Nintendo profits fall 18%

After 6 consecutive years of revenue growth, the company behind the Wii may finally be reaching the point of diminishing returns – it has just posted its first profit decline since 2004.

Despite the fact that Wii still outsold the PS3 and Xbox 360 in the US, in some months by a margin of two-to-one, it was unable to match the record sales pace that it achieved last year. The console also struggled to have as much success in Japan, where the PS3 is thriving in a much bigger way.

As such, net profit for the fiscal year ending in March was down 18.1%, down to 228.64 billion yen ($2.45 billion). As the company forecast earlier this week, that’s the first time in six years that its year-to-year profits went down.

A nearly $2.5 billion profit is nothing to balk at, but it’s an important sign that Nintendo’s massive dominance in the current gaming generation is starting to dwindle. Nintendo already predicts that the current fiscal year will show another decline by around 13%.

Competition from the Xbox 360 and PS3 proved to be much stronger over the last year, causing Nintendo to slash its Wii price by 25%. That’s a big part of the lower profit numbers, but even at that same price point for the next year, Nintendo still expects to fall.

George Hogan, an analyst for Macquarie, said in an Agence France-Presse (AFP) report that Nintendo’s new 3DS handheld system could help bring new juice into the company’s portfolio. “New hardware will be a key factor in turning profits around for Nintendo,” he said.