[Agosta44]

a great look on the business side of games...and speculation about the future of Nintendo and why it gets ignored.




Highlights In The Article:

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.

http://www.buzzcut.c...005053122342247

This post has been edited by darkwarrior4: 02 June 2005 - 12:31 AM

[Muzzy Roberto]

Good ol' Nintendo. Always good for a laugh. Nice job of posting only the interesting snippits of info, and not the WHOLE DAMNED ARTICLE as SOME members like to do here.

[Agosta44]

'Welcome Muzzy.

[Sway]

I post the whole damned article.

[Agosta44]

Sway, on Jun 2 2005, 12:48 AM, said:

I post the whole damned article.

For shame....

[Selatein]

Hmm... interesting speculation... Very professional, really, no fanboy crap.... hmmmmmm.......

[Fading Light]

That's similar to an article on the new systems in the Wall Street Journal. Nintendo has been quiet and hasn't taken the burden of entering the "games race" that Sony and Microsoft are so busy dueling each other in. It's funny how people insult Nintendo, yet fail to see such important figures and realities as presented in this article.

[Invader Tails]

Another important reason is that Nintendo makes well selling first party games, so they make money from that, and that they have 3 still produced on consoles in the market. Also there last failure was the virtual boy, so they can afford a loss (unlike sega who sadly had a few failures before the Dreamcast).

[Muzzy Roberto]

Ah, the 32X...

[Sway]

I'm still skeptical of and worried about Nintendo's ability to keep at it. Yes, these tell of past performance, but no one knows the future. How many on Wall Street in 1988 would have predicted Microsoft would be the biggest computer company around and IBM would crumble? How many people would have predicted Sony could make a successful foray into consoles to begin with? Shit, how many people predicted the Pats would win Super Bowl XXXVI? I also seem to remember Sega and Nintendo being able to push longtime top game company Atari out of the way pretty easily.

Things can happen, and Nintendo is going head to head with two of the most ruthless and dominating companies around. I don't care how efficient their business is run, if it continues to be all Sony and Microsoft hype, I think Nintendo will be forced to go Sega's route and develop as a third party, or perhaps cater to a very niche market as Apple does. Even portable gaming systems will likely be replaced by cell phones soon, so the future is not as bright as it once was for Nintendo.