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Wednesday, February 15, 2023

Nintendo's Nine-Month Financial Results Q&A Briefing for Fiscal Year Ending March 2023

By LUDWIG VON KOOPA - Eight questions. Eight answers. Eight mini-analyses.

Cutting to the chase, Nintendo did not have a good (relative to their expectations) holiday season at the end of 2022. They blew their own forecasts and lowered them. And after announcing these dismal results, Nintendo's executives had to take questions from stock analysts. Surely, the questions ought to have an outraged tone and Nintendo's executives ought to be more humble and apologetic than usual, right? And KoopaTV is all for looking at that, since Nintendo deserves it based off their own (incorrect) forecasts. So what questions did we actually get?

Question 1: Why did software sales weaken in the Americas?


Nintendo President Shuntaro Furukawa responded that the Americas was the sole region with year-on-year declines. (By a negative 19.5% growth.) While Splatoon 3 is disproportionately powerful in Japan (so far, about 62% of Splatoon 3's sales are from Japan, compared to Japan normally being about 23% to 25% of Nintendo's overall sales), and Nintendo Switch Sports and Mario Strikers: Battle League apparently have a lot of European fans because they're idiotic soccer-loving socialists, there wasn't a big stand-out seller in North America. It didn't help that at the same time in 2021, America was buying up the likes of Metroid Dread (which hasn't behaved as an evergreen title ever since).

Question 2: How fares the demand for multiple Switch models?


Furukawa went back to the idea that people are buying multiple Nintendo Switch systems (and about 30% of Switch hardware sales this year comes from people... or households... getting more than one unit), and that the Nintendo Switch (OLED model) is going from being an additional or replacement system to being many more people's first system. Furukawa acknowledges that continuing to sell to people who have a Switch already is a growth strategy, but that the Switch in general has passed its peak as it enters into its seventh year on the market. Still, it was a very high peak, so there is still quite a bit of profit left to earn in this lifecycle.

Question 3: What specific measures will Nintendo take to get more hardware sales besides just more new software?


Furukawa took issue with the question basically attacking Nintendo's core hardware-software integrated business model by implying that new software shouldn't be seen as doing enough to sell consoles. He specifically called out that The Legend of Zelda: Tears of the Kingdom and Pikmin 4 will be releasing in the next fiscal year, and I guess those will be system-sellers to the point that people who have cooled off from playing their Switch as their primary entertainment option post-pandemic will come back to the Switch and play it more. Furukawa's answer echoes what Reggie Fils-Aime has said about competing for customers’ time against all entertainment choices out there.

By the way, I'd like to remind you that The Legend of Zelda: Breath of the Wild DID release on the Wii U. Now, the Switch version outsold the Wii U version by more than 10x, but technically up to this point, people who only buy Nintendo consoles for The Legend of Zelda haven't had to get a Nintendo Switch yet. So maybe it really will sell some systems. And I guess Nintendo thinks the Pikmin series is actually important enough to do the same. (Well, it sure wasn't a system seller of the Wii U!)


Question 4: Established, popular franchises are getting all the attention. How about doing something to expand the user base like Ring Fit Adventure?


Yes, I had to mention in the question heading that Ring Fit Adventure got name-dropped. Furukawa stated that Ring Fit Adventure and Nintendo Switch Sports were purchased by many customers over the holiday season, as were games from established series Pokémon and Splatoon. (Though Furukawa said that by Pokémon standards, Splatoon is far, far more new.) Pokémon Scarlet and Pokémon Violet in particular exceeded Nintendo's expectations, but Furukawa again lamented that less people around the world are getting their entertainment value from playing their Switch than he would like, compared to doing other things.

Personally, I take issue with Furukawa stating that Ring Fit Adventure has intuitive controls. I mean, yes, it does, but there are many examples of Fit Skills that I have documented in the KoopaTV Fitness Friday series (see the Fitness Log category) that are buggy, unintuitive and don't follow the actual exercises they claim to be based on, or possibly harmful to your body or your controllers. These include Planks, Hip Lifts, and Standing Forward Fold. And if Nintendo in Japan still wants more Ring Fit Adventure sales, they should admonish Nintendo of America but compliment Nintendo in Europe.

There was very non-specific and non-committal language from Furukawa that third parties would continue to expand the Nintendo Switch business together. Would be nice for him to give an example.


Question 5: What is the Nintendo Switch's remaining lifecycle going to be like?


The Nintendo Switch has been unprecedented in all of Nintendo's history for being the one console with the longest legs. They'll try to continue momentum by, as stated before, getting people to buy more Switch consoles even if they own one already, and sell new and old games. They also somehow factor in SUPER NINTENDO WORLD (officially opening Friday in Hollywood) and The Super Mario Bros. Movie into their plan to remind people that Nintendo is an entertainment option.

Nintendo does not plan to change the pricing model on the Nintendo Switch's hardware or software. They did not address the higher-than-the-usual-$60 $70 price tag on The Legend of Zelda: Tears of the Kingdom.


Question 6: Why aren't more people buying more (older) games?


A lot of people are buying new games, but new Switch owners aren't exposing themselves to older games released a few years ago. Nintendo said they're thinking about how to get sales of evergreen titles back up, and maybe that's why you see Nintendo Switch game vouchers back in North America, since most of the titles available are released in non-current years.

Question 7: Are people playing their Nintendo Switch for longer amounts of time?


While Furukawa didn't actually answer if play time is up, he did say it's not crucial to the success of the Switch. Nintendo still gets revenue if people buy the games but don't actually put a lot of time into playing the games. There are lots of people I'm Switch friends with where I can see on their profile that almost all of the games they've played have been for about 0 to 9 hours, but they have a long list of those games, meaning they keep buying games but don't play through them. I personally don't understand those habits, but I'm sure Nintendo appreciates it.

Question 8: What will the fiscal year ending March 2024 be like?


As Furukawa has been explaining in several of these questions, The Legend of Zelda: Tears of the Kingdom is Nintendo's big-ticket item for the next year. (Which probably means it'll be a year for me to clear my backlog, since I want no part in that game because I'm not a fan of The Legend of Zelda: Breath of the Wild.) Nintendo also wants to keep getting subscription revenue from Nintendo Switch Online, and that'll mean getting more subscribers to the base service, and those already on the base service to go up to the Expansion Pack. And hence... Game Boy Advance games are a thing now.


Ludwig asks you to remember that Japan stat about Splatoon 3, because it will play an important role to understanding future Splatoon articles, including an imminent one. Ludwig is upset that none of the questions were about how Nintendo flip-flopped their financial forecast from one quarter to another, but they were all focused on what Nintendo plans to do in the future. (Which is almost all about The Legend of Zelda: Tears of the Kingdom and occasionally Pikmin 4. Surely not everyone is that mature enough to realise that Nintendo can't change their past mistakes and it's best to focus on what you can change, the future? It's at least worth trying to verbally warn Nintendo to learn a lesson and not do that sort of financial mischief ever again.


The chronologically previous question and answer session, at the six-month mark for the year ending March 2023, is here.
Next question and answer session came three months later, covering the entire FY23's results.
Last year's nine-month financial results briefing question and answer session is here.
Splatoon 3's Japanese userbase has a major impact on Splatfests, like the favourite chocolate flavour where Japan's preference for white chocolate won the day.

6 comments :

  1. Surprised he didn't plug the Mario movie and Super Nintendo World during question 3, seemed like a good opportunity to me.

    Given that Nintendo has never had anything like Online before, I wonder if all that "extra" money is being put to good use within the company. I can't imagine that the upkeep for all the online extras is that difficult, especially since we only get about 3 games or so every other month. Although I guess it should be noted that people no longer have to rebuy virtual console games every time they buy a new system. Some of those games can be priced at 10 dollars, so two virtual console games already equal the price of the regular switch online membership. I wonder what percent of people have rebought the same game multiple times spread amongst different systems because they don't want to have to set up their old system just to play one game.

    ReplyDelete
    Replies
    1. Perhaps he realised he ought to have been plugging those things after that third question was over, and decided to make up for not doing so by plugging it at almost any tangential opportunity thereafter.

      Delete
    2. Furukawa's innate ingenious strikes again!

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    3. It feels like a school child doing a book report.

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  2. Did Nintendo expect Splatoon 3 to not sell well out of Japan and now the rest of the world has to be roped into Japan's choices for Splatfests as there are no more regional Splatfests?

    ReplyDelete
    Replies
    1. Something bad must have happened in the pre-release Splatfest for us to go from that being a regional Splatfest to us no longer having those.

      Delete

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