itself into a giant in the entertainment world. After an unprecedentedly bad year, which saw profits slashed even as rivals prospered, will it be able to make the changes necessary to succeed once again?

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1 Comment on 2011: Great for Games, Disaster for Nintendo

Deryl Powers

On December 21, 2011 at 2:04 am

wtf about Skyward Sword?! It was meant to have a slow start to make people get a feel into the game before they get into real action!