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Reuters/Phil McCarten
If only sales were this buoyant.
FINTENDO

Why Nintendo just cut its sales forecast for the Wii U by 70%

By Leo Mirani

Reporter

Nintendo thought it might sell 9 million units of its Wii U gaming console and make as much as ¥100 billion ($958 million) in operating income in the financial year ending Mar. 31. 2014. Market-watchers knew this was going to be hard. By the middle of the year, it had sold fewer than half a million. It comes as little surprise, then, that Nintendo has finally woken up to its excessive optimism, slashing its sales forecast to 2.8 million consoles and operating income to a loss of ¥35 billion (paywall).

How did Nintendo find itself in this dismal position? For one thing, the company pinned its hopes too firmly on holiday sales at a time when two shiny new consoles—the PlayStation 4 and the XBox One—had just come to the market, along with a bevy of new games. It also doesn’t help that gaming dollars are shifting over to mobile and the free-to-play model.

To make matters worse, Nintendo had hoped to move lots of software over Christmas season, something that obviously depends on people having bought the hardware to use it. This did not happen. “In the year-end sales season which constitutes the highest proportion of the annual sales volume, software sales with a relatively high margin were significantly lower than our original forecasts mainly due to the fact that hardware sales did not reach their expected level,” the company said (pdf).

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