Nintendo's buoyant position in the video game market is good news for long-time fans of the Japanese company. After weathering the storm of the Wii U era, Nintendo's refocused 'hybrid' strategy has paid off handsomely, with Switch still one of the hottest tech products on the market, even after more than four years on sale. This week, the company releases the Switch OLED, an iterative update that should bolster hardware sales as we move into 2022.
However, a recent report by The Wall Street Journal puts Nintendo's success into perspective. According to the news outlet, figures released as part of Apple's recent antitrust trial reveal that in 2019, it made more operating profit from games than Nintendo, Microsoft, Sony and Activision Blizzard combined.
The total was a whopping $8.5 billion, although it's worth noting that Apple has said that the operating margins discussed during the trial were incorrect and the figure is therefore too high. Even when taking that into account, it's clear that Apple is making a tidy sum from games – which is ironic when you consider that it doesn't make any of its own.
The staggering figure is generated via the 30% cut Apple takes from all digital purchases via its App Store, which is used on millions of devices all over the world, including iPhones, iPads and laptop computers. Even Nintendo is contributing to that figure, as several of its games – Super Mario Run, Animal Crossing: Pocket Camp and Pokémon GO (Nintendo is a part-owner of The Pokémon Company) – are available on iOS.
It's worth noting that Apple's 'cut' of digital sales is believed to be the same as Nintendo's on the eShop, and it's understandable that the platform holder should take a bite out of every sale made on its platform. The difference here, of course, is that while Nintendo has sold an impressive 90 million Switches over the past four years, Apple sold 196.9 million iPhones in 2020 alone. The number of iOS devices in active use today will totally dwarf the install base of Switch, which accounts for the amazing profit Apple is able to generate from games.
Apple's position has been challenged recently by Epic Games, the maker of Fortnite, which filed a lawsuit against Apple, claiming that it held a monopoly over how software is sold on its devices by forcing developers and publishers to use its own in-app purchasing system. Fortnite is free-to-play, and relies on in-app purchases to generate a profit – purchases which are subject to Apple's 30% cut.
In the trial, Apple pointed to the fact that other platform holders – such as Google and Microsoft – employ the exact same system. U.S. District Judge Yvonne Gonzalez Rogers agreed for the most part, but also ordered that Apple allow developers to offer payment methods inside their own apps – payment methods which would circumvent Apple's App Store and avoid the 30% cut.
This means that games like Fortnite could potentially generate millions for their publisher on iOS without giving Apple a single penny – and that could have long-term ramifications for other platform holders, including Nintendo.