Nintendo-Video Games software and Games Consoles Industry - Video Games Essay Example

 Nintendo-Video Games software and Games Consoles Industry

Nintendo Company, Ltd, Kyoto Japan as been one of the foremost leaders in the creative interactive entertainment industry - Nintendo-Video Games software and Games Consoles Industry introduction. Some of theirs famous video games has been Nintendo 64 and Game Boy. American households have as much as 40% of Nintendo products. One of their main strengths lies in their understanding of the human resources and related issues.

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The success of Nintendo products lies in its strategy and this is because Nintendo did not have the financial resources to market the product like the way Sony did its PSP (Play Station Portable), but what it did use was innovation. Their gaming system had dual screens, a touch screen interface, play/pause and standby features, all giving the player an interactive experience like never before. They focused on the gaming experience not only for the gamer but also for the developer who is now able to add various elements to the game which was never though possible before. The products were made for people who were not much into gaming, who wanted something easy and simple to use without any complications. The product is very comfortable and attractive, which has become its trademark and brand over the years.

Nintendo outsold Sony (SNE) and Microsoft (MSFT) in the first six months of its launch. According to Ehrenberg. R (2007), the Nintendo’s Wii’s financial strategy has led to the following,

·               Low selling price.

·               Immense popularity

·               Cross-market presence which helps in leveraging wealth

·               High profit margins on the sales of consoles.

·               Game development costs are comparatively lower

·               Low risks involved for all third party developers.

·               Platforms are exciting and engaging, such as portable and Wiimote.

·               Good supply on launch.

·               Good sales from word of mouth.

Bantick.M (2008), has made a mention that piracy has been affecting the business of Nintendo. Nintendo DS and Wii have been very successful and so there are many people who are trying to counterfeit it. The company had lost US$975 million because of piracy. This has given them the reason to work with governments all over the world to stop illegal activity in the area.

According to Mori.Y (2007), the Senior Managing Director of Nintendo Co., Ltd. Has given the following figures show their financial status from April 2007 to December 2007:

·               Net Sales was 1,316.4 billion yen, an increase of 603.8 billion yen.

·               Operating income was 394 billion yen an increase of (+226.4 billion yen).

·               Income before taxes such as income tax and other items was 430.8 billion yen, an increase of 210.1 billion yen.

·               The Net Income totally becomes 258.9 billion yen, an increase of 127 billion yen.

Mr Mori.Y (2007) gives the following reason for their increased success,

·               The  reason for increase in Net Sales is because of Nintendo DS as well as Wii hardware and software had brisk sales. The other reason was that the average exchange rate of US Dollar and Euro was favorable because the yen was weak.

·               The Gross Margin increase was similar to last year’s ratio which is 42%. The main impact being the yen exchange rate.

·               The marketing, selling and administrative expenses were high which has a positive impact on the increased sales.

It has been seen that Nintendo DS hardware sales reached 24.5 million units all over the world within 9 months with 10.42 million units in Europe alone within December 2007. Wii was launched in December 2006 and has continued to do very good business throughout 2007, especially in America (Mori.Y, 27).

According to DFC Intelligence (2007), portable gaming market has Nintendo as its global leader and not the other brands such as Sony. The following chart displays Nintendo’s revenue between 2001 and 2005.

Nintendo Co. Ltd reported revenue in millions of USD at 1 USD = 120 JPY for fiscal year ending 3/31

            Nintendo’s main strategy has been to target “casual gamers” and the younger generation. They also are into product diversification having games appealing to age groups.

It is very beneficial for anyone who wants to invest in the hardware and in the sector of the gaming industry. Suppliers provide commodity products such as plastic and computers that are being used in software development. The sale has risen drastically over the years proving that the gaming industry is booming for computer, mobile and console gaming. So if there are manufactures who are ready to supply the hardware necessities then there are companies always ready to but. Nintendo for one believes in outsourcing its work to contractors for its hardware and software requirements. There are many people involved in making games for systems. There is a group who develop games only for their systems such as Nintendo, Sony and Microsoft. Another group develops games for the company such as Rare Ltd. for Nintendo. The last group develops games for various console systems, such as saga and Electronic Arts. www.idsa.com has mentioned that 47% of the hardware systems sales in the US were by Game Boy.

With reference to Nintendo Co. Ltd. (2008), the below diagram shows the hardware sales across the world for Nintendo, this shows that there is a huge market for anyone getting into the hardware industry of gaming consoles. The Wii sales in 2008 in the hardware sector have also been significantly good.

Consolidated Sales Units of Nintendo DS or Financial Year Quarter 3 in 2008. (Nintendo Co. Ltd., 2008)

The below diagram shows the software sales across the world for Nintendo, this shows that there is a very big market for anyone getting into the software field of the gaming industry. The Wii sales in 2008 in the software sector have also been equally good (Nintendo Co. Ltd., 2008).

Consolidated Sales Units of Nintendo DS or Financial Year Quarter 3 in 2008

(Nintendo Co. Ltd., 2008)

As seen in the diagrams above and with the detailed break up of the business in Nintendo Co. Ltd. (2008) in the year 2007, it is clear that both the hardware sector as well as the software sector has a lot of business available for vendors, suppliers and game developers. Nintendo Stock (2007), mentions that there will be a revised forecast of dividends and earnings by Nintendo because Wii is still doing well as people still have a continued interest in buying the product. Although there is going to be considerable competition in the year 2008 which will be further pushing up the stock prices for Nintendo, thereby increasing gamer confidence.

Gaming be it PC, online or console gaming all the markets are set to increase over the years. There is going to a constant inflow of consumers who are willing to pay high prices for the gamming experiences are definitely going to be rewarded. With competition between companies to come out with the best there is going to be a constant need of manufacturers, suppliers and software developers. All kinds of games need to be developed catering to different needs of the consumers. Looks like there is going to a lot of interest in the area for the consumer as well as the company involved provided that the company can keep up with the advancements in technology and the growing needs of the consumer.
References

Ehrenberg. R (2007). Nintendo: Wii Brings Financial, Strategic Nirvana. Seeking Alpha. Retrieved on 04 March 2008 from
http://seekingalpha.com/article/36091-nintendo-wii-brings-financial-strategic-nirvana

Bantick.M (2008). Nintendo wants pirates to walk the plank. www.itwire.com. Retrieved on 04 March 2008 from http://www.itwire.com/content/view/16665/1154/

Mori.Y (2007), Investor Relations Information (2007). Retrieved on 04 March 2008

from http://www.nintendo.co.jp/ir/en/library/events/080125/index.html

DFC Intelligence (2007). Going Mobile – Welcome to the World of Nintendo.

Investing in the MMOG Space. Retrieved on 04 March 2008

Nintendo Co. Ltd. (2008). Financial results briefing for the nine-month period ended

December 2007. Briefing Date 25/1/2008. Retrieved on 04 March 2008

http://www.nintendo.co.jp/ir/pdf/2008/080125e.pdf#page=6

Nintendo Stock (2007). Nintendo Stockowners Anxiously Await Announcement.

Retrieved on 04 March 2008. http://nintendostock.blogspot.com/

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