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Nintendo's Difficult Path Forward

April 30, 2013 Article Start Page 1 of 4 Next
 

Nintendo's latest annual results, announced last week, were disappointing in many ways. On Thursday its global president Satoru Iwata used his presentation to investors, along with the subsequent question and answer session, to explain his vision of where the company is and where it is going.

In expectation of the results, I had written that Iwata would “likely focus on its upcoming first- and third-party titles for the 3DS and Wii U” and then “attempt to reassure investors that its basic business model is still viable.” That's essentially what happened, although the details matter. I'll get into those below.

My outlook beforehand wasn't rosy: “I don't think their arguments will reassure anyone.” Now that I've had a chance to look at the numbers, read over the president's comments, and think them over a bit, I'm not significantly more optimistic.

I would break down Iwata's comments into three parts:

1. The Nintendo 3DS has a strong slate of software this year, and that should help keep the system's hardware and software sales robust through this fiscal year. Nintendo has raised its hardware estimates for the 3DS to 18 million, up from 14 million in the past couple of years.

2. Iwata has committed the company to increasing support for the Wii U, after what he admits were some stumbles so far. This includes dealing with the system's identity, which he admitted some consumers felt was “just [the original] Wii with a pad for games.” He also explained that the system still doesn't have a title comparable to Wii Sports which could help “people immediately comprehended its product value.” On top of better communication, Nintendo will make up for “lost momentum” by launching key titles for the system starting with Pikmin 3 in July or August of this year, nearly three months from now.

3. Nintendo plans to expand its digital business, and showed some of the clearest digital sales data we've seen from any platform holder. On top of this digital initiative, Iwata discussed some interesting new angles, with Nintendo's Web Framework and the use of the Unity engine to get games to the Wii U quickly.

Hanging over all of this, the company restated its goal to reach operating income of ¥100 billion ($1.02 billion) by the end of the current fiscal year, ending on 31 March 2014. In discussing this in previous sessions with investors, Iwata has used language that suggests he would step down if that goal were not met.

If Nintendo executes well on each of these points, it should post positive results for the current fiscal year. However, I'm doubtful that Nintendo can accomplish all these goals. Let me take them one at a time, and tell you why.


Article Start Page 1 of 4 Next

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