Nintendo Sells 3DS Under Cost, Reports First Annual Loss In 30 Years

Apr 26, 2012 by Jeff Schille

Nintendo has just published its Consolidated Financial Statements for the years ending March 31, 2011 and 2012. Despite the worldwide success of the 3DS — in fact, partially because of it — the picture is nowhere near as rosy as some might imagine. The company posted a total loss of $461.2 million dollars for the 2011 fiscal year — the first time Nintendo has posted an annual loss in thirty years.

In the Analysis of Operations portion of the Statements, Nintendo notes that it has continued to “pursue its basic strategy of ‘Gaming Population Expansion’ by offering compelling products that anyone can enjoy, regardless of age, gender or gaming experience.” Unfortunately, the current key component of that strategy — the 3DS — is also driving the company’s losses. Ever since the system’s dramatic price cut last Summer, which saw the unit’s sales rebound impressively, Nintendo, the Statements reveal, has been selling the 3DS at a loss — a tactic the company has famously and scrupulously avoided in the past. Combined with the strength of the Yen and what Nintendo terms a “year-end sales season [that] was slower in comparison to the last few years,” the company was unable to recover “from the sales slump early in the fiscal year.”

Nintendo hopes to begin selling 3DS systems at a profit half-way through the 2012 fiscal year (meaning September), ostensibly by reducing production costs, though given the company’s history, a redesign of the unit can’t be ruled out. Meanwhile, Nintendo looks to new iterations of its tent-pole franchises to help boost profits — specifically, the Statements call out New Super Mario Bros. 2 and Animal Crossing (which it notes will launch “this fall in Japan”), in addition to a new entry in the Brain Age series.

Then, of course, there is the Wii U, which Nintendo hopes to establish as a sizable (and profitable) hit well in advance of the release of competing systems from Sony and Microsoft. Neither pricing nor a specific release date for the hardware has been announced, though given the toll selling 3DS systems at a loss has taken on the company’s bottom line, don’t expect Wii U to follow the same path. Will Nintendo be able to hit the unit’s rumored launch price and still make money on the hardware? What do you think?

It’s been an exceedingly difficult year for a number of game companies. In addition to Nintendo’s dire end-of-year results, Sony reported massive losses, as did SEGA – even Electronic Arts is feeling the pinch. Will the launch of Wii U, combined with new versions of proven sellers, be enough to put Nintendo back in the black? Let us know what you think in the comments below.