Despite a 74-percent drop in profits, Nintendo claims a hardware comeback

By Ryan Fleming January 31, 2011

Image used with permission by copyright holder

Last week the news out of Japan did not seem to fare well for Nintendo. The bubble seemed to have burst, and the casual gamer push that rocketed Wii sales into the atmosphere seemed to have dried up. The company was reporting a 74-percent drop in profits over just the first nine month period of 2010, causing the gaming giant to revise its sales forecasts.

But even though Nintendo has lost much of the steam that was pushing the Wii towards sales figures that bordered on the insane, the console maker still managed to post some impressive sales numbers last months- just not as impressive as the year before. Yet the Wii still sold twice as many units as the PS3 did in December in Japan (where the PS3 is much stronger than the Xbox 360), prompting Nintendo President Satoru Iwata to claim that Nintendo’s hardware is making a comeback.

It is hard to be king, especially when the subjects that would potentially be among the most loyal tend to ignore your rule. The Wii has managed to create a fan base out of thin air, and while the hardcore gamers tend to push for the graphical superiority of the PS3, or the online community of the Xbox 360, the Wii has targeted a new group of gamers that might otherwise not own a gaming system at all. While that has helped the Wii go on to sell more consoles than anyone thought possible, it also suggests a limited pool of customers who may have reached their saturation point.

But according to Iwata, the Wii is not done yet, and in a statement to investors that was recounted by Gameindustry.biz, the real story is not the drop in profit, but the comeback that happened in December. “”Few people in the industry were able to anticipate that Wii would regain its momentum at the end of the year.” Iwata said.

The Wii did in fact see big sales numbers this holiday season. They were nowhere near the 2009 levels where records were shattered, but the Wii still managed to outsell its competitors, including moving 2,350,000 units in America alone.

“Wii was in the lowest position among all the consoles, so when I told you that I believed Wii would make a comeback in the year-end sales season”, Iwata said referring to a speech he gave in October of 2010, “it might have sounded like nothing but a mere dream.

“Wii sales rose sharply to the top in the 43rd week, which is when we released the red Wii hardware. The sales pace picked up even more speed during the year-end sales season, and Wii went back to holding the largest market share.

“I think that few people could have expected that in the peak week of the year-end sales season, Wii hardware would be selling almost twice that of other consoles.”

Worldwide, the Wii has sold 84.5 million units, far outpacing its competitors. Currently the Xbox 360 sits in second with 51.2 million units moved, and the PS3 rests in third with 47 million consoles sold. One advantage Nintendo has retained since the Wii was released is that it has seen consistently strong sales around the world. By comparison, the Xbox 360 has done very well in the U.S., with 30.2 million consoles sold, while in Japan, Microsoft’s gaming system has sold a lowly 1.5 million units. On the other hand, the PS3 does very well in Japan, where it has sold 6.3 million PS3s, but has only moved 18.5 million consoles in the U.S. The Wii has sold 40.3 million in the U.S., and 11.4 million in Japan.

“Overall the home console market in 2010 could not create the excitement that the industry had experienced in the 2009 year-end sales season.” Iwata said, explaining the drop in sales.

So despite a huge decline in the profits through the first three quarters of 2010, Nintendo believes that things are looking up. With the imminent release of the Nintendo 3Ds, and rumors of a Wii 2 perhaps due out next year, the company might actually be in fairly good shape.

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