Let's talk about the last Nintendo results
I was eager to see it and finally I had time to take a look.
When I saw the 920m profit I couldn't believe my eyes. This is sort of 10x more than last year's result. However there's some misunderstanding out there. Nintendo took some decisions last year, released new products like Pokemon Go and got rid of some huge assets and that's how that magical result number has showed.
My conclusion is that Nintendo might be doing well now, but 2016 wasn't that good year yet.
First let me share the numbers for the last 10 years:
Nintendo profit numbers since 2007
March 31, 2007 US$1477m (exchange rate March 31, 2007) Wii, DS
March 31, 2008 US$2573m (exchange rate March 31, 2008) Wii, DS
March 31, 2009 US$2847m (exchange rate March 31, 2009) Wii, DS
March 31, 2010 US$2458m (exchange rate March 31, 2010) Wii, DS
March 31, 2011 US$935m (exchange rate March 31, 2011) Wii, DS
March 31, 2012 -US$526m (exchange rate March 31, 2012) Wii, 3DS
March 31, 2013 US$75m (exchange rate March 31, 2013) Wii U, 3DS
March 31, 2014 -US$225m (exchange rate March 31, 2014) Wii U, 3DS
March 31, 2015 US$348m (exchange rate March 31, 2015) Wii U, 3DS
March 31, 2016 US$146m (exchange rate March 31, 2016) Wii U, 3DS
March 31, 2017 US$920m* (exchange rate April 28, 2017) Wii U, 3DS (*) Including extraordinary gains.
March 31, 2017 US$263m* (exchange rate April 28, 2017) Wii U, 3DS (*) Sales net income
Those numbers haven't been updated considering inflation, but you clearly can see the Wii bubble (2007, 2008, 2009,2010) and the Wii U disaster from 2012 on.
In 2015 Nintendo presented some acceptable results (348m) but 2016 was worse than 2015 (146m). Besides considering the accumulated 2012-2014 results (-676m), until 2016 Nintendo was still in the red.
For 2017 I added two results.
2017 results
As you can see, 920m is 2016's profit (until March 2017). The exchange rate is mine. However I added an asterisk right there, because this number includes huge extraordinary gains that can't be ignored this year. That's why I added the result of 263m which is the sales income.
This number, 263m, is the real gain from the business sales, I mean, what Nintendo really sells: hardware and software games. This is basically the profit that comes from Wii U and 3DS businesses.
Where does the other 657m come from? Nintendo has included 28.5b yen from the shares of The Pokemon Company and other minor stuff that isn't detailed. That's Pokemon Go. Yeah, Nintendo mobile business is doing great. Nintendo also included 64.5b yen due to the sale of the participation on the Seattle Mariners MLB team (Yes, Nintendo used to own Seattle Mariners).
To sum it up, that's a lot of money that comes due to the liquidation of its shares of Seattle Mariners, an extraordinary profit that has no precedence in Nintendo's financial history, plus US$256m (my exchange rate) that comes from the Pokemon Company.
Sales income history
Since I'm talking about the US$263m number, we need to take a look at the history of the income and net sales. This number is bigger than last year's company profit which is US$146m. However, last year's financial results also has included some money from other investments.
Those are the numbers of the last 3 years:
Income
2015 US$222m
2016 US$295m
2017 US$263m
Net sales (millions of yen)
2015 549
2016 504
2017 489
Although we can't ignore The Pokemon Company results, because it's also Nintendo's somehow, unfortunately this year result is still worse than last year's. Net sales also keeps declining and 489m is the lowest number in Nintendo history since 2012. The Pokemon Go faddish is over, so I don't see Pokemon Company alone doing that again in 2017.
Looking through those lens, Nintendo didn't have the incredible 2016 people are assuming.
My conclusion
Did Nintendo finally made a huge profit and the Wii U days are behind them?
No, not yet. The company net sales are decreasing and the net business income is worse than last year's. This level of profit is still not enough for a company as big as Nintendo. We still don't have any level of downsizing going on, since the assets and properties of the company are still basically the same, but no, those are not fabulous numbers as many are stating.
On the other hand, NSW is the most promissing Nintendo system since Wii and it's already doing far better than Wii U and considering the launch period and 2017 lineup, we can bet that NSW might beat Wii U/3DS past monthly sales combined, at least this year.
Plus, we can't ignore Pokemon Go numbers. They can't be considered Nintendo true results, because Pokemon Company is another company and Pokemon Go is a Google product, however, Nintendo made that money, it's their brand and it was enough to keep the company in the blue despite the premature death of Wii U and the slowing sales of 3DS.
How big was the Pokemon Go effect?
We finally can talk about this. The financial link between Nintendo and Pokemon Go is quite confusing due to the fact that Pokemon Company is separate business that Nintendo has shares.
Pokemon Company business, with Pokemon Go, has been as big as the 3DS and Wii U business combined (US$256m). This might be astonishing for a lot of people that didn't believe in the Nintendo's mobile potential and the Pokemon brand.
That's why I keep saying that Pokemon is perhaps the best product Nintendo has, not Mario, not Zelda. Pokemon is the real Nintendo's Call of Duty and I'd say that Pokemon Go saved the company in 2016. Without it and other extraordinary figures, Nintendo financial results would be disappointing again.
What about amiibo?
I can't answer this question. We don't have the right level of detail on amiibo, but we all know that this business is quite dangerous and it might end up being a fad. However, considering all the Wii U years, I'd say that amiibo was one of the Nintendo saviours this generation.
How about the Nintendo situation throughout the years after this report?
That's the answer everyone wants to hear. Is Nintendo doomed? Is Nintendo declining? Is Nintendo finally ruling the world?
Well, considering the numbers from 2012, I'd say that the steady fall of Nintendo financial situation isn't over yet, but it's not as sharp as it was back in 2013 and 2014. Nintendo's recovering from those awful years, but it's not a fantastic recovery, it's slow.
However the only thing that we need to understand is that this recovery has been achieved through a series of quite aggressive projects. They're selling big assets, they're testing the mobile waters, that's the amiibo stuff and they're downsizing the product line and investing everything on a single system. So, Nintendo's in war mode and it's working. The only problem is that a company can't work in war mode forever. The next financial results, in 2018, will show how NSW is really doing, and that's the product that must make profit, because that's the main investment now.
If we consider the main investments between 2012 and this report I'd answer the question saying that Nintendo are fluctuating in a quite stable bottom level of their business history, which means that they're far from dropping, but they still have accumulated losses to recover and 2016 wasn't the Nintendo good year yet. It's not disappointing though, considering that it was a year of investment in a new big product and they were dealing with two dying systems, but it's not the great financial result yet either.
