Nintendo Confirms Wii U Has Flopped, Slashes Sales Forecast By ~70%

Nintendo has confirmed what we knew already: its unhappy controller/console combo, the Wii U, is a flop. The company said hardware sales of the Wii U had failed to reach its target during the year-end, pushing it into a third consecutive annual loss, Reuters reports.

“We failed to reach our target for hardware sales during the year-end, when revenues are the highest,” said Nintendo’s president, Satoru Iwata, at a shareholder briefing on the sales figures.

With the Wii U failing to shift off shelves — and that despite a $50 price cut last September, to $299 — Nintendo has slashed its global sales forecast for the device for the year to March 31 by almost 70%. It said it’s expecting Wii U sales to number just 2.8 million units over that period. It also cut its sales forecast for its handheld 3DS console to 13.5 million units from 18 million.

Both Nintendo’s devices are facing fierce competition from non-specialist consumer hardware fuelled by thousands of often inexpensive games apps — aka the smartphones and tablets running on platforms such as Google’s Android OS and Apple’s iOS. Ownership of app-supporting mobile devices has exploded since the original Wii’s hey-day, of circa 2006, shifting the gaming goalposts from the living room to people’s pockets.

Meanwhile, the home console market has been increasingly dominated by Microsoft’s Xbox and Sony’s PlayStation — leaving Nintendo to be squeezed out by those more powerful home consoles at the higher end, attracting pro gamers with huge franchise titles such as Grand Theft Auto, and driven out at the lower end by the consumerization of portable gaming via mainstream mobile devices. Talk about a rock and a hard place.

The other point to note is that the Wii U itself just isn’t very good. It’s neither fish nor fowl, so to speak. As TC columnist MG Siegler put it back in September, it’s “a poor concept accentuated by poor hardware”. He also described Nintendo as being “in the beginning of a death spiral”. Today’s  sales forecasts pour more fuel on those flames.

Nintendo said it is now expecting an operating loss of 35 billion yen ($335.76 million) this business year vs its initial forecast of a 100 billion yen profit. It also warned of a net loss of 25 billion yen for the year ending on March 31 — having previously projected a 55 billion yen profit. And expects revenues of 590 billion yen, down 36% from its prior forecast.

Update: Nintendo appears to be mulling a new smartphone-focused business strategy, according to comments reported by Bloomberg. “We are thinking about a new business structure,” Iwata is reported as saying at a press conference in Osaka, Japan.

“Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. It’s not as simple as enabling Mario to move on a smartphone.”

It’s unclear exactly what Nintendo is considering but it appears to be reluctant to allow its flagship gaming franchises to simply be unchained from its own hardware and offered as apps on other platforms.

“We cannot continue a business without winning,” Iwata added. “We must take a skeptical approach whether we can still simply make game players, offer them in the same way as in the past for 20,000 yen or 30,000 yen, and sell titles for a couple of thousand yen each.”