Nintendo Wii sales decline continues

Nintendo on Thursday forecast a continued decline in sales of Wii hardware and software after the game console’s falling popularity led to an 18 per cent drop in net profits in the year to March 2010.

The forecast, which was lower than analysts expected, suggests that Microsoft’s Xbox 360 and Sony’s PlayStation 3 will continue to close the gap on the Wii this year and will fuel speculation about when Nintendo might launch a successor.

The company said it expected Wii hardware sales to fall from 20.5m to 18m units this year and also predicted a further 12.5 per cent decline in net profits to Y200bn ($2.1bn). In 2008, when the craze for the console and its innovative motion controller was at its peak, Wii sales hit 26m.

Later this year both Sony and Microsoft plan to rival the Wii’s core feature by launching motion controllers – which respond to user movement rather than pressing buttons – for their own machines.

The company still recorded Y229bn in net profit last year, however, with a 25 per cent operating margin and a return on equity of 18 per cent. Nintendo’s profitability shows that while sales may be slowing it still leads in this generation of gaming hardware. Cumulative sales of the Wii have now reached 70.9m compared with the Xbox 360’s sales of more than 40m.

“Business performance was negatively impacted by a price reduction on Wii hardware, fewer strong Wii software titles in the first half and appreciation of the yen,” the company said.

Nintendo’s sales fell by 22 per cent last year after a decline in every product area. As well as weaker sales of the Wii, sales of the DS handheld console fell 13 per cent to 27.1m units, and software sales for both machines also declined.

Nintendo plans to launch a new version of the DS this year that can display games in 3D with no need for special glasses. It forecast a relatively small increase in sales of handheld consoles to 30m this year, suggesting that the “3DS” will be an upgrade rather than a new device.

After the huge success of the DS and the Wii, Nintendo is struggling to maintain its momentum in the face of a number of strategic challenges. The growing popularity of video games on smartphones is a threat to the DS.

Microsoft and Sony have fought back against the Wii with price cuts, and their consoles have large disk drives and support for high-definition televisions, which the Wii lacks. The PS3 also has a Blu-ray disc drive.

The Wii was launched in 2006 and based on the historic pattern of the industry, a replacement could be announced as early as this year.