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Nintendo reported a net loss of ¥23.2 billion for the fiscal year ended March 31, 2014. The “$229 million” headline was a contemporaneous conversion of that yen result, not the figure Nintendo reported in its accounts. The Wii U struggled, but it was not the only factor: operating costs, foreign-currency costs and a tax-related reduction in deferred tax assets also shaped the final loss.
What Nintendo reported for fiscal 2014
Nintendo Co., Ltd.’s fiscal year ended March 31, 2014—not December 31, 2014. Its results included four different measures that describe different stages of the accounts:
| Measure | Fiscal 2014 result |
|---|---|
| Net sales | ¥571.7 billion |
| Operating income (loss) | ¥46.4 billion loss |
| Ordinary income | ¥6.0 billion |
| Net income (loss) | ¥23.2 billion loss |
The yen figures are Nintendo’s reported results; GamesBeat described the net loss as $229 million in its 2014 coverage. That dollar amount is a contemporaneous conversion, not a separate accounting result. Nintendo’s FY2014 results and GamesBeat’s 2014 report provide the respective figures.
Why the net loss was larger than the operating loss
The operating loss of ¥46.4 billion reflects the shortfall at the operating stage. Nintendo said gross profit increased from the prior year, partly because hardware made up a smaller share of sales and 3DS hardware profitability improved. Even so, selling, general and administrative expenses exceeded gross profit.
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Nintendo attributed the operating-loss situation to increased research and development spending and higher yen costs for expenses incurred in foreign currencies. The yen’s depreciation against the U.S. dollar and euro increased those costs when converted into yen.
At the next accounting stage, Nintendo recorded ¥39.2 billion in foreign-exchange gains, which contributed to ordinary income of ¥6.0 billion. The final net loss was mainly due to a reduction in deferred tax assets related to losses carried over in the United States. These are distinct factors: the Wii U’s performance contributed to business pressure, but the reported net loss cannot be attributed to the console alone. Nintendo’s operating-results statement explains the reported causes.
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- The Wii U GamePad breaks down barriers between you and your entertainment with a 6.2" 16:9 LCD touch screen, motion control system, front-facing camera, microphone, stereo speakers, rumble feature
- Console works with most games from the original Wii console, as well as the Wii Remote, Wii Remote Plus, Nunchuk controllers, Balance Board and many other Wii accessories, so you can continue to enjoy your favorite Wii features
- Play using a Wii Remote controller, the Wii U GamePad controller or a Wii U Pro Controller.
- Four USB 2.0 connector slots are included. The new console is backward compatible with Wii games and Wii accessories.
How badly the Wii U sold
In fiscal 2014, Nintendo reported sales of 2.72 million Wii U hardware units and 18.86 million Wii U software units. It summarized the platform’s performance by saying, “The ‘Wii U’ business as a whole showed slow growth.”
Nintendo said hardware markdowns in the United States and Europe hurt Wii U profits. It also said software sales—higher-margin than hardware—had not grown sufficiently. The gap between hardware and software unit sales is one way to see why merely selling more consoles was not enough to solve the platform’s profitability problem.
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The 3DS was a stronger counterpoint: Nintendo reported 12.24 million hardware units and 67.89 million software units sold in the year. It cited a strong game lineup that included Pokémon X, Pokémon Y and Animal Crossing: New Leaf. Those totals show the difference in sales scale between Nintendo’s handheld and home-console platforms during the period; they do not, by themselves, measure profit per unit. Nintendo’s results give the platform sales figures and its explanation of Wii U profitability.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What Nintendo expected next
In 2014, Nintendo forecast a recovery for the fiscal year ending March 31, 2015. Management projected ¥590.0 billion in sales, ¥40.0 billion in operating income, ¥35.0 billion in ordinary income and ¥20.0 billion in net income. It also forecast 3.6 million Wii U hardware units and 20.0 million Wii U software units.
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Nintendo identified Mario Kart 8 and Super Smash Bros. for Wii U as key titles intended to stimulate the platform. President Satoru Iwata argued that the underlying consumer dynamic had not changed: “the basic idea that consumers reluctantly purchase hardware only because they want to play with appealing software remains unchanged.”
In its investor Q&A, Nintendo said production costs above the trade price had already been accounted for in the previous fiscal year and that it therefore expected almost no loss on sales of the 3.6 million forecast Wii U units. These were management’s forecasts and statements at the time, not realized results or current guidance. Nintendo’s FY2015 plan and investor Q&A contain those projections and comments.
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