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Wii U bombed, so Nintendo CEO cuts his own pay

Satoru Iwata in 2011. Photo: Kevork Djansezian/Getty Images

The head of Nintendo said Wednesday he would slash his salary in half after announcing a 30 per cent dive in nine-month profit on weak demand for its new Wii U console as gamers are enticed by cheap, downloadable games for mobiles.

President Satoru Iwata told reporters he would draw a reduced salary for five months to atone for the downturn, while other members of the board will take a pay cut of between 20 and 30 per cent.

When asked if his pay cut could extend beyond June, Iwata said: “I will make a decision after looking at the management situation at that time.”

Nintendo is due to hold an analyst conference Thursday to outline plans for a new business strategy.

The news comes just over a week after the Kyoto-based company shocked investors by warning it expects to slip back into the red in the year to March and slashed its Wii U sales forecast owing to weaker-than-expected holiday season demand.

Analysts have criticised the system’s limited game selection, as rivals Sony and Microsoft enjoy robust demand for their new PlayStation 4 and Xbox One consoles.

“Nintendo’s worse-than-expected performance is mainly due to a slump in the Wii U,” said Hideki Yasuda, a games analyst at Ace Securities in Tokyo.

“They haven’t released attractive games titles which slammed the brakes on console sales. Also, its rivals have seen strong demand for their consoles which is taking market share away from Nintendo.”

The three giants of the $US44 billion global video games market are locked in a tough battle against cheap — or sometimes free — games that can be downloaded to smartphones and tablets.

A move into mobile games?

Nintendo has also faced criticism for refusing to licence some of its iconic brands, such as Donkey Kong and Super Mario, for use on mobile applications.

But Iwata hinted at a move into the mobile games business, saying that “how to utilise smart devices is the theme of our management policy conference (Thursday)”.

On Wednesday Nintendo said it earned 10.20 billion yen ($98.8 million) in the nine months to December as revenue fell 8.1 per cent to 499.12 billion yen. It also reported a 1.58 billion yen operating loss.

The company’s shares have fallen about 12 per cent since it warned it would make a loss this fiscal year and sell just 2.8 million units of the Wii U worldwide.

That is less than a third of its earlier forecast for 9.0 million consoles, and deals a blow to its hopes of matching the blockbuster success of the original Wii. Nintendo launched the Wii U in late 2012.

By contrast, Sony had sold more than 4.2 million PlayStation 4 consoles by the start of this year, less than two months after its release.

December video game hardware sales reached $US1.31 billion as gamers flocked to hits including “Grand Theft Auto V” and military shooter title “Battlefield 4”, according to market research firm NPD Group.

To help shore up its embattled stock, Nintendo on Wednesday announced it would buy back nearly 8.0 per cent of its outstanding shares.

The grim forecast is especially disappointing for a company that scratched its way back to profitability last year thanks to a sharply weaker yen, which inflates Japanese firms’ repatriated profits.

Nintendo has previously blamed weak earnings partly on high development and marketing costs for the Wii U, launched in late 2012, although sales of its 3DS handheld console and related game titles fared better. It cut prices on both consoles to boost sales.

This month, Iwata apologized to shareholders for the downturn, saying that “my duty, more than anything else, is to revive our business momentum”.

It is not uncommon for Japanese executives — who tend to make far less than their US and European counterparts — to take pay cuts when results come in below expectations or in the case of unethical behaviour.

Copyright (2014) AFP. All rights reserved.

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