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Is Nintendo Headed For A Rough Patch?

This story was written by Tameka Kee.
Nintendo President Satoru Iwata says the company isn't worried about competition from likes of *Sony* and *Apple*, but judging from some of the latest press, there's a growing sentiment that Nintendo's choke-hold on video game hardware and software sales might be coming to an end.

The NYT digs into why news that Japanese PS3 sales eclipsed sales of the Wii for the first time, should actually give Nintendo pause: it could be the first sign that the market for casual gameswhich the Wii thrives onis softening.

The Wii, with its motion-sensing controller and suite of easy-to-play games, has enjoyed tremendous success here in the U.S., but Japanese consumers started the trend, something that often happens with new technology. As KBC Securities analyst Hiroshi Kamide told the NYT: "The usual idea is that whatever you see happening in Japan, you tend to see overseas two to three years later." If the shift away from family-friendly, casual games in Japan (where game industry sales are down 18 percent overall) is more than just a Q1 anomaly, then Nintendo is going to continue to hemorrhage sales to Sony (NYSE: SNE) and even Microsoft, over time and across the globe.

Meanwhile, Cowen and Company analyst Doug Creutz told Gamasutra that the Wii's sales numbers represent "fool's gold" for investors wanting to jump into video games, because the scope of best-selling Wii titles has been very limited: "There is a very clear correlation between game quality and unit sales on the 360/PS3, while there is very little correlation on the Wii, at least for third-party games ... You're rolling the dice on succeeding in a market which has proved very resistant to generating meaningful hits away from Nintendo titles and the music genre." (And the music game genre is facing its own headwinds.)

Then, there's competition from Sonynot from the PS3but from its predecessor, the PS2. Sony exec John Koller recently said that the company was aiming for potential Wii-buyers when it slashed the price of the PS2 to $99. And with industry execs hyping the iPhone as the next great gaming platform, Apple (NSDQ: AAPL) is emerging as a credible player in the casual video game market.

But to hear Iwata tell it, Nintendo isn't stressing out over competitors or fickle consumers: "We are a company that has sought to create entertainment products for as many people as possible ... if we were only doing what mobile phone games can do, then handheld games would have disappeared a long time ago. Our job is to come up with things that other devices can't do."

Photo Credit: DsWii

By Tameka Kee

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