Nintendo's Financial Results Briefing for Fiscal Year Ended March 2023 Q&A Analysis!

By LUDWIG VON KOOPA - They are most interested in the Switch's successor, as well as The Super Mario Bros. Movie.

After Nintendo announced how their financial results for their fiscal year that ended March 2023 went—which was pretty much as expected—they had to field questions from their stock analysts. And that means... I get to analyse their seven questions and Nintendo's (President Shuntaro Furukawa's) answers! You can read the translated question and answer session at this link. What follows are my thoughts, and this time, I think I've written some intelligent things (for what might not all be intelligent questions).

Question 1: What impact will The Super Mario Bros. Movie's success have on Nintendo's future IP expansion initiatives, including revenue projections?

Furukawa says he and Shigeru Miyamoto are pleased about the fans’ overall positive reception to The Super Mario Bros. Movie, including stories of super-fans who had watched it several times. Nintendo will report the revenues of the movie (which are in the NEXT fiscal year that ends March 2024, since the fiscal year just ended in March 2023, and the movie released in April), and Nintendo does see money from that along with Universal, but what they really see is the potential in people buying Nintendo Switch consoles and a bunch of Super Mario videogames as a result of watching and being excited around the movie. Maybe that's how New Super Mario Bros. U Deluxe has re-outsold Ring Fit Adventure.

Nintendo does plan to “pour [their] efforts into a variety of visual content”, and it seems like they are looking for other non-game opportunities to expand selective IP in, “with the goal of continually invigorating our core dedicated video game platform business.” Well, you know what could really use some re-invigorating and would be excellent fodder for movies? F-Zero and/or Punch-Out!!. But I think Nintendo wants to get the most bang for their movie investment buck, which means there needs to be several sellable items associated with a new thing they make a movie of. F-Zero and Punch-Out!! have zero, unless you really want to stretch and say people will pay for a Nintendo Switch Online subscription to play Punch-Out!! on the NES... or upgrade to an Expansion Pack to play F-Zero X on the Nintendo 64. But “several” means “more than one”...

On the Nintendo Switch Online bit, Nintendo IS observing and appreciates those numbers, citing a non-specific “slight rise in activity for classic Mario titles that can be played through Nintendo Switch Online.” And maybe THAT means that if you go and play Paper Mario right now on the Expansion Pack emulator, they'll count that as people wanting more Mario games, not people wanting more classic JRPG Paper Mario games. (See that comments section discussion on Nintendo Switch Online emulator telemetry.)

It turns out this isn't the last question on The Super Mario Bros. Movie, though:

Question 2: Has The Super Mario Bros. Movie extended the Nintendo Switch's lifecycle?

I had a discussion in the financial results disclosure article about how Nintendo said in September 2020 that the Nintendo Switch has entered the midpoint of its lifecycle, which would put the endpoint around this time next year. That's still longer than typical Nintendo console lifespans, and Furukawa acknowleged that by stating, “In the history of our dedicated video game platform business, we have never anticipated sales of 15 million units of hardware and 180 million units of software in a seventh year for a system, so we see ourselves as having entered uncharted territory.”

It's an important note to make: Even if the Nintendo Switch has moved past its peak in terms of sales, and it isn't growing faster than previous years, it is still growing by a LOT for such an old (by industry standards), and there is still PLENTY of profit to be had. Furukawa described how “movie-related revenues will impact earnings mostly in the current fiscal year [which ends March 2024], but I think that the positive ripple effects from the movie on the Nintendo Switch business will be greater over the medium to long term.”

Did you catch that? Between now and March 2024 is the short term. The use of “but” is what separates now to March 2024 was the short term, versus the medium to long term. And THAT means that Nintendo intends to CONTINUE the Nintendo Switch business after March 2024. And note that Furukawa said “Nintendo Switch business” and not just “Nintendo business”. He specified it's the Switch. So how much after March 2024? Well, however you define “medium to long term”, but that's probably another year after that (2025) if one year is a short term. That means the Nintendo Switch won't be fully replaced anytime soon, or even if there is a new console, the Nintendo Switch will still have some sales and marketing support concurrently during the transition, and the movie should help. (Maybe that means more Mario sellable items too. Like a third Baseball game?)

Usually these question and answers don't have very useful information, but this actually did unexpectantly reveal quite good intel. Assuming that Nintendo isn't going to just go and walk it back later. Oh, and The New Super Mario Bros. Movie gets another name-drop in the next question.

Question 3: How will Nintendo use the success of The Super Mario Bros. Movie to break Nintendo's historical barriers of 500–600 million yen annual operating profit, and threshold of seemingly 140–160 million unit sales of hardware?

This is such a weird question with faulty premises. First, for the 140 to 160 million units, the only Nintendo hardware family to be in that range is the Nintendo DS family at 154.02 million units. Second place is the Nintendo Switch at 125.62 million. (Third place is the Game Boy family at 118.69 million.) The Switch is also the undisputed winner in software (at 1.036 BILLION), which is why this guy didn't ask about it.

I don't know how “cumulative unit sales seem to hit a threshold at 140 to 160 million units” as if that has regularly happened in history. It was one time, with a handheld system at over a hundred dollars less in MSRP than the Switch. Like, the Nintendo DS Lite (the most popular model) was sold for only $130 back in the day, and later got price-dropped to a mere $100. The Nintendo Switch MSRPs from $200 (Nintendo Switch Lite) to $350 (Nintendo Switch (OLED model)). It's tough to compete with that precedent.

As for operating profit, Nintendo did beat that in 2021 (640,634 million yen); 2023 just ended at 504,375 million yen. Before FY 2021, the last time Nintendo's annual operating profit was 500 to 600 million yen was all the way back in 2009 (555,263 million yen), and 2009 was the first time it was ever in that range in the company's history. In other words, that's historically only happened in 2009, 2021, 2022, and 2023. Is it really a historical barrier when Nintendo just erected that “barrier” in the present generation?

Nintendo, in this current generation, just redefined what it means to have Nintendo profit levels. The analyst is a fool.

Well, that's my response. But how did the guy who the question was actually addressed to respond? He mentioned SUPER NINTENDO WORLD and Nintendo-operated stores, as well as The Super Mario Bros. Movie, as touchpoints that allow access to Nintendo intellectual property to grow, and Nintendo will expand these further, including in other regions. (Maybe Europe will see some love?) And maybe if this strategy works out, Nintendo will grow their business to make even more profit and sell more hardware units. ...Eh, I like my response challenging the premise of the question a lot more than how Furukawa politely responded to it.

Question 4: Since the Switch keeps adding to its annual playing users, is a new platform even necessary?

Furukawa does believe that there is a need for a next-generation platform, even given the current-generation Nintendo Switch's success and high engagement. The next-generation console will have to build its userbase from zero, so it's tempting to advocate not wanting to give that up. But at some point, it'll be necessary as customer expectations change, as well as developer expectations, both in-house and out-house. But Furukawa stated that Nintendo's top priority is the Nintendo Switch, and thinking about how to transition to what's next is secondary. At this moment, anyway.

Question 5: How about a hardware price cut? And why is The Legend of Zelda: Tears of the Kingdom 70 USD versus the normal 60 USD?

While hardware component costs have fallen in some areas, in other areas, like foreign exchange rates and high inflation, they're still going up. Nintendo doesn't plan to introduce price cuts in this fiscal year (but of course they won't announce a price cut in advance because that'll kill current sales until the price cut occurs). As for The Legend of Zelda: Tears of the Kingdom's higher price (and they specify this is in the United States), this doesn't reflect higher prices across the board, and prices are on a case-by-case basis. But Nintendo said that games with more content and online play do increase development costs, so maybe Nintendo will price titles higher in the future. While The Legend of Zelda: Tears of the Kingdom is quite big content-wise, bigger than even The Legend of Zelda: Breath of the Wild), it doesn't have online play, so it's interesting he mentioned that. Maybe he wishes that Super Smash Bros. Ultimate was priced higher. (But that's what the TWO DLC passes are for.)

Question 6: Your sales are forecasted to go down, but overall net sales go down at a % rate less than your hardware and software unit sales. What's up with that?

Furukawa reminded this analyst that Nintendo's integrated hardware-software business isn't Nintendo's only revenue stream. They get royalties related to things like the theme parks and The Super Mario Bros. Movie, and they get subscription money from Nintendo Switch Online. Also, unit sales figures aren't all created equal. For example, Nintendo selling DLC on a first-party game is more profitable to Nintendo than Nintendo receiving some commission money from a third-party publisher's sale from the Nintendo eShop (which are recognised as net sales/revenue). So that's how software unit sales can be projected to go down by 15.9% (213.96 million units to 180 million units) but net sales (the entire business) in yen would go down by only 9.5% year-over-year (1,601.6 billion yen to 1,450 billion yen).

Question 7: Did Nintendo like the launch timeframe between the Nintendo NX and its release?

Nintendo had a stealth announcement of the Nintendo NX in March 2015, but its real unveiling as the Nintendo Switch was in October 2016, with a big presentation in January 2017 for its March 2017 launch. That means the NX was announced two years in advance, though it was under half a year in advance before we actually knew concrete details about what this console actually was.

Furukawa didn't evaluate whether or not the timing of those announcements worked in favour of or worked against the interests of the Nintendo business. Instead, he basically said Nintendo will announce things when they are ready to, and the reason for the early announcement of the NX was so people wouldn't be afraid that Nintendo was abandoning the console market with its then-new entrance into the mobile gaming market. It certainly was unusual to announce a new console just two and a half years later after the Wii U's launch, but the Wii U also had its own set of... unique situations that the Nintendo Switch doesn't face.

Overall, analysts really liked what Nintendo did with The Super Mario Bros. Movie, but they also really want to hear news about the next Nintendo hardware generation. Since Nintendo will be selling less Switch units and less software, but their costs will still be the same (or more). The cost of getting more people into the Switch ecosystem than before will be higher than previous years, and Nintendo's profit margins will be going down. (But...historically, the operating profit ratio is also among the highest it's ever been, at 31.5%, with the only years higher than that being 2021, 2022, and... 1982.) Investors like to see endlessly positive growth, so now that Nintendo is slowing down, they're worrying. But they loved the Wii years, and this is even better, stronger, and more sustainable than the Wii, so they really should be happy the way things are.


Ludwig is not an owner of Nintendo stock, though maybe he should be since he has faith in the company and its performance. Do you have that level of faith? Do you want a new Nintendo console as much as Nintendo's analysts do (except for that one guy in question 4)? Or are you like Ludwig and appreciate the status quo?


Last quarter's (nine months into FY23) question and answer analysis article is here.
Last year's question and answer summary and analysis was located here. That also had seven questions.