For the last six years, Nintendo has been swimming high with great profits. Recently, however, the company announced that it would reduce its sales forecasts and reported a 52% drop in profits after sales of the Wii and DS game consoles dropped.
Nintendo is facing increased competition from Sony and Microsoft with cheaper consoles being more of a factor in the market. Nintendo is also facing stiff competition in the mobile gaming space from Apple with its iPhone and iPod touch.
Nintendo President Satoru Iwata maintains that Nintendo and Apple are not competitors and insists that the two companies go after different market segments. No matter how much urging Iwata presses, Apple has made it clear that it intends to pursue the mobile gaming market and has positioned its iPod touch as a mobile gaming device. In September, the Wall Street Journal reported that Apple’s Phil Schiller said the dedicated gaming devices seemed cool at first, but now don’t match up to the iPod touch or iPhone.
Global sales of the current DS consoles are down by about 15% reports the WSJ and sales of the Sony PSP are down a whopping 38% for the six months ending in September. Nintendo reports that it will sell 30 million DS consoles this fiscal year. It has lowered its overcast for DS software sales by 17% to 150 million units.
Nintendo isn’t taking the decrease in profits and slumping sales of its Wii and DS lying down though. The gaming giant is set to launch a new DSi LL in Japan in time for the holiday season and in other countries next year. The new console will have a larger screen and make playing games and surfing the net more fun.
Iwata said, “If we can’t make clear why customers pay a lot of money to play games on Nintendo hardware and Nintendo software and differentiate ourselves from games on the mobile phone or iPhone, then our future is dark.”
Research firm DFC Intelligence feels dedicated consoles like the DS and PSP have peaked and that over the coming five years, Apple will drive the mobile gaming market. Revenue for iPod touch and iPhone games is expected to grow from an already impressive $46 million in 2008 to $2.8 billion by 2014. Revenue from software sales for dedicated gaming devices is expected to drop by 27% to $6.3 billion over the same time frame.
Nintendo is continuing to look for new avenues though it maintains it will not add voice capability to its console until there is a model that requires no monthly connection fee. Iwata said, “My job is to find the potential in something that others can not see, to secretly pour our resources into them and turn them into hits before anyone else catches on.”
A Sony Games Division spokesperson added, “From the actual game play to the games themselves, we don’t see any real overlap [between the iPhone/iPod touch and the PSP].”