Quote:We see plenty of reporting and regurgitation of marketing hype. And we could subsist on an endless diet of wild speculation. But we rarely get the kind of business analysis that we need.
This gap was painfully obvious to me post-E3. Because while everyone was busily laying bets on the horse race between Sony and Microsoft for the dominance of the next generation of gaming, Nintendo was quietly disregarded on the side.
Business-wise, this was weird. Because as far as I can tell, Nintendo is the business story to watch. And strangely enough, you don’t have to try very hard to see why. I can only conclude that most of us are not looking at all.
Quote:In this light, it’s odd how few game commentators seem to understand just how profitable Nintendo really is. With a net margin of over 20%, Nintendo is a financial rock star. Just by way of comparison, General Electric, that monster global conglomerate whose executives write the books about corporate leadership that other Fortune 500 execs read, clocks in with a net margin of 11% Nintendo’s business engine is so efficient that even though they sell far less than Sony, they make, bottom line, about as much as all of Sony, Yes, that’s right. Little Nintendo generates about as much cash as giant Sony—electronics, movies, the works. (For a bunch of good financial data on this subject in one place, see PCVSConsole).
Now there are a number of lessons in this. But let me point to the most obvious:
When looking at the current console war, it’s important to keep in mind that Sony is a big company that does well on its games and film subsidiaries, but has been taking big losses in electronics. Microsoft is a very, very profitable software company that has so far taken large losses in its entertainment division. And Nintendo is a reasonably large company that has continued to make money with no obvious financial liabilities. As businesses, these three companies have different strengths and weaknesses. But none is the overwhelming leader from a business position.
Full Article Here
Indeed, but all of this positive publicity about Nintendo is making me nervous. The end is near.
Nintendo is playing their cards smart with their current business stradegy. Although they've ultimately lost marketshare with their latest console incarnations, as this article points out, they're still making plenty of profit to stay in business for a long time. Why is this, anyhow? Is it us die-hard Nintendo fanboys keeping them alive? Nintendo still caters to a young audience, so that must also help them out a bunch. Let's just hope that the profit trends of Sony and Microsoft continue with the way they are now. The two corporate juggernauts have deep pockets, but each will only continue to deficit-spend for so long... until one gains a comfortable enough marketshare, at least. Which of the three will be the first to withdraw from video games? It's a tough call, to be honest. I'm not the most competant person when it comes to the industry, but obviously, it's extremely promising to continue to see Nintendo to be so profitable, even with their marketshare decreasing. I know that until they put a gun in Mario's gloved hands to popa cap into Toad's weak jive turkey ass FOO they'll remain my favorite company and my first choice when it comes to console/game spending. Let's just hope their fanbase stays where they are right now (at least, doesn't decrease), so they continue makin' the moneys.
Poop Dogg: "Word-up kids! Y'all wanna go magnet wit the MONEYS?"
Kids: "YEAAHHH!!! ... what does it mean?"
I keep saying it all the time: Nintendo is making the money.
Quote:they're still making plenty of profit to stay in business for a long time. Why is this, anyhow?
I think there large profit margin comes down to two things: inexpensive consoles and games with smaller budgets. Maybe there's some other business aspects going on behind the scenes that helps out too. I'm sure it also helped that the Pokemon franchise has sold over 100 million copies.
This is why I think it will be a long time before Nintendo goes the route of Sega, if it happens at all. They know how to make money there and even though it kills us die-hards to see them relegated to third place they still know how to turn a profit, which means we will continue to see Nintendo games and consoles for some time to come. Nintendo still caters to kids, which is smart since kids will always want to buy videogames, and it is what keeps Nintendo profitable. If they want to increase their marketshare they will do as much as they can to reach out to the older gamers, but, in my opinion, they will never do anything that will harm their ownership of the younger market.
Sega had to leave behind the hardware-making aspect of the industry because they were going bankrupt, Nintendo is nowhere close to that. Not only are they making a lot of money, they also have over 5 billion stashed away between the matress of their bed.
Unlike Sony and Microsoft, Nintendo's video game business makes money, and alot of money. I would say its Sony who needs to worry about a prolonged loss.
Nintendo always had a lot more money on hand than Sega, even when Sega was doing well... so they've got a lot more room for error, not that they've needed it. So yeah, Nintendo won't be going the way of Sega anytime soon.
I thought the point that Nintendo makes as much money as all of Sony was pretty impressive...
Nintendo's not a tiny company, they've been around over 100 years and they know a thing or two about how to run a company. As Derek said, it can be painful for us die-hard Nintendo fans to see them llinger in 3rd, but by no means are they losing anything. They're turning a profit, and a reasonable one.
Now if only they could do what they're doing and be in first...ah, we can dream, can't we?