Nintendo's recent success highlights a critical risk to the gaming giant's business
- Nintendo's doing better than it has in years, with a massively popular game console in the Switch and over a dozen games that have sold over a million copies.
- But that success is underscored by the company's near-total reliance on the sales of first-party games.
- Nearly 85% of games sold on the Nintendo Switch are made by Nintendo.
The Nintendo Switch is a massive success - the console has now sold over 32 million units worldwide since launching in March 2017.
That puts Nintendo's Switch on a similar sales trajectory with that of Sony's PlayStation 4 and even Nintendo's Wii.So what's driving all that sales momentum? Games, of course!
Nintendo's latest blockbuster release, "Super Smash Bros. Ultimate," is the fastest-selling Nintendo game of all time - it sold over 12 million copies in less than two months.
Similarly, Nintendo's "Super Mario Odyssey" and "Mario Kart 8 Deluxe" are massive hits; both games have sold over 13 million copies apiece. Nintendo has developed and published at least a dozen million-plus selling games on the Nintendo Switch since the console launched.
That's far from normal.
Both Microsoft and Sony rely on major third-party games like "Grand Theft Auto" and "Call of Duty" to bolster sales of the Xbox One and PlayStation 4 consoles, and only produce a handful of major first-party games themselves. In 2018, each had two biggies apiece - Sony's PlayStation 4 had "God of War" and "Marvel's Spider-Man," while Microsoft's Xbox One had "Sea of Thieves" and "Forza Horizon 4."
The 10 best-selling games of 2018 are almost all third-party games with the exception of Nintendo's "Super Smash Bros. Ultimate" and Sony's two first-party exclusives.
It's a tremendous success for Nintendo - and it also highlights a tremendous risk in the company's strategy: As ever, the Japanese gaming giant is almost entirely reliant on first-party games to drive the success of the Nintendo Switch.
Nintendo's latest financial filing confirms as much:
Just about 85% of Nintendo Switch software sales are first-party games - games made and/or published by Nintendo.
There are two ways of looking at that number:
- Nintendo is making the vast majority of profits from game sales on the Nintendo Switch - definitely true!
- If Nintendo has to delay a major game, or for any other reason doesn't have a regular cadence of major game releases, sales of the Switch suffer - also true!
Look no further than 2018 for evidence of the latter.
Nintendo initially forecast sales of over 20 million Nintendo Switch consoles in its current fiscal year (March 2018 to March 2019). That forecast had to be lowered to 17 million units. Why?
Because Nintendo had a weak line-up of Switch game releases in the first half of 2018 that didn't make people want to buy the Nintendo Switch.
"Hardware sales were fairly weak during the first half of the year as the software output, mostly Wii U ports and [Nintendo] Labo, was not hugely attractive," Niko Partners analyst Daniel Ahmad said on Twitter last week.
But in the second half of 2018? "The launch of 'Super Mario Party,' 'Super Smash Bros. Ultimate' and 'Pokémon: Let's Go!' saw hardware sales skyrocket. Switch achieved nearly half its original full year target in just that quarter alone," Ahmad said.
It's a testament to Nintendo's ability to move game consoles through the games it makes and publishers, no doubt, but it's also a testament to Nintendo's near-total reliance on its own games to entice people to buy the Nintendo Switch.