Nintendo Reports First Annual Losses in Decades

The video game industry has been surprisingly sturdy throughout the recession that began in 2008, though game sales in March were down 25 percent compared to this time last year.

What caused the drop in revenue?

	Mobile games like Angry Birds are creating competition for Nintendo's handheld gaming consoles.

Nintendo has slowly lost dominance in the home console market as the Sony PlayStation and Microsoft Xbox were released in successive waves during the past 20 years. The company managed to find a new audience with its 2006 Wii console, which targeted both hard-core video game fanatics and new customers open to more casual fare.

Many of those initial Wii owners have drifted to the Xbox 360 and PlayStation 3. Those systems bill themselves as both powerful gaming consoles with blockbuster titles and as multimedia centers that play music and movies, which could overwhelm Nintendo's Wii system.

The Nintendo DS handheld system found success by undercutting its competition and generating a reliable stream of money. To date, it has shipped more than 151 million units.

Nintendo’s hold on the market is now being challenged by game apps that are cheap and available to anyone with an Apple or Android smartphone or tablet. The ease of use and wide audience appeal that games like Angry Birds present to millions of players is the same appeal with which Nintendo marketed its own consoles for years. Today, mobile device-based games are engaging would-be Nintendo players, posing a threat to Nintendo's revenue stream.

What’s next for Nintendo?

	Nintendo plans to release a new Wii system that it hopes will rival gaming consoles like the Microsoft Xbox.

The Wii U is Nintendo’s planned successor to the Wii system. Introduced to the public at the 2011 Electronic Entertainment Expo last spring, the new console will feature true high-definition graphics, improved graphics hardware and a controller that resembles a touch screen tablet computer. The Wii U will be released in November, one year ahead of updates from rivals Sony and Microsoft.

The company hopes that the new machine will cast a much wider net to lure back those customers who traded in a Wii for a Sony or Microsoft console. Satoru Iwata, the president of Nintedo, said, “I certainly do not think that Wii was able to cater to every gamer's needs, so that's also something I wanted to resolve.”

What should the company do?

	' Nintendo's characters, such as Mario and Luigi, are its most recognizable features.

When the news broke about Nintendo's revenue losses, several critics thought the company’s plans may not be enough to turn it around, given the changes in the way people buy games on Apple or Android devices.

“Nintendo has to deal with the change and let Mario games be played on non-Nintendo devices. I think it will take a couple of years to see that,” said Nanako Imazu, an analyst for CLSA in Tokyo, said in a Reuters article looking at the issue. Nintendo has a stable cast of recognizable characters, such as Mario and Pikachu, who are featured in many of the games it develops in its own studios.

Another old Japanese video game company, SEGA, went one step further when its own Dreamcast console began to perform badly in the market. It stopped making hardware altogether and began to bring its trademark games, such as Sonic the Hedgehog, to once-rival Nintendo and Sony consoles. However, it may take much more than a setback year to deter Nintendo from selling hardware. That decision hinges on just how well the Wii U lives up to the anticipation of gamers this Christmas.