Today brought the Q2 Nintendo financial results, which would be easy to miss with the understandable excitement of Animal Crossing: New Horizons version 2.0 arriving a day early. In some ways they're results with two sides, though within Nintendo's boardroom they may feel like they're somewhat stuck in the middle.
First of all, below is some of our coverage that we'll be referring to in this article.
- Nintendo's Profits Remain Down But On Track, Despite Drop In Switch Sales Projection
- Nintendo Switch Has Now Sold 92.87 Million Units, And It's Catching The Wii
- Mario Kart 8 Deluxe Has Now Outsold Mario Kart Wii
- Here Are The Top Ten Best-Selling Nintendo Switch Games As Of September 2021
- Nintendo Reconfirms Release Windows For Major Upcoming Switch Games
When you look at the numbers for areas like net sales and net profit, for a 6-month period, you'd be forgiven for thinking that Nintendo is cruising and that investors would be falling over themselves to express their happiness. But billion dollar+ profits are all relative, as you can see with the declines compared to the boom results of 2020/2021.
- Net Sales - 624.2 billion Yen (approx $5.47 billion USD) - down 18.9% on previous year
- Operating Profit - 219.9 billion Yen (approx $1.93 billion USD) - down 24.5% on previous year
- Net Profit - 171.8 billion Yen (approx $1.5 billion USD) - down 19.4% on previous year
It's the 18.9%+ declines that have led to recent noise from investors undoubtedly being negative. Nintendo's share price (via Bloomberg) closed down 1.66%, which isn't that big a deal, but its current value of 49,140 Yen is still hovering near a low for the past year, which is a continuation of a consistent fall.
This can certainly be attributed, in part, to Nintendo's strengths in 2020's unique circumstances becoming a weakness with the rather different troubles of 2021. While the 2020 spike in demand for home entertainment played into the big N's hands with Switch and Animal Crossing in particular — Switch Lite inventory picking up slack when stock fell low for the standard model — in 2021 the picture is very different.
Not only are the unique at-home circumstances of last year dropping away, but a global chip shortage and manufacturing issues are also having an impact.
Not only are the unique at-home circumstances of last year dropping away, but a global chip shortage and manufacturing issues are also having an impact. Nintendo had to cut 1.5 million units from its Switch hardware projection as a result, with Nikkei suggesting the previous figure already represented a cut of 4.5 million from plans earlier in the year. Nintendo, basically, can't make enough systems to maximise its sales and profits.
And of course, on top of that, the elephant in the room is Switch 'Pro', or whatever you want to call the 'next' Switch. It wasn't just fans online that got carried away this year and voiced disappointment with the OLED model reveal, but investors as well. If the Switch was already lower in power when it arrived on the market alongside Xbox One and PS4, it's now in a very distant position compared to Xbox Series and PS5 systems. 'Triple-A' ports will become less common, or some publishers will try to convince Switch gamers to buy 'cloud' versions, which doesn't seem likely to work on a major scale. Until a new 'generation' or beefier system comes around, the conversation won't go away.
In addition, Nintendo's digital revenues are dipping with everything else, and have static trends in a period when Microsoft in particular is upending the market with Xbox Game Pass. The negative reception for the Nintendo Switch Online Expansion Pack adds to a sense that Nintendo is struggling to find a successful and unique angle in that area. With the continuing growth of the download gaming market, Nintendo's offering doesn't stand out, at least not in a good way.
Yet, on the positive side, the Switch remains popular and, because of that ageing off-the-shelf technology, extremely profitable. As the first product to fully represent the merging of home console and portable divisions at Nintendo, it's proven to work particularly well. Its sales will surpass those of Wii U and 3DS combined, with the bonus that maintaining one primary system is far more efficient for Nintendo's teams. The Switch is catching the Wii and will overtake it soon, and its biggest-selling title, Mario Kart 8 Deluxe, has surpassed its hugely successful Wii equivalent. In an era of gaming across so many platforms — don't forget mobile, a bigger than ever PC space, cloud streaming, etc. — Nintendo has been able to produce a success story that's elevated its place in popular culture.
With more theme parks and a major motion picture on the way, and of course existing partnerships like the major Lego releases, Nintendo is establishing itself further outside of gaming. It's easy to foresee a time, perhaps 18 months from now, when initiatives like those combine with new hardware to elevate the company further.
Still, over-confidence should be discouraged. We need to remember that Nintendo went from the giddy highs of DS and Wii to the relative struggles of 3DS and Wii U; two consecutive 'winning' generations is tough to do.
The Switch generation has undoubtedly been a success, with more to come. 24.5 million projected sales as a downgrade due to production issues is impressive no matter the spin; demand remains very high. Nintendo is turning billion dollar+ profits, again, which is impressive. Yet the success is relative — 2020/21 set standards that just can't be reproduced.
On the one hand Nintendo is on a winning streak; on the other, there's lots of room for improvement and growth. All eyes on the Holiday season, then.
Comments 57
Nintendo (and every gaming company) should never bend to the will of investors who don't care about video games.
These v̶u̶l̶t̶u̶r̶e̶ venture capitalists would see profit over player satisfaction, and it shows in every lootbox, season pass, microtransaction, and cloud gaming release that has irreparably tainted AAA gaming.
@CharlieGirl Investors only care about money.
That's why they're investors.
Nintendo is in such a stable financial position that they could operate like the Wii U years for 20 years just fine.
Nintendo will firgure out how to keep the success going. They've earned my trust this gen
I feel like at this point that the Switch Pro is no longer a thing, even if Nintendo wants it to be. The Switch OLED model is currently heavily supply-constrained despite using the same Mariko SoC as before. A Switch Pro would face even worse supply constraints while being in even higher demand, which is just a worse situation all around.
At this point, it would better to just whether the storm until late 2023 when the semiconductor & component shortage is expected to end (or at least improve) and release a full-blown next-gen 4K-capable (via DLSS) Switch 2 by then.
Why should Nintendo bring out a Switch pro (Or whatever), if the only thing stopping them from selling more regular Switch consoles is that they can't make enough of the things due to a chip shortage?
@westman98 Not only should they wait before releasing it, but when they do, it's so very important that it has full BC with the original Switch.
aka "NintenDough" 💰.
Sheesh, Wario is so excited & proud he's literally drooling.
My only worry is what Nintendo does after this switch comes to the end of its life cycle, do they risk making something totally different and risk it flopping like the wiiu or do they stick with a true switch successor and call it switch 2 (which I'm hoping for)
I don’t think you can look past Nintendo’s past 2 years of software releases. Yes we had Animal Crossing and the Mario collection in 2020, and yes this year we had Metroid, Skyward Sword and Pokemon Snap, but in comparison to previous years it’s been a bit dry on the release front.
Nintendo seem to be gearing up for a massive year of releases next year, with a lot of reveals to the more mature or ‘core gamer’ market. I would guess Splatoon 3, Pokemon Arceus, Bayonetta 3, Kirby and BOTW2 will sell a lot of consoles, and who knows what else is on the horizon (platforming Mario’s been quiet recently).
In other words, it's a Tuesday. Of course Nintendo faces pressure, they're a publicly traded company and have a wide variety of investors. Unfortunately for them, a good number of the big ones don't actually know much about the company and believe they will (not should, WILL) act like like their competitors. This is very much the wrong way to approach them, but I don't have the capital for my opinion to matter. Lol
"Nintendo's digital sales and trends have been relatively static"
I've been Digital-Only for my Switch life (I'll likely start getting bigger file sized games on a cart like BOTW2 to save data space). However Nintendo needs to do a better job with their Eshop infrastructure, options as well as more frequent & significant 1st Party sales, especially for some of their older titles- as their competitors often have done for some time now. That would no doubt help "un-stagnate" digital sales growth. Another option that would likely boost digital is bringing back a full Virtual Console, but we know how that's going.
My Top Requested Improvements for Switch Eshop: 🛒
**None of these are likely to happen anytime soon, but
... Wun can only hope. 🎮
@MysticX Osborne effect. They don't want to announce a new console when it's not just ready to launch and the current models are selling well. See what happened to Sega in the Post-Genesis 90's.
@uptownsoul Could be possible. Only reasons why the Switch wasn't backwards compatible with the Wii U was with the change from disks to carts and the change of architecture from PowerPC to ARM.
@IronMan30 Porridge today, Gromit! TUESDAY!
@uptownsoul The Wii U is similar to the Switch but it has many distinct features that aren't on the Switch and are incorporated in every Wii U game at least to a minor extent. That, plus the Wii U's sales were beyond abysmal. It was, for all intents and purposes, a failure. That's why I think not many are complaining that they're selling ports of Wii U games with, in some cases, added content, because they didn't make a lot of money off these games when they were released for the first time.
That, and they could also bulk up the Switch software lineup when filling in the gaps with simpler ports. When it comes to the next generation, IF Nintendo really is just going to continue with the Switch and a cartridge-based system (I see no reason why they wouldn't, the cartridges are becoming cheaper to develop and there have already been factories built for this purpose) then I believe that Backwards compatibility is inevitable. The current Switch is simply too popular and it would be entirely anti-consumer to just dump all of these games and start re-selling them all over again.
Another factor that makes me quite sure of this is the Nintendo Switch Online — presumably they're carrying this service forward to the next console which means it will now include things like Animal Crossing New Horizons DLC and games such as Tetris 99. These additions may be minor to some, but still add value to the online service. It would be odd to switch (pun intended) to a new system in the future with these features missing simply because they aren't compatible.
I honestly hope that Nintendo just improves on what they currently have with the Switch and don't try any new insane features that might end up bulking up the price of the system. We do, really, at this point need a power upgrade. It's a bit disheartening that Nintendo's own first party games sometimes underperform on the system and seeing every single review have "performance issues" as a regular negative in the end.
@wuntyme8 I would also add the clearing of shovelware and/or updating the back-end to handle thousands of games in the store.
Something tells me that the flood of shovelware is from not having any quality (and quantity) control than having bad quality control. Nintendo needs to wake up and smell the sewage before it gets as bad as Steam.
@InkIdols,
Nintendo have struck gold with the Switch, a console that appeals to a wider audience including casuals, and has got them buying traditional software, the Switch brand will be here for quite a while I think.
@NatiaAdamo,
All that software good or bad adds choice, and we can't all like the same things, and don't forget the steady stream of such software disguises the occasional first party droughts.
I feel like Nintendo's unique angle is their legacy content, which they've so far kind of snubbed. I think the biggest plague to the Switch is it's online infrastructure and lack of a real online player ecosystem. It's a struggle sometimes to find people to play with or to befriend on the Switch which in turn separates the player base and prevents the ecosystem to truly grow.
@johnvboy 100% agreed man
As has been commented elsewhere, Switch's Q3 sales have been the highest ever (with the logical exception of 2020 and its paradoxically blursed factors), so the demand clearly remains - and when component supply shortages are blamed for the sales target decrease, any sane person would view a "Pro" or a "successor" the LAST probable solution to it (if anything, they would fuel the fire - I'm impressed Nintendo even risked rolling out OLED if they were already aware of the constraints). Of course, how many investors are sane and how many have relegated thinking to their stock exchange bots may be a different matter, but Nintendo is mercifully among the relatively more immune companies when it comes to investor pressure. And the latest report numbers ultimately reinforce that immunity.
Why though? The Switch has been doing great!
@CharlieGirl Umm yeah that's how they make money. You think they invest out of their goodness of their hearts?
I don’t know much about investments and shares, but can’t Nintendo just buy its shares back from investors?
@NatiaAdamo
Yea I don't know how Nintendo would quality control without pissing off some partners though (too bad for them? lol). Maybe the "Official Nintendo Seal" needs to come back or even the "Nintendo Selects" brand as store tabs. Let's be honest, there has always and will always be shovelware in copious amounts. It was even worse on Wii imo.
I agree organization and featuring in the Eshop storefront needs to be handled better though (I edited, updated and added to some of my earlier suggestions in my listed comment above). More easily perusable categories and choices would be a start. Scrolling down randomly while an assortment of titles slowly load clearly isn't it.
... Wun can only hope.
I'll buy more Nintendo stock when it drops into the $30s again.
Honestly at this stage it is better to ignore a pro version and go for the switch 2 and embrace BC.
The lack of a Switch Pro is definitely hurting it entering this next generation, and it will only become an increasingly big issue as time goes by. I remember the Wii being in a similar situation, where it was selling extremely well until HD really became the standard, then the sales really fell off as it looked notably outdated compared to everything else. They got in a situation where they had no shortage of console sales but the software sales really declined.
Luckily the Switch has portability going for it, and that is definitely making it age a lot better than it would otherwise, but that said the Switch is really losing it's ground as a home console as the modern next gen consoles make their way into more households. 4K is the new standard, that is simply a fact of reality, and the Switch's lack of 4K support is really going to hurt it in the long run as the years go on. Portability is the only thing it really has going for it besides first party games.
This is better understood, I think, if you understand that videogames on the scale that Nintendo produce and manufacture them are more entertainment than art.
What I mean is that they need to put out products that appeal to very large numbers of people in a very diverse market, a HUGE global market. The creation, production and distribution of triple A games, consoles and accesories is a very expensive business that operates on a deficit basis, you invest heavily on a project and you "cross your fingers" you get back more than what you originally invested.
Seen in that light, I believe it is a positive that Nintendo answers to investors, because they push for success. A good game is a popular game is a money-making game. Specially if you also take into consideration that Nintendo is a company that also takes risks on more artistic or innovative endeavors.
@JayJ
I agree, but with the Switch still selling so well I don't see Nintendo acting on 4K anytime soon. True 4K consumer adoption as well as content isn't that prominent as of yet, but surely it will be eventually. However I think the ongoing pandemic and parts shortages have elongated the 4K adoption period as well. Widespread adoption and implementation is coming, but it's not quite here yet. And I suspect Nintendo is willing to keep things mostly par for the course while they ride the wave of the Switch's success until it's successor or update is ready a couple years from now- along with launch window software ready to showcase and support it (i.e. Metroid Prime 4). Not only that, but this gen one of Nintendo's core strategies seems to be reselling updated versions of old content on new hardware with slight improvements. I could foresee this being the case with their next hardware entry as well with 'now in 4K' or 'upscaled' being a selling and marketing point.
You're right though in that hopefully Nintendo doesn't wait too long and get caught in the Wii era limbo with 3rd parties deciding the gap is too large or resource-intensive to develop for both 'Next-Gen' systems plus the Switch reasonably and without significant concessions- which like you I believe is coming sooner than later. Continued third party support is usually crucial to overall continued success.
... Wun can only hope.
The Nintendo Switch Pro is very much real. But it's a controller, not a console.
A lesson in sales graphs:
Switch is released = the walk up the mountain
Switch hits a peak = tip of the mountain; enjoy the view!
Switch sales decline = the inevitable walk back down the mountain
These types of ideas are apparent in nature. All unpleasant things eventually return to neutral and then become unpleasant, and vice versa. Nothing has a static hold, and nothing is above this law of nature, even Nintendo's hardware sales.
At this point, I'm pretty sure that most people that wanted a Switch, got one. Once you get one, there's no need to buy another unless it's a gift, a replacement, or for an additional family member. So naturally, sales will decline, since the demand has basically been met.
NINJA APPROVED
The Switch would inevitably outsell the Wii and PlayStation 1, unless there was an absurd drop in sales. As long as Nintendo knows what they're doing as they have since the beginning, investors will be the ones making mistakes.
"Its sales will surpass those of Wii U and 3DS combined"
Considering how poorly the Wii U sold might as well leave those numbers out of it and just focus on 1 console - home or portable - at a time. I forget the numbers but it's probably surpassed 3DS so just Wii at about 100mil and then DS? And finally PS2 if a Pro comes out instead of a 2 and they make like the New 3DS and have a bunch of games work only on Switch Pro but still call it the same gen.
I hope I live long enough to see things get back to normal, whatever normal was. 😒
Remember, kids. The value of shares can go down as well as up. I'm sure plenty of investors managed to capitalise on everyone's pandemic misery last year and those new shareholders will have to wait for their moment. As long as their growth continues from breaths of fresh air (like the Wii and Switch concepts or injecting new way gameplay into their franchises) as opposed to cynial marketing strategies like tying us all in to costly subscrition services, then I'm fine. And I do appreciate Nintendo have to pay lip service to those ideas or get swallowed up by the industry unfortunately.
But it is disappointing to still hear talk of a Switch Pro being the saviour of the Switch in some manner as if those that think that are still in denial of how popular the console still is. Software sells consoles. I think their first party output has been industry inspiring (Wii U enhanced ports gave many overlooked games a fair crack of the whip) and their relationship with third parties is stronger than recent years pre Switch. But one lesson folk reeeally struggle with is Nintendo aren't letting the third party tail wag the dog. Something SONY and Mirosoft allowed years ago.
Switch only needs a constant release of good first party titles. That’s it. What’s weird to me is despite having fewer systems we don’t seem to be getting that many more games.
Why would Nintendo release a Switch Pro when they can't keep the three models they already have on shelves? What is the point? They shouldn't release a Switch Pro until sales are slowing. If that's so far in the future that the Switch 2 or whatever its called is ready, then release that instead. This doesn't seem that complicated. Sure, I'd like a Switch Pro, but I understand why they don't release one.
In the same release where they gave these number they also were clear they are not going to hit holiday targets because of chip shortages and an inability to meet demand.
A 1.6% drop from "we are not going to hit Q4 targets" is a huge show of investor confidence, not the other way around. The price is likely to hover where it is right now until we get details about NOS. If the buy in to the new service is strong, it will be a huge positive given there is nothing investors like more then reliable, steady income.
And given 22 million people are looking at the option of trying it out and having access to a huge expansion for a game they already own, I think they are going to the numbers they are looking for. If not (or maybe it's already part of the plan) they will release BOTW and maybe some other DLC on the service as well.
Further proof downvotes and bad emulation don't matter. People want the Switch because it's the cool thing to show off, like a new pair of Jordans or an iPhone. Of course there are great games but it's portable and interactive. But still, what can they do next that doesn't involve bringing their online infrastructure into the present?
Yeah I am hoping the stock doesn’t dip too much. Nintendo is one of my long haul investments so I ride the waves and buy during the dips. But most investors with deep pockets aren’t consumers and may ignore the fricken global chip shortage like it is Nintendo’s fault.
If you have a family online membership, can you have different accounts across 2 Switches?
@BiscuitCrumbsInMyBed actually they just did a few months ago, I think little by little they will continue to do so. If anything this just speak of their financial health
I just hope nintendo doesn’t do anything crazy next gen, literally just make a more powerful switch and update the os to have more modern features like party chat. Thats it
Don't worry they will be announcing the Switch 2 by E3 undoubtedly.
@Jokerwolf
Just like how the Switch Pro was going to be announced at this year's E3?
The Switch brand has 2 years left in the chamber, probably
The Switch is still doing well, but it really looks like it's starting to lose momentum. I think it's a combination of the lack of a proper Switch Pro, the poor value of the NSO Expansion Pack, and a shortage of major first party games since the pandemic started. The last of those is fixable, and is looking like it will be fixed with an explosion of games coming in 2022, but the former two are a bit more concerning and may take more time and money to fix than would be worthwhile for a 4 year old console that's a budget, low specs option. It's probably time for them to start thinking about next gen.
@westman98 The next E3 mark my words, Nintendo already said if a new system comes out there will be cross generation first party games and this was back in the early days of the switch. That all but confirms that it's going to have full backwards compatibility as well.
Any investor who is judging this year against last year-and specifically, who bought in on Pandemic year highs expecting Nintendo to sustain them- hasn’t done their research properly. They may put pressure on but it’s their bad call.
That said, everything in this article apart from the unavoidable stock shortages is more the grievances held by some fans rather than issues investors will really care about.
@westman98 @SilentHunter382 @Bolt_Strike
Totally agree. I was expecting/hoping for an upgraded Switch 5is year but can see why it hasn’t happened. Now I think it’ll be a ‘Switch 2’ in 2023 with a real leap in tech and BC.
@Bolt_Strike
"Lack of a proper Switch Pro" is irrelevant. As I said before, the OLED model is currently heavily supply-constrained as is - a Pro would face even worse supply issues while being in even higher demand.
NSO + Expansion Pack doesn't factor into these numbers since it launched outside of the Jul-Sep 2021 quarter.
@Jokerwolf
Good luck on that prediction lol
@westman98 It's pretty much guaranteed I'm telling you. Nintendo would be stupid not to have their next system ready to be unveiled. Investors are expecting a new system.
@Jokerwolf
Your overconfidence makes this all the funnier.
The need for constant growth in businesses and the economy is one of the (if not the) biggest problems with the world we live in. It'd help fix so much (including slowing climate change) if that was no longer a thing.
@westman98 I have been right about a lot, including the Switch itself being a hybrid console far before they announced it.
@Jokerwolf
I too predicted that the NX would be a hybrid long before the Switch reveal, does that mean I get a cookie too?
@westman98 Yes, you may.
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