What Do the Latest Japanese Sales Numbers Mean for Sony and Nintendo?

Source: PlayStation.com

The latest Japanese sales numbers from Media Create are in , and things continue to look dismal across the traditional gaming industry. Nintendo's (NASDAQOTH: NTDOY  )  Mario Kart 8 reclaimed the top spot on the weekly software charts, but the company is still seeing disappointing hardware numbers. Meanwhile, Sony's (NYSE: SNE  ) PS Vita got a small sales bump over the previous week thanks to a couple new software releases, but PlayStation 4 continues to be a major underperformer. Where is the Japanese gaming industry headed?

Nintendo needs to inject life into 3DS
The most recently reported Japanese sales week saw Nintendo's 3DS move approximately 27,000 units. This performance was enough to earn the top spot on the hardware charts, nearly doubling the sales of its closest competitor the PS Vita, but also indicative of platform decline. Looking at year-to-date figures, the 3DS has sold approximately 1 million units in 2014 compared to approximately 1.84 million units across the same period in 2013.

Declining 3DS business represents a huge risk for Nintendo, and the company's stated projections for its handheld appear overly optimistic. The 3DS sold 12.24 million units globally in Nintendo's last fiscal year, far short of the initially projected 18 million unit sales. This year has Nintendo targeting 12 million 3DS sales, but performance erosion is substantial when stacked against the previous year. The 3DS is central to Nintendo's goal of returning to profitability, but the platform looks to fall short unless an attractive new model or price cut is introduced.

Mario Kart 8 can't give Wii U enough boost
On the Wii U side, Nintendo has scored an undeniable hit with Mario Kart 8. The game is on track to be the best selling console game in Japan this year, but the fact that it hasn't more significantly improved Wii U sales is telling.

Source: Nintendo.com

Waning interest in the platform can be observed by comparing the effects of Pikmin 3 and Mario Kart 8 on hardware sales. In the first week that the most recent Pikmin game was on the market, Wii U hardware sales hit approximately 21,000 units. Mario Kart 8's first week drove Wii U hardware sales to approximately 19,000 units. Pikmin 3's release also created a more sustained hardware bump, despite the fact that "Mario Kart" is the bigger series. The newest game in the mascot racing franchise is selling to Nintendo's core audience, but it's not doing enough to entice the broader field.

PS Vita continues to disappoint
Sony's PS Vita took second place in this week's hardware charts, selling approximately 15,000 units in the period. Vita sales year-to-date stand at approximately 609,000 units, while 2013 had the system at approximately 496,000 units sold. The increase in momentum is not enough to put the platform on a healthy trajectory, and Sony appears ready to mostly write the system off. Recent comments President of World Wide Studios Shuhei Yoshida suggest that indie games and smaller third-party titles will define the platform going forward.

PS4's software saviors are missing in action
Sales of PlayStation 4 continue to track at dismal levels. Media Create's data has Sony's most recent system selling approximately 8,400 units in the last week, and lifetime Japanese sales at approximately 606,000 units. The PlayStation 4's Japanese outlook appears even more dismal coming out of E3. Kingdom Hearts 3 and Final Fantasy XV, big hitters from Square Enix, are viewed as some of the only games with the ability to energize the system in the territory, but both were absent from the industry's biggest trade show. The fact that neither title was shown suggests that both games are a long way off, and may not be ready until 2016.

Source: KingdomHearts.com

Foolish final thoughts...
The age of the traditional gaming industry is drawing to a close in Japan. The ubiquity of smartphones and the emergence of mobile players such as Nexon, Tencent, and GungHo has drastically reshaped the market and hampered the appeal of dedicated gaming devices. Without an innovative hardware hook and breakthrough software, there's little reason to believe that Sony and Nintendo will be able to match their previous successes in the territory.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 22, 2014, at 3:49 PM, JJ82 wrote:

    "The ubiquity of smartphones and the emergence of mobile players such as Nexon, Tencent, and GungHo has drastically reshaped the market and hampered the appeal of dedicated gaming devices."

    This is grade A BS.

    The Wii U and PS4 is not selling well because of the lack of Japanese games and Japan has been a mobile game market since the 90s with the original Gameboy.

    Nexon has been in the phone/tablet market for a long time and their success has not increased at all in the Japanese market. In fact, the smartphone/tablet gaming market is far smaller in Japan than it is in the west due to the types of games that are on them.

    No phone/tablet can do the most popular games in Japan like Monster Hunter.

    The article is written by someone that doesn't know a thing about the gaming market, just another investor without a clue.

  • Report this Comment On June 22, 2014, at 4:06 PM, awang0718 wrote:

    The 3DS is doing fine and it is following the exact sames sales trend as the original DS in Japan. The 3DS should hit or slightly exceed sales targets this year, but Nintendo needs to better evolve their next handheld to prevent anymore smartphone cannablization.

    The PS Vita is also doing okay in Japan, but it is a complete disaster outside of Japan. Sony is prepared to drop Vita support and will likely never make another portable.

    The Wii U and PS4 are both doing poorly in Japan. Nintendo will provide the Wii U with occasional sales bumps through their first party titles, while the PS4 will likely never get a big sales bump until Final Fantasy 15 hits the market.

    Dedicated console gaming has shrunk very significantly in Japan and will likely never recover. Meanwhile, dedicated handheld gaming has shrunk primarily due to the major under-performance of the PS Vita.

  • Report this Comment On June 22, 2014, at 11:14 PM, sbo1111 wrote:

    It's the same Keith guy again with false negativity on Nintendo ROFL

    I swear this guy can never write anything you can trust. Funny how he doesn't write anything about PS4 doing better than XBox

  • Report this Comment On June 23, 2014, at 5:40 PM, ReachMana wrote:

    "Looking at year-to-date figures, the 3DS has sold approximately 1 million units in 2014 compared to approximately 1.84 million units across the same period in 2013."

    Did you actually read this part? 2014 is only half over! 1 million units in a little under 7 months is exactly where it should be if it sold 1.84 million over the course of 12 months last year! How is that a decline?

    You didn't even mention that the Vita will be integrated more as a PS4 accessory now! You're also forgetting the target audience in Japan for Final Fantasy since FF8: Japanese otakus. Will FF15 or KH3 really do enough to turn the PS4 around in Japan? Maybe, but the audience the games are going for (while it exists) isn't a large audience.

    This is where investors like you fall short: Target audience. You guys look at what's popular, but you never look at the target audience.

    Call of Duty is designed for American and European adults who like to shoot things.

    Final Fantasy is designed for Japanese otakus who are (sadly) stereotyped as fat, ugly, and perverted nerds obsessed with Anime and Manga.

    Mario and Zelda are designed for (wait for it) anyone who just wants to pick up a controller and play a fun game, even people who've never played a Mario or Zelda game before.

    In fact, I'd say that while Nintendo's fan base may not be as large as Sony's or Microsoft's anymore, it is still far more diverse then either of theirs.

    Actually, I still wonder what many gamers here in the U.S. actually NEED to consider a game good. I only need a good story and/or gameplay to like a game. I see people who say that they absolutely need good graphics to play a game, and I'm thinking "Look at CoD Ghosts on 360, PS3, Wii U, PS4, XB1, and PC. Tell me one major gameplay difference between these games besides the fact that the other controller options exist alone? The Wii Remote's pointer allows you to aim anywhere on the screen, and the Mouse/Keyboard set up allows for pinpoint precision. Other than that (and you can still use normal controllers on the Wii U and PC), the gamepad's second screen becoming a map isn't really a good enough gameplay difference, and the only difference left between the games is how they look."

    That actually makes me either want the PC or Wii U versions instead of the PS4 or XB1 versions. I'm not a huge CoD player either, but then again, I was just using it as an example.

  • Report this Comment On June 25, 2014, at 8:57 PM, keithnoonan wrote:

    @ReachMana

    In the section you quoted, "across the same period" means up to the same reporting period in the previous year, not the end of calendar 2013.

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