Apple’s iPhone and iPod touch put the squeeze on Nintendo

“Nintendo Co. said its fiscal-first-half net profit tumbled more than 50% and warned the rough ride will continue, slicing nearly a quarter off its full-year profit forecast as sales of its Wii videogame consoles wane amid a shortage of new blockbuster games,” Kenneth Maxwell reports for The Wall Street Journal.

“The Kyoto-based company, long one of Japan’s technology stars, said net profit for the six months ended September fell to 69.5 billion yen ($765.5 million) from 144.8 billion yen a year earlier. That is well below Nintendo’s own previous forecast of 100 billion yen. It didn’t disclose details of its earnings for the quarter ended September,” Maxwell reports. “The first-half slump leaves Nintendo with a headache with respect to its Wii strategy going forward. The results reflect a nearly 50% drop in Wii console sales to 5.75 million from 10.1 million. Overall, first-half revenue dropped 35% to 548.1 billion yen from 836.9 billion yen a year earlier.”

Nintendo “faces growing competition in the hand-held market from Apple Inc.’s iPhone and iPod touch and their growing lineup of games,” Maxwell reports. “Nintendo on Thursday said it will introduce a new version of its popular DS hand-held, the Nintendo DSi LL, that comes with a larger 4.2-inch screen that allows users to surf the Web and will encourage them to use the device as a music player. The current DSi has a 3.25-inch screen. The company said it will go on sale in Japan on Nov. 21 for 20,000 yen, though it did not announce any immediate plans to sell the new device outside of Japan.”

Maxwell reports, “Nintendo said it now expects net profit for the year through March 2010 to be 230 billion yen, down from the 300 billion yen it previously forecast. That would mean an 18% drop from the 279.1 billion yen net profit it reported for the year ended in March.”

Full article here.

36 Comments

  1. Not necessarily true. Gaming on the Nintendo Wii and DS is a completely different arena that the iPhone largely doesn’t impact. The experience those system provide are fundamentally different. Touch screen is not the same as stylus and D-Pad driven games. Call me when real games come to the iPhone and I don’t mean Grand Theft Auto. For the large part the iPhone has offered a unique experience, that is fulfilling, but nothing compared to the countless quality games on the DS. I would like to see the third party companies which do develop on the iPhone bring some of their real games over. Where are the Kingdom Hearts, DragonQuest, Countless quality RPGs, Strategy Games, and the rest of what is good out there. Likewise I don’t see the amount of shovelware ported to the DS, not that it doesn’t have its share of crap. This is really non Apple news, and just an excuse to toot Apple’s horn. Nintendo is in direct competition with Sony and Microsoft. If you just want Apple News why not talk about the PSP and how Apple is hurting that platform. Well because it really isn’t it is a battle between the PSP and the DS not with Apple. I think the PSP Go is a good indication that stand alone downloaded games are not a real platform yet. So there really isn’t any true comparison here.

  2. Uh, whatever4real . . .

    Since you are so very knowledgeable in this arena, please explain the alarming drop in Nintendo’s profits.

    50%? For the love of all things financial! Only the death of the CEO or failure to deliver a signature piece of software can account for a disaster like that.

    So, what’s your explanation? (I know, I know, it’s not the iPod.)

  3. I totally agree with Whatever. The iPhone simply cannot compete with the Nintendo DS. The gaming experience on the DS is far far more extensive than the iPhone can ever hope to be. Clearly, the author if this article is just an Apple fan boy.

  4. Again, whatever4real and macarina . . .

    WHAT’S BEHIND THE 50+% DROP IN NINTENDO’S REVENUES AND PROFITS?

    What financial firms are you both working with in this equity? Clearly, they must have told you SOMETHING else to explain this calamity. Right?

    So, at the risk of being redundant here, what’s behind the Nintendo cataclysm, if not the iPod line? (And, please, for the love of all things Microshaft, don’t blame the downturn in the world economy.)

  5. macarina, you are sooooo wrong. iPhone game apps are only getting better and more powerful, and most of all, 1/3rd the price, and I am rounding up. Welcome to a new platform without a stylus, pal.
    It is just beginning. Noboy wants the DS to go away, it just now has
    severe competition, and $39 games just aren’t justifiable when compared to the app store. This is 2009, Nintendo has to find another way to make money, because the price of those games is a punch in the stomach. Time to get off their butts and laurels and really compete.

  6. Agree with many posters that gaming on a game machine is significantly different than gaming on an iPhone/Touch.
    The problem Nintendo has is that parents looking to buy one (1) handheld device will 1) ask the kids what the want, 2) compare features and cost. A Nintendo DS is $169, 8G iPod Touch is $199. Hmmm…..
    Considering the Touch can play video/apps/music/games/internet etc. the iPod Touch looks to be a formidable competitor. And re: games, for many folks, the iPod Touch is good enough for casual use

  7. whateverforreal, you don’t get it. I’m sure you are convinced that DS (or PSP) offer superior gaming experience than iPod/iPhone. However, masses of ordinary consumers who also like to buy games don’t care about that. Apple built iPod touch as a media player with web surfing and e-mailing features. Consumers ended up buying it as a gaming device. Apple noticed and started marketing it as a gaming device. And as a gaming device, it is outselling DS, PSP and other portable consoles (are there any other?). Nintendo can build an ultra-fast, totally immersive hand-held device with a 3D screen, and yet the crowds will continue to buy iPhones and iPods. That’s because they offer BETTER value.

    Vast majority of handheld gamers buy them for their children, or for their own casual gaming. You will never see anyone with a PSP playing a game for 3 hours. The consumers use them while waiting, riding trains/buses/planes, killing snippets of time. And iPod/iPhone games provide perfect solution for that, are cheaper and don’t require a bunch of cartridges in addition to the console.

    As many have predicted Apple is seriously disrupting Nintendo’s portable gaming business. When Sony reports their financial results, we’ll discover that the same is the case for PSP. And it certainly is NOT the economy (as much as MS and Dell would like us to believe).

  8. C’mon boys, (whatever and macarina) this has nothing to do with Mac fanboys. no one is putting down the level of games or the gaming experience of the Nintendo units (or the PSP). That’s really beside the point.

    The question to ask? WHO is (or rather WAS) buying dedicated handheld gaming devices? Who’s spending money on these things? My guess? PARENTS.

    Say I were a parent looking for a portable gaming device for my kid(s). I look at the Nintendo and the PSP and the iPod touch and compare features and functions.

    Then consider a one-trick-pony device dedicated to essentially ONE function, gaming, vs. the iPod touch which not only provides a vast array of games… at MUCH lower prices than the dedicated gamers… plus a vast array of applications and functions that neither the Nintendo nor PSP provide or can offer. My kid(s) could actually use an iPod touch for homework! OMFG!

    As a caring and concerned parent, I would also find the “casual” games available for the iPod touch much more appealing than the “hard-core” games of the others. Why? I’d rather my kid(s) be reading, playing outdoors, etc. rather than glued to a little screen for hours on end, getting fat and going slowly blind.

    So, for the cost of ONE device…
    I get the games. Check
    I get a great communication and research tool. Check. Check.
    Oh yeah… AND it’s an iPod

    Game over, maaaaan! Game OVER!

  9. My wife is the gaming nut in our family. She loves her DS and plays with it constantly. However, she also loves her iPod touch and plays with that constantly as well. Currently, the only game on the touch that gets much attention is FreeCell, but I think that’s going to change. She’s expressed interest in many of the new games hitting the App Store, and as time goes on, I expect the touch to draw more of her attention away from the DS.

    What really makes me laugh is that Nintendo thinks they can solve the problem by marketing the DS as a web-browser and music player. Web-browser? Maybe, although IMHO it’s only the multi-touch scan and zoom capability that makes mobile Safari enjoyable.

    But a music player? Don’t make me laugh. Do they plan to have some iTunes-like computer application that will simplify the movement of music files on and off the DS? Or (as I expect), will users be expected to move files themselves onto an SD card?

    If Nintendo wants to stay on top, they need to beat Apple at what Nintendo does best — building a gaming machine. Find a way to distribute DS-quality titles at App Store prices over the net, and Nintendo has nothing to fear from Apple.

    ——RM

  10. Mr. Reeee,

    And to expand a bit on what you’re saying, there is one more reason. Today, children as young as 8 are already bringing iPods to school. By the age 13, pretty much all children are expected (by their peers) to have an iPod. A parent, doing their back-to-school shopping for 7th or 8th grade, has to consider, among things like pencils, notebooks, etc., which iPod shall they get for their child. If the child also expects (or wants) a gaming device, this becomes a no-brainer for the parent. An iPod touch kills the two birds with that one stone. Hardly any kid will ask for a DS or PSP if they get an iPod touch. Even if they do, very few parents will indulge them, since in their mind, they already got the most popular gaming device, as well as the most popular MP3 player.

    Sony is reporting financials tomorrow. I don’t expect any major influence of the PSP on the total results (after all, PSP is just a part of their gaming division, which is just a part of their consumer electronic division, which is just a part of Sony as a whole). However, somebody will surely ask a question, or dig up some numbers that will clearly show that PSP is affected by the iPod/iPhone juggernaut. And no amount of Nintento fanboism can neutralise that.

  11. Ittruly is amazing isn’t it that despite everything that points otherwise over the years that people like whatever and msca just can’t seethat one device is effecting another simply because it isn’t a perfect match. The successful innovators out there see so far beyond the likes of Palm or Rim who just don’t see the threat coming even when its looking them in the face and battering them around the jaw.

    The sad thing about Nintendo is that they were an innovator, unfortunately they ignored the next generation of devices that would take over their handheld market being too busy checking out the PSP, ignored the fact that it would be only a matter of time that potentially far superior platforms would take on the Wii’s features over time and do them so much better graphically and thirdly they stayed in the low end of the market (just like Nokia in phones) while the playing field is progressively moving up market. Their problem is that they don’t have the finance to invest and compete there over the long term.

  12. All I know is that my two nephews, 4yrs old and 8 yrs old, were begging my brother for an iPod touch this year! So, I helped my brother get a couple for their birthdays, recently. Their Nintendo DSes are now collecting dust, and the two boys are addicted to their touches.

  13. Haven’t played my DS since I got my iPhone — it’s nice to have the games at my fingertips without having to switch out cartridges (sort of like the way the original iPod and other MP3 players replaced having to switch out cassettes or CDs out of portable players), and new games are far less expensive on the iPhone/iPod touch than they are for either the DS or the PSP.

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