Nintendo reports first annual operating loss

Marketplace Contributor Apr 26, 2012

Tess Vigeland: Here’s evidence that Apple and other smartphone and tablet makers are changing the game in yet another lucrative arena. Nintendo reported its first annual operating loss — ever. The video game giant came up short by $533 million for its just-ended fiscal year. But it’s still a long way from..

“Pacman” death sound

Nintendo is still sitting on a mountain of cash, roughly $14 billion, that it’s made selling the popular Wii gaming system. But as our senior business correspondent Bob Moon tells us, analysts are warning of a need to change strategy.

Bob Moon: So when’s the last time you played “Pokemon,” “Donkey Kong” or “Super Mario”? Industry watchers say chances are you’ve turned instead to something that’s literally right at hand, and a lot cheaper to play.

CNET senior editor Dan Ackerman says alternatives like “Angry Birds” have come stormed the casual gaming world, and could end up leaving Nintendo behind.

Dan Ackerman: People are playing a lot of games on their iPhones or their iPads, and even Facebook is a huge gaming platform. And the company’s frankly always sort of played that down, said it’s not really a big threat. Well, turns out it really was a big threat.

Nintendo was forced to lower the price on its portable 3DS system to below cost. Its software franchises also lagged. It’s banking on turning things around for Christmas with its next-generation Wii-U — complete with a gyroscopic, tablet-style controller. Analysts estimate that to break even, it’ll have to be priced for as much as $350. Ackerman wonders if it can really attract new buyers.

Ackerman: People are used to, you know, paying $499 for an iPad that does so many things besides just play games. We may be in a whole different sort of pricing mindset now.

Wedbush Securities analyst Michael Pachter says rival systems from Microsoft and Sony appeal more to hardcore gamers, and so don’t face as serious a threat.

Michael Pachter: The guys who are playing “Call of Duty” aren’t about to stop, you know, playing on their Xbox 360 or PS3 and go play “Farmville” on their PC or “Angry Birds” on their tablet.

Pachter suggests Nintendo could build a new fortune migrating its games to the iPad and other platforms, but he says that would likely require a shake-up at the top: The company’s CEO has long resisted such licensing moves.

I’m Bob Moon for Marketplace.

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