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Nintendo Profits Up Amid GameCube Worries
Thanks to Gamesindustry.biz for their report on Nintendo's announcement of significant first-quarter profits, around $95 million (11.5bn Yen), "buoyed by stellar Game Boy Advance console sales, foreign exchange rate gains in Europe and the well timed re-emergence of the Pokemon brand." However, the article cautions that GameCube's current prospects are "...looking increasingly bleak, with a mere 800,000 units of the underperforming console selling through from April to June. Targets of six million have been set for the end of its financial year, but it's looking unlikely that it will reach this unless it's prepared to heavily discount the console in the run up to Christmas - something Nintendo has traditionally been reluctant to do." What can Nintendo do to get out of this hardware slump? Update: 08/05 20:43 GMT by S : According to this Reuters report, Nintendo sold just 80,000 GameCubes to retailers worldwide, not 800,000.
Nintendo is a niche console. The people who own it will buy the big games no matter what. They don't need market saturation because they have a significant base of loyal fans/customers. These people are a steady, reliable income stream.
See also: Apple Computers.
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End result? The company is on the rocks, the employees get griped at and have hours cut, and the people responsible (game makers for not making games that move systems and retailers for building up unreasonable hype) scratch their heads.
"Infants flesh will be in season throughout the year." -Swift
Nintendo has a major problem with their business strategy: their relationship with their developers. Nintendo still has the mindset of a console superpower and therefore treat third party developers like crap. I have developed for Nintendo before and this could be seen as a rant, but if they want to shape up that should be their focus. The reason PS2 and XBox are doing well is they support and encourage their third party developers (Heck Micro$oft even paid for the development of a lot of projects during the early XBox days) Nintendo on the other hand makes the debug kits and SDK hardware impossible to afford for small companies and the cart and burn fees are much worse than the same fees for Xbox and PS2.
"Xbox and PS2 can break the limit of 1 per household because they can run Linux,"
Come on now, did you really just type that statement? I know many an XBox and PS2 user, many of them nerds, geek, whatever. How many actually run Linux on them? Zero. While fun and interesting to have Linux running on you console, is there really a need? The consoles were designed to do one thing, play games. And that's what most people use them for. To say that the Gamecube is failing to sell because it doesn't support Linux is ridiculous.
...Nintendo, which actually gives away dev kits...
According to Nintendo, a GameCube dev kit costs upwards of $10,000. Not to mention, "Financial stability is expected," which means they don't just loan them out to just-starting developers.
Not that Sony isn't expensive either. And I can't imagine Xbox dev kits being too cheap anymore, either.
Nintendo has improved things so much since the N64. The Gamecube is a really great machine, with a set of killer gamecube specific titles (already mentioned in this thread), that cause people to buy gamecubes just so they can play those titles. I know I did.
However, Sony got so much market share with the PS1, back when all the other console manufacturers had their heads far up their asses, that it's pretty hard to come back and gain ground. Still, I'm sure they have, compare the market share of the N64 to the PS1, and I think you'll see the Gamecube is doing a lot better.
The GBA and the level of integration they offer with it is exceptional. The new Playstation hand held is Sony trying to copy them, and I'm sure it's going to kick ass (I have a PS2 and I'll buy one of the Sony handhelds for sure). None the less I'm already convinced that my Gameboy Advance SP is going to remain my favorite hand held console. I don't need a killer CPU, and larger screen, for my portable player. I don't need portable movies and music (esp. since DRM will make sure I have to pay $15-30 for each disk). I need something small, sexy, long battery life, with great games - that's the gameboy advance SP.
The GBA SP is great also because it plays Gameboy Color and Gameboy games as well. Very smart. Gameboy Player lets you play all those on your TV (Great purchase, strong incentive to buy a cube, GBA games are great and are great to play on a TV. Friends have come over to my house and spent 60+ hours playing Golden Sun on my gameboy player). Unfortunately everything from the N64 and back is lost, but I'm sure the next edition of the GameCube will support GameCube games. Nintendo has recognized how great for Sony it has been that the PS2 plays PS1 games (I love that I can play dance dance revolution PS1 games on my PS2, plus super puzzle fighter).
The one area Nintendo does seem to still mess up on, is their high licensing fees, which discourage development by destroying profit for game makers. I don't know why Nintendo doesn't wake up and halve those. It would work great, games would drop $5 and developer profits would increase $5. Customers and developers both happier, more units sold, maybe less money for Nintendo in the short term but a better chance for market share growth.
The gamecube is the fun family console. If I was buying one console system for my 12-or-under kids I would buy a gamecube probably. They're also a great secondary console for houses that already have a PS2 or XBox and want to get in on Nintendo games. With Cubes being cheap and coming bundled often with killer games like Metroid Prime, Gamecube is in a great position to be that second console. I'm pretty sure that's where the future of the gamecube really lies, being the second console for grownups, and the first console for kids. They won't beat Sony any time soon, but hopefully they'll obtain a growing market share.
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I'm not sure they really need to do anything.
Is the gamecube slumping? Yes, but it isn't Nintendos cash cow right now anyway, the gameboy is. Most of the people crying for nintendo to improve the gamecube position are analysts outside the company. Sure more profit is always good but nintendo is hardly in any sort of danger right now. No big projects forth coming? Nintendo can be notoriously tight lipped at times, look at the Gameboy advanced SP, no info on it even leaked much earlier than a month before launch. They could be hiding a couple aces, and its not like MS or Sony have killer aps slated for this year either.
The big picture could change though. Sony's Portable is going to give a serious challenge for the mature gamers (18+) but its cost is going to be too high to capture the younger gamers at first. Nintendo is leaning very heavy on that portable leg and if it gets kicked out from under them they are going to be headed down the road Sega just recently hopped along if they don't get their claws into something else. Its hard to say though if this could happen over night. Sony venturing into the portable market is very similar to the launch of the game cube: a superior (in most respects) console against the entrenched behemoth.
Also keep this in mind: Sony's profits were very low last quarter, while their console is doing well, the company as a whole did not perform as well as Sony would have liked. Neither Nintendo or MS is so far behind that they couldn't rise up and close the gap quickly. If the market fragments with the next generation, Sony is the one with the most to lose, to go from 80% to 33% is a huge loss while virtualy any outcome would be better for Nintendo and MS since they together control only about 20-30%
I stop rambling now...
On Wall Street they say "buy low, sell high" On the pad we say, "buy high, sell high" Isn't that somehow better?
Can that number really be right? According to this chart at MagicBox the GameCube sold 4,500 unites the week of May 19th - May 25th. This Dengeki Chart says the GameCube sold 13,000 units in Japan for the week of July 21st through July 27th. So we know that sales have increased since the 4,500 a week amount, so let's say that 4,500 is the average for April - June, which is still probably low.
4,500 units a week over 12 weeks gives 54,000 units. They sold 54,000 units in Japan and only 26,000 in the entire rest of the _world_?
I think Reuters screwed up, and of course no one will read the correction they post later. Just one more bit of evidence for the percieved bias against the GameCube. What do you want to bet that if they'd made the same mistake for XBox someone would have stopped to question such an absurdly low number before the article was printed/put up?
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