Today, Nintendo updated its full-year earnings forecast, dropping from 570 billion yen ($5 billion) down to 500 billion yen ($4.39 billion). The company's net income tanked as well, dropping around 50 percent to 17 billion ($149 million) from the previous forecasted 35 billion yen ($307 million). Nintendo has a ton of cash in the bank still, but part of the lowered forecast is due to Nintendo 3DS sales not performing as expected.
"Sales of the 3DS fell short of our targets from January," Nintendo spokesman Yasuhiro Minagawa told Bloomberg. "After adding the impact of stronger yen, we had no choice but to revise."
"Lack of hit titles dragged down 3DS sales during the holiday season and looks like the slump extended to January and February," Iwai Cosmo Securities analyst Tomoaki Kawasaki added. "Nintendo is at the end of the hardware cycle, so neither 3DS nor Wi U are likely to see much growth."
Nintendo expected to sell 7.6 million 3DS units worldwide this fiscal year, but that number dropped to 6.6 million. The 3DS market is declining faster than its predecessors. This is the 3DS's fifth year on the market and sales are projected at 6.6 million. By the DS's fifth year in 2009, that system was selling 27.11 million units worldwide, with 12.29 million of that in the Americas. In the Game Boy Advance's fifth year, that system sold 7.7 million units, but the year before that saw total hardware sales of 17.9 million, more than double the 3DS's 8.73 million for last year. Looking at life-to-date numbers, the GBA and Nintendo DS ended at 81.51 million units and 154.01 million units sold, respectively. The 3DS is only at 57.94 million to date.
3DS sales are good, but track below previous Nintendo handhelds. Part of that has to do with the rise of mobile gaming in Japan. Most of the Japanese public has smartphones and the technology has progressed to the point that robust games can be created on those platforms. There's money to be made on those platforms, which is why many veteran Japanese developers have created strong content for mobile.
Mistwalker created Terra Battle for iOS and Android, bringing together Final Fantasy creator Hironobu Sakaguchi, Drakengard 3 and Last Story character designer Kimihiko Fujisaka, composer Nobuo Uematsu, and additional contributions from Yasumi Matsuno, Hideo Minaba, Yoshitaka Amano, Ami Shibata, Kenji Ito, Yoko Shimomura, and Yasunori Mitsuda. Kenji Ito also worked on Puzzle & Dragons, the hit mobile title from GungHo Online Entertainment.
Square Enix is betting heavily on mobile, with successful original titles like Mobius Final Fantasy, Final Fantasy Brave Exvius, and Heavenstrike Rivals or the host of mobile ports for Final Fantasy and Dragon Quest titles. Capcom, Tecmo Koei, and Konami have followed suit, chasing the same trend. Even Nintendo finally got into the game via a new partnership with DeNA. The first game, Miitomo, is coming soon and Nintendo's plans are larger than that.
In Japan, the 3DS is the normal king of the Media Create charts, though the PlayStation 4 and Vita put up a fight depending on game releases. Given the fact that the 3DS is tracking on the low side comparatively, Nintendo has to hope that the Nintendo NX sees greater success than the 3DS and Wii U did this generation. Finding that success will probably entail looking beyond Japan when it comes to console and portable gaming.
Japan is a big part of Nintendo currently. It's not only its home region; Japan bought 3 million of the 12.60 million Wii U's sold worldwide and 20 million of the 57.94 million 3DS units sold worldwide. If you look at the 35 million PlayStation 4's sold worldwide, with only 2.5 million coming from Japan, you have to wonder if Nintendo is seeing the same numbers and rethinking its strategies. It's not hard ton see current president Tatsumi Kimishima asking, "If consoles aren't the focus for Japanese consumers, perhaps we should make mobile games for them and look outward more in consoles?"
Those are the thoughts that underpin Nintendo's decisions now. It's also what Nintendo is thinking about when announcing Pokemon Sun/Moon for a release in Traditional and Simplified Chinese. There's money to be made on consoles in Japan, but there's more money in looking towards other regions. Nintendo has to think: "How is this going to perform in the US or Europe? What about China, Korea, or Taiwan?" That's an easy answer for much of Nintendo's output, which is relatively family friendly and open to everyone. But it's something to think about with second-party games like Fire Emblem or Xenoblade Chronicles.
Things are changing for Nintendo, it's just a matter of if the company can keep its soul while doing so.