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SCOPE OF THE REPORT

Scope

Toys and Games

US$ 154,832 million

Disclaimer

Much of the information in this briefing is of a statistical nature and, while every attempt has been made to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errors.

Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies’ opinions, reader discretion is advised.

Nintendo has a long and enviable history in video games. Recently, the company has struggled to adapt to a changing world of video gaming, which has seen a large part of

Nintendo’s “casual games” market eroded by smartphones and free to play social games. Lacklustre 3DS sales and ageing Wii consoles were largely to blame for the first annual loss in

Nintendo’s history. However, the new Wii U console is due for release in Q4 2012, which may return the video games crown back to Nintendo.

Nintendo remained the largest video games company globally in 2011 in value terms, despite facing considerable challenges in driving software and hardware sales since 2009, and losing a large part of its market share in the process.

Following disappointing sales of 3DS, its latest portable gaming console launched in 2011, Nintendo reduced the price from US$249 to US$170 in the US market. The move came only seven months after the 3DS’s initial launch. Excluding its home Japan market, sales of 3DS have not lived up to expectations.

In 2012, Nintendo’s focus will be set on the Wii U launch.

The launch marks the first new static video game console to launch since 2006, and is crucially important for the company’s future. If the console manages to repeat the success of Nintendo Wii in 2006, Nintendo will have a steady food in global video games market again.

Nintendo has a wealthy heritage of first party software titles such as Super Mario, Zelda, and Pokemon. The poor results in 2011, however, were largely attributed to a lack of new software titles as the company reorientated its development efforts towards the Wii U platform.

Net income ¥ million

% year-on-year growth

US$ million

Nintendo’s fall was the main story in video games in 2011. The 3DS handheld console did not deliver the expected sales, and the Wii platform likewise struggled because of the software draught. In 2011, Nintendo announced a price cut for the 3DS.

Xbox 360’s Kinect controller and Sony’s Move continued to drive the popularity of their platforms in 2011. The key video games releases have also been tailored towards high-definition platforms from Microsoft and Sony, such as Assassins Creed, and Call of Duty.

Microsoft was the main winner in 2011, and the only first party publisher to gain global market share in 2011. Microsoft’s position was helped by the release of Gears of War 3 in fall 2012, as well as the range of new titles exclusively for its Kinect remote sensor.

Electronic Arts stole the march among the 3rd party publishers. Its digital strategy continues to account for larger share of revenues, and Electronics Arts was the largest mobile game publisher in 2011. Its key franchises from EA Sports also remained popular.

Video Games: Leading Global Companies by Value Share 2008-2011

Nintendo has a rough year

 Nintendo was forced to admit to its shareholders that 2011 had not been a great year. Initial 3DS sales failed to live up to expectations, which prompted a price cut, but this also failed to change demand significantly. The company faced decline of sales in 2011, as 3DS sales did not replace falling DS sales, and Wii console had a very barren year in terms of new software launched. The company is now expecting a stronger year in 2013.

Making most of Wii U launch

 The company will release a new Wii U static video game console in 2012. Neither Sony nor Microsoft has officially confirmed their next-gen plans so far, giving Wii U a comfortable one-year lead before the rival consoles are launched. Most importantly, it will give Nintendo a chance to popularise the

“second screen” and multi-media capability before similar services are launched on Xbox and PlayStation.

Bringing more third party publishers

 Nintendo has pointed to its failure to keep pace with new software for the 3DS as a key factor in its lacklustre sales. The company is trying to rectify this with a much stronger software line-up in the latter half of 2012 in support of the Wii U launch. The software, however, has been an issue for Nintendo for some time. It has historically developed and released many first party titles, but it should seek to bring more publishers on board to keep content exciting.

Fending off free to play revolution

 Nintendo’s strength has been its family friendly games, which have appealed to parents and a younger demographic. The latter demographic, however, has moved to free to play games and social games alternatives on social networks that have eroded much of Nintendo’s core customer base. As such, it will be harder to sell US$60 games, and more innovative gameplay mechanics maybe needed to bring the gamers back.