Nintendo gets serious about online gaming and downloads

01/02/2012

Nintendo has announced Nintendo Network, an online service that will span the Wii U and Nintendo 3DS, providing personal user accounts and the ability to purchase downloadable content. Nintendo knows it must take a “bold attempt” in establishing a robust online ecosystem for Wii U, and simplifying DLC shopping is key to that plan, the company’s president has said.

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Satoru Iwata believes Nintendo has struggled to establish its digital games business because online transactions “are not simple enough” for the typical Wii customer.

“It is said that with each extra step [in purchasing DLC], the number of consumers drops by one-tenth,” Iwata told investors in a Tokyo financial briefing last week.“Our challenge is how to improve such steps one by one.”

Iwata dismissed the idea that the age of the dedicated handheld games device was over and said he aimed to return the company to substantial profit in 2012/13, after it warned of its first ever operating loss this year.

Smartphones eating into console sales?

Shares in Kyoto-based Nintendo tumbled nearly 85 to an 8-year low after it slashed its full-year guidance for the third time in 6 months, and analysts said the potential market for its products was shrinking rapidly.

The creator of the Super Mario franchise reported a sharp drop in quarterly earnings, as its sales of its games devices that have dominated the industry for years were hit by competing gadgets such as Apple Inc's iPhone.

Iwata said he blamed the dismal results on a mixture of strategic errors and the difficult business environment created by the strong yen and European consumer gloom.

"Nintendo is facing its worst results since it entered the games business. What matters now is how Nintendo can make a profit from next year onwards, even under these harsh conditions," he told an analysts' meeting.

The maker of the Wii home console and DS handheld games is struggling to compete as sales of more versatile smartphones and tablets boom, and poor sales forced it to slash the price of its much anticipated 3DS handheld game device in August.

"The profitability of 3DS hardware was the biggest issue for earnings this financial year, but it looks like we'll be able to resolve the problem we've been having with losses on the 3DS during the first half of the next financial year," Iwata said.

"We should be able to generate a large profit by getting rid of losses on the 3DS hardware, if we can substantially lift sales of software."

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