Nintendo Looks to Online as It Reports Its First Loss

"Adding a more fully fledged online service at this stage in the game-console market is a bit late," said analyst Michael Inouye of Nintendo's plans. "But at the same time, I don't think it hurt Nintendo too much. Nintendo's success with the Wii was more predicated on a lower price, compared to the Xbox 360 and [Sony] PS3."

It's been a tough year for game giant Nintendo. Sales of its 3DS portable gaming platform were disappointing and its top-selling but flagging Wii console is now caught between the groundbreaking, motion-sensing version introduced in 2006 and the refreshed Wii U due sometime this year.

That has led to sagging figures for the Kyoto, Japan-based company, which reported its first loss this week since it began reporting numbers in 1981. For the fiscal year ending in March, Nintendo expects to be down $264 million, according to Bloomberg news. The company forecast $9.8 billion in revenue, revised downward by 16.5 percent from October projections.

In mid-2011, Nintendo said it lost about $327 million in the quarter ending in June, and it cut the price of the first-of-its kind 3D-enabled handheld game, successor to the DS, from $249.99 to $169.99. This week the company lowered its projection of 3DS sales from 16 million to 14 million, and lowered its Wii projection from 12 million to 10 million for the fiscal year.

The downturn likely has much to do with soaring sales of smartphones and tablets, which can download hundreds of thousands of game offerings. But it's also a question of content offerings by Nintendo, which has failed to keep up with rivals Sony and Microsoft in third-party game titles and hasn't enhanced its online user experience much.

Now, the company thinks it has an answer in the Nintendo Network, which will allow users to download content, create online profiles and play with other users online, like Microsoft's Xbox Live and Sony's PlayStation Network. It will be available for users of the Wii and 3DS, both of which are Wi-Fi enabled.

Nintendo President Satoru Iwata told investors Friday that the Nintendo Network was coming soon, but did not announce a date. It will be based on a model already in place for the game Mario Kart 7.

"Unlike Nintendo Wi-Fi Connection, which has been focused upon specific functionalities and concepts, we are aiming to establish a platform where various services available through the network for our consumers shall be connected via Nintendo Network service so that the company can make comprehensive proposals to consumers," Satoru said, according to a transcript of his remarks posted online by Nintendo.

Some may ask what took so long. But Michael Inouye, an analyst with ABI Research, said Nintendo did not have to rush its network.

"Adding a more fully fledged online service at this stage in the game-console market is a bit late," he said. "But at the same time, I don't think it hurt Nintendo too much. Nintendo's success with the Wii was more predicated on a lower price, compared to the Xbox 360 and [Sony] PS3. For much of the current generation of the console's life cycle it has a unique user interface. In addition Nintendo has several strong unique franchises such as Mario, Zelda and Pokemon that help create some separation."

Inouye said Nintendo's biggest challenge was the growing competition in the casual game market, tapped by smartphones and tablet users.

"In addition HDTV ownership is higher in 2012 than it was in 2006, so the Wii's inability to support HD is becoming a factor as well. Both Sony and Microsoft have also launched peripherals [for motion sensing] that offer a similar experience to Nintendo's Wii."

Since downloadable content is becoming an essential part of hard-core gaming, "it is good to see Nintendo taking the steps to better address this deficiency," he added, "particularly since Nintendo has stated its intentions to better cater to the core gaming crowd with the upcoming Wii U."

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