Nintendo's recent Q&A with investors, following the third quarter financial results, has now been officially translated and published in English. Comments such as those about potential additional platforms will raise some eyebrows, but further details have revealed some less surprising news, though undoubtedly positive for the company.
While Nintendo is eager to continue with existing models for distributing games, it has been making improvements in its download business, increasing sales with a growing 3DS eShop library and a range of retail download offerings; Wii U, in its early days, is also contributing with a mix of download exclusives and retail options. As a result this looks set to be a record year of download sales for the company, as Satoru Iwata explained.
This shows the digital download sales transitions (see graph below). For the current fiscal year, we have just finished the third quarter, but the digital sales have already reached 11.1 billion yen so far, and it is certain that in this fiscal year we will see our largest digital download sales. Another peak in digital sales you can see around the centre of this graph is when Wii was widespread and Nintendo DSi had just been launched. In spite of the fact that the current installed base of Nintendo 3DS is still much smaller than how popular Wii was back then, we are already seeing the growth in digital download sales mainly for Nintendo 3DS, which, I believe, is an encouraging trend.
Retail downloads in Japan are likely to be major contributors, with Animal Crossing: New Leaf being a notable success. The Japanese market has also seen an emphasis on download POS (point of sale) cards, which have proven popular with retailers not keen to take excessive risks with physical stock. These cards haven't as yet played a prominent role in the West, though we'd be surprised if that situation doesn't change in the coming year.
A fairly large volume of "Animal Crossing: New Leaf" for Nintendo 3DS was sold in the form of a POSA card, which is activated only when it goes through POS registers at retailers and therefore the retailers do not have to shoulder the physical inventory risk. The growing sales of the POSA version of this game must have helped retailers see the business opportunity for video games with such a business structure.
We therefore expect that our publishers may be interested in selling POSA cards for some titles they are publishing as download-only titles and that they will want to make more games available in POSA card format. Although convenience stores have limited shelf space to spare for a number of video game POSA cards, retailers with more shelf space might expand the areas designated to the video game POSA cards. They might even educate their customers who are not familiar with digital download software. We can expect to see a number of new possibilities. We expect our digital distribution to increase in importance and become an important revenue source.
Various major game specialist retailers already have extensive ranges of download cards on sale for DLC on rival platforms, so it seems like an area ripe for expansion. Most importantly it's being recognised as an "important revenue source" — where there's revenue, there's will.
Would you like to see an increase in point of sale download cards in retailers, especially if there was potential for high-street competition in prices? Let us know what you think of the idea in the comments below.