Cantillon: Nintendo losing in the console game

What you wouldn't give to be a fly on the wall in the headquarters of Japanese games company Nintendo. Once the darling of the games industry – the company had not lost money on a games console before its current incarnation, the Wii U – Nintendo is set to post its third consecutive year of operating losses.

It is an embarrassing situation for Nintendo chief executive Satoshi Iwata, who has had to scale back sales projections for the console by almost 70 per cent for the business year.

The company’s other troubled offering, the 3DS, hasn’t exactly been a runaway success for the firm either, with sales forecasts cut by almost five million units over the same period.

It seems a far cry from the heyday of the Wii, when Nintendo was winning over new players with a family-friendly console that had motion control as its unique selling point. But fast forward a few years and now not only have Nintendo’s rivals caught up on the motion-control gravy train but, in the case of the Kinect, they’ve arguably managed to go one better.

The Wii U was supposed to be a more grown-up version of the Wii, offering high-definition graphics and therefore opening the way for a wider variety of games on the console.

That hasn’t happened. Third-party developers haven’t been flocking to the console as anticipated, leaving it up to Nintendo’s own developers to provide the games. Casual gamers, meanwhile, which were the mainstay of the audience for the 3DS and the Wii, have progressed to other forms of entertainment as tablets and smartphones become more advanced.

Will this spell the end of Nintendo’s time in the hardware market? Not necessarily. Nintendo isn’t in danger of going bankrupt any time soon. The company has been stockpiling cash, giving it plenty in the tank to keep it running even in the face of yet another operating loss. The question is: how long will Nintendo keep trying to push the Wii U before it decides to cut its losses and move on to the next generation of consoles?