Nintendo Dismisses Cloud Gaming in Face of Increased Digital Sales

During a question and answer session at Nintendo's latest Corporate Policy Briefing, company President Satoru Iwata told investors that cloud gaming would not be a priority on the Wii U or 3DS.

Speaking this week in response to Nintendo's third-quarter figures, Satoru Iwata said:

"The term "cloud gaming" is one of the words we have lately heard so often, but I would like people to understand that there are certain things that cloud gaming cannot achieve... I find it strange that many people claim that cloud gaming is the future. Our stance is that dedicated gaming platforms will not die out and we are determined to create a future where they will not."

Competing console maker Sony has been vocal in the past about the importance of cloud gaming. In July, 2012, the PlayStation developer purchased cloud gaming company GaiKai, with Sony CEO Kaz Hirai telling Business Insider that that GaiKai is "going to propel the movement of the video game business into the cloud space very quickly."

There has also been speculation that Microsoft will add cloud functionality to the next generation of Xbox, after the company hosted a mixer for the employees made redundant by cloud gaming service OnLive's restructuring in August, 2012. The official invitation sent to former OnLive employees said that Microsoft was "looking to add key players who want to make a real impact in creating groundbreaking new products and services."

However, although Iwata played down the importance of cloud gaming in Nintendo's future, he said that digital distribution would play a larger role. In November, 2012, the NPD group reported that digital game sales had increased 22 percent during the third financial quarter, while physical game sales had dropped by 25 percent.

Nintendo has been keen to bulk up its own digital store The Nintendo Shop by confirming virtual NES and SNES consoles and games to be added later in 2013:

Digital downloads

"I have no intention of simply replacing the packaged business with the digital download one, but it is also true that there are several issues with the current packaged software distribution business," Iwata said.

"Everyone develops and launches a software title with the hope to make it a smash hit but when it comes to the actual sales in the market, even the most seasoned marketers cannot forecast the figures accurately...When I discussed with Shinji Hatano (Senior Managing Director, General Manager of Marketing Division) the company's endeavours with the POSA card to expand our digital download sales outlets to retail shops, he stressed that it would provide distributors with a huge opportunity to solve the existing issues."

Digital downloads generated 11.1 billion yen (£75 million) of revenue for Nintendo during the company's most recent financial quarter.

Stressing

However, despite stressing the importance of digital sales, Iwata also assured investors that the Wii U's software line-up would be "enriched" in 2013. Alongside mildly well-received exclusives like Nintendo Land, New Super Mario Bros. Wii U and Zombi U, the Wii U's range of games currently depends heavily on ported versions of existing PS3 and Xbox 360 games. New Zelda and Yoshi titles have been confirmed for later in the year, however, with Iwata saying that new games should give the Wii U a sales boost:

"There will not be any key titles at the beginning of the year," he said "so even though it will take some time, starting from this summer when the software line-up is enriched, we will promote our platform and aim to change the sales momentum dramatically."

Data monitoring site VG Chartz shows that the 3DS is still struggling in North America and Europe, with respective sales of 37,990 units and 40,767 units for the week ending 26 January, compared to in Japan, where the 3DS 78,288 units in the same period.

Nintendo has also lowered its annual sales expectations for the console to 670,000 down from 810,000 for the year ending 31 March. In order to reach the company's forecast 100 billion yen of operating income for the next fiscal year, Satoru Iwata says he wants to increase the 3DS' presence outside Japan.

"What I mean by committing to earning an operating profit of 100 billion yen is that this is going to be reflected in the financial forecast of the next fiscal year unless the expected foreign exchange rate situation changes...My job is to establish as promising a situation as possible to accomplish this aim. From this perspective, for Nintendo 3DS, it is vital to create similar momentum as we see in Japan in the overseas markets.

"The current sales levels of Nintendo 3DS in the overseas markets are not at all satisfactory in regard to the hardware's potential...obviously, our aim is to increase our hardware sales more than in this fiscal year."