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Nintendo's Profits Are In Another Castle

LuigiFor the past, oh, thirty years or so, Nintendo has enjoyed turning an annual profit.  Even in the waning days of the GameCube, the company managed to eke out a little income.  With Wii sales not as energetic as they used to be and the 3DS limping along out of the gate for a while, it stands to reason that Nintendo's annual financial numbers wouldn't be all that great.  Now that the company has announced its revised financial forecast for the year, we can see just how bad things are going to get.  Reuters tells it like it is:

Nintendo now expects an annual operating loss of 45 billion yen ($575 million), dwarfing expectations of a 4.2 billion yen loss, based on the average of 21 analyst forecasts.

Nintendo cut its forecast for annual sales of its ageing Wii console to 10 million devices from 12 million, and for the 3DS handheld games device to 14 million from 16 million.

"We had higher expectations for the year-end season, but failed to meet them," President Satoru Iwata told reporters in Osaka.

Kotaku brings some additional figures and history into the story:

Hardware sales are not meeting expectations—though, things could be worse. Back in Oct. 27, 2011, Nintendo forecasted hardware sales at 6 million DS units shipped for 2012, but as of Jan. 26, 2012, changed that number to 5.5 million DS units. For DS software, the forecast changed from 62 million to 59 million units.

On Oct. 27, 2011, Nintendo forecasted 12 million Wii units sold in the 2012 financial year. That number was revised to 10 million units. Wii software was originally forecasted at 100 million. That number was unchanged.

The 3DS is both on the comeback trail, but still underperforming. On Oct. 27, 2011, Nintendo forecasted 16 million 3DS units shipped. That number has been changed to 14 million. For 3DS software, Nintendo forecasted 50 million units shipped. On Jan. 26, 2012, that number was changed to 38 million units ship—a huge drop.

See, here's the thing: by now, everyone that wanted a Wii has one.  There are no compelling Wii games on the way (and there weren't many to choose from last year).  The Wii is aging technology in an era when more and more people are getting high definition televisions (they're more affordable now than ever even for those on a budget).  Casual-oriented smartphone and tablet games have drawn in the Wii's best known target audience with cheaper games that offer more social experiences.  The 3DS turned a lot of prospective buyers away at launch thanks to its high price tag and lack of exciting debut software.  The Wii U is still months away and is largely an unknown until some actual new games are shown for it (and Nintendo has got to launch with a new Super Mario title this time if it wants to come out swinging).  This is the end of this console generation for Nintendo and we've seen sales drop off during these transitional periods before.  Nintendo was so wildly successful this generation that a failure to sell mass amounts of new units is harder to take now than at the end of the Nintendo 64 or GameCube eras.  This news is a costly bump in the road, but never count Nintendo out.  I've seen the company power-up and surprise us all far too many times to dismiss its future.