Nintendo's Nine-Month Financial Results Q&A Briefing for Fiscal Year Ending Mar. 2022

By LUDWIG VON KOOPA - I comment on Nintendo-analyst exchanges.

For some reason, when Nintendo and investors/analysts exchanged questions and answers after Nintendo's third-quarter-ended financial results revealed last week, it got a lot of attention? More attention than usual. But that attention was based off unofficial transcripts (and translations) and hearsay. As a result, I didn't put any attention to it because I know that around tonight Nintendo would release the official English translation of the Q&A session. And so they did, accessible here.

I intend to comment on each of the EIGHT exchanges. Everything is paraphrased unless I put it in quotation marks. I might bring up points that Nintendo didn't based on my years of industry analysis, so please read the transcript for yourself. Note that this took place before yesterday's Nintendo Direct.

Question 1: Please talk to us about evergreen software titles!

Evergreen titles refer to games that released years ago but still have decent software sales, such as Ring Fit Adventure and Mario Kart 8 Deluxe. A lot of other games otherwise release and have 90% of their sales occur in their opening month, but there are just many first-party Nintendo games that are strong performers forever.

As for Nintendo President Shuntaro Furukawa's answer, he connected first-time recent Switch owners with purchasing evergreen titles (as opposed to titles that just released) as their second or third game—so someone might've just bought a Nintendo Switch specifically to play Metroid Dread in October or November because they were waiting for that to make their purchase, and then the next game they might buy could be Super Smash Bros. Ultimate despite it releasing several years ago. So if there are less new Switch owners (who presumably have purchased the evergreen titles by now if they've wanted them!), then evergreen sales will fall.

Question 2: I think the fourth quarter will have better profits than you're projecting because of Pokémon Legends: Arceus!

Furukawa explained that Nintendo's software projections are actually higher than what they were saying before, with Pokémon Legends: Arceus being a big part of that, as well as Kirby and the Forgotten Land in March. But profitability is tempered because of semiconductor components limiting the number of Switch consoles that can be manufactured, as well as the United States Dollar becoming stronger versus the Japanese Yen than previously anticipated. ...This was fairly self-explanatory from Nintendo's financial results documents released before this Q&A begin, so this was a wasted question.

Question 3: When will the semiconductor shortage stop so the Switch won't have shortages?

Shuntaro Furukawa gave uncharacteristically good colour in his answer. Basically, there was higher demand than supply for the Nintendo Switch (OLED model) in Europe and Japan. For the United States, there have been persistent shortages for Switch consoles ever since Thanksgiving, which apparently continue to this day. Nintendo would like to manufacture enough Switch systems to meet demand, but they don't have any special insight to share into this semiconductor shortage that the thousands of other affected business and government organisations haven't already put out into the public.

Question 4: Please explain annual playing users! And compare to the Wii.

Nintendo had a metric in their presentation calling Annual Playing Users, and there are 98 million of them in 2021. That means of the 103.54 million Switch owners as of December 31 2021, 98 million of them played something on their Switch in 2021. I think one year is way too long of a time period to be a core metric that Nintendo judges the health of the business on. It should be a shorter time period so it's more... dynamic. I think if you haven't touched your Switch in nine months, you're significantly less likely to touch it tomorrow, but it's about the same likelihood as if you haven't touched it within twelve months. I'm sure you could plot a curve of this, but Nintendo didn't and I know I won't. (...But if you do want me to talk about active users in detail, let me know by requesting it, since it's an important concept that I don't believe has an article.) Furukawa declined to provide the Wii's metrics as a comparison, but I'm sure the Switch's are significantly better.

Question 5: What are Nintendo's views on the metaverse and non-fungible tokens (NFTs)?

This is the question that got a lot of attention. But if you look at Furukawa's answer... well... he didn't mention NFTs at all. He did talk about the metaverse in the sense that “it has great potential.” And that, in a way, Animal Crossing: New Horizons qualifies as the Nintendo Switch's biggest foray into the metaverse, especially because during the CCP Virus pandemic, a lot of people have been doing things like conducting their weddings through the game, which seems like a metaverse-y vision.

But for now, according to Furukawa, Nintendo hasn't found a way that going hard on the metaverse concept would benefit (or entertain) Nintendo customers... and that a lot of people don't really understand it yet. Furukawa didn't say a word about NFTs even though the questioner did. It's obviously not on Nintendo's agenda.

Question 6: How many Animal Crossing: New Horizons players bought the paid DLC, Happy Home Paradise?

Shuntaro Furukawa refused to answer the question, but said that digital sales overall grew in the third quarter thanks to this DLC, Sora's release in Super Smash Bros. Ultimate, and however many people subscribed to Nintendo Switch Online + Expansion Pack. (KoopaTV's staff did not do the latter.) No figures were provided for any of those.

Question 7: The semiconductor shortage is making manufacturing more expensive and less profitable, but by how much?

While Nintendo didn't give specific numbers, Furukawa did confirm that the Nintendo Switch (OLED model) has a lower profit margin than the Nintendo Switch and the Nintendo Switch Lite, which is another jab at FAKE NEWS groups that claimed the opposite. (By the way, that's a really good reason to also reject when FAKE NEWS groups said the OLED model would totally replace the regular Nintendo Switch).

Furukawa doesn't think that profitability will INCREASE, and that if the shortages continue (and Nintendo has no power in the matter whether they will or not), profitability will go and decrease.

Question 8: Why doesn't Nintendo outsource mobile game development? Then more mobile games could be made!

Nintendo explained they are already doing this, with Niantic developing Pikmin Bloom. Nintendo must select its development partners carefully, because if the mobile version of a franchise is bad, that will sour mobile users’ feelings towards that franchise, so they won't go and buy merchandise or a Switch and play the console version of that franchise.

Furukawa didn't mention this, but should have: Nintendo also outsources a lot of console game development to other parties. This notably includes titles like Super Smash Bros. Ultimate and Fire Emblem: Three Houses. Otherwise their current (and past, since this has been going on for decades) rate of releases wouldn't be possible. This guy's suggestion isn't... novel.


It turns out that when you read what people actually said, this Q&A session wasn't as interesting as social media made it out to be. Certainly not all that informative. But feel free to comment on Ludwig's commentary in the comments section if you feel otherwise.


Click here for last year's third-quarter Q&A session.
The last one of these investor Q&A sessions KoopaTV has commentated on happened about half a year ago!
Nintendo's analysts had a more focused tone for the fiscal year ending March 2023 nine-months in.