Consumer Spending is the True Measure of Nintendo Switch's Success - Game Design Gazette

Friday 26 April 2019

Consumer Spending is the True Measure of Nintendo Switch's Success

Software is the name of the game these days, and Nintendo’s financial results briefing reinforced that fact at the end of their financial year. Speaking with investors and analysts, Nintendo president Shuntaro Furukawa stated that Nintendo is changing how they measure a platform’s success.

In the past, attach rates (the average amount of software sold per console) were considered the measure of a successful game device. However, with the enormous success of indie games on Switch--a number of which are priced much lower than your average AAA game—this metric no longer applies.

Cheaper games naturally enable people to buy much more software than they would have in the past. As a result, Nintendo is now measuring the average amount of spend per Nintendo Switch console. This includes money from sales of first-party software, royalties from sales of third-party software, sales from accessories such as Joy-Cons and Pro Controllers, sales of DLC for games, and even paid subscriptions to the Nintendo Switch Online service.

Furukawa stressed that this is where the measure of Nintendo Switch’s success lies. While Switch hardware sales are tracking behind those of the Nintendo DS and Wii, the amount of money being made per every Switch console is higher than that of the Wii, as indicated in the chart above.

This is partly due to a 70% increase in sales of first-party Nintendo Switch software. Of the 118.5 million units of software sold on Switch last year, nearly 60 million units comprised of first-party software, with brands like Zelda, Mario, and Super Smash Bros. on Switch seeing some of the highest sales in their respective series in years. This was compounded by the growth of newer brands such as Splatoon.

Digital software plays a big role in this equation as well. Revenue from digital software reached 118.8 billion yen for the financial year ended in March 2018. That’s the highest ever for Nintendo, and ensures that they get a larger cut of the revenue than with a retailer involved.

For the fiscal year ahead, software will once again play a key role in Nintendo’s success. While the company indicates it will sell a modest 18 million units of Nintendo Switch consoles in the year ahead, it also indicated that it will sell 125 million units of software, spearheaded by releases such as Pokemon Sword & Shield, Animal Crossing, Super Mario Maker 2, and more.

To put this figure into perspective, the total amount of software sold on Nintendo 3DS since its launch in 2011 is 378 million units. By the end of its third year, Switch will be at 312 million units. That said, as per Nintendo’s definition of success, the true measure of Switch’s success will be how much consumers spend on Switch software, accessories, DLC, and services over the next year.