Nintendo Sees Bigger Profit Decline on Faltering Switch Demand
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(Bloomberg) -- Nintendo Co. forecast a bigger profit decline for the full year after reporting its fifth straight quarterly profit decline on slowing demand for its aging Switch console.
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The Kyoto-based company cut its operating profit outlook to ￥360 billion ($2.4 billion), down from a previously expected ￥400 billion. It’s unusual for game companies to lower their guidance before the all-important year-end shopping season. It also cut its annual Switch sales outlook to 12.5 million units, down from a previously forecast 13.5 million.
The company’s struggled to maintain sales of game hardware and software as consumers sow spending to await the announcement of the next-generation console. For the September quarter, Nintendo’s operating profit fell to ￥67 billion, missing market expectations for a profit of ￥71.8 billion.
Nintendo has been struggling to win consumers and prolong momentum around its seven-year-old Switch ahead of a promised announcement by March of a new flagship console.
That’s as the Switch faces sleeker and more powerful updates from rivals Sony Group Corp. and Microsoft Corp. ahead of the holiday shopping season.
“It’s getting harder and harder for them to convince new people to buy a Switch,” said Tokyo-based analyst Serkan Toto ahead of the earnings results, adding that the Switch is in its final stretch. “Nintendo has no new Pokemon or any other big game for the holidays, as they gear up for the launch of new hardware.”
Instead, the company’s launched a number of products geared at capitalizing on its intellectual property. That includes Alarmo, a $99 alarm clock featuring Nintendo’s game characters and music, as well as a Nintendo Music smartphone app for online service subscribers. It also opened a museum near its headquarters last month. Its affiliate Pokémon Co., meanwhile, released a smartphone app version of its highly-popular trading card game in a bid to boost revenue.
The company’s also putting more resources behind a push into Hollywood. Encouraged by the blockbuster success of The Super Mario Bros. Movie last year, Nintendo’s teaming up with Illumination to produce another animated film based on the hit franchise. It’s also developing a live-action film based on the The Legend of Zelda.