If you want a very brief summary of the current status of Nintendo’s finances, they’re extremely healthy. When any company posts profits in the billions of dollars, it’s a sign of impressive health and long term stability. It’s a boom that rather brings to mind the Wii / DS era, albeit Nintendo has now long-since evolved its business into one line of hardware (with iterations, of course). The Switch era has allowed the company to streamline and focus, and you combine that with a bumper year and you have impressive results.
In this article we’re going to break down some key takeaways from Nintendo’s financial results, but first of all below are links to our initial coverage as the reports were issued.
So, here are some key aspects of Nintendo’s financial reports.
Nintendo spent a record amount on R&D (Research and Development)
Over the course of the last financial year Nintendo spent 93.2 billion Yen on research and development expenses, which is north of $850 million. The key thing to note is that this was an increase of 10.8% over the previous year. Senior Analyst at Niko Partners, Daniel Ahmad, shared an informative graph that shows this is also a record for Nintendo; the orange line shows it was actually a drop in percentage of overall revenue, but as it was such an outstanding year for Nintendo this is no surprise.
The assumption that will be made is that a chunk of this will be on the next notable hardware release, though that’s rather like saying Nintendo is actively developing Mario projects. What most fans will really care about is the timing for the next system, and that’s still at the mercy of rumours and speculation, with 2 years+ of talk around a Switch ‘Pro’. There have been reports it’s planned for this year, though many of the same sources said a Pro would arrive last year; right now only Nintendo knows, but no doubt a portion of that R&D will have been devoted to new hardware and related projects.
The figure should excite us for other reasons, though. We’ve seen Nintendo produce some left-field products in recent years, from cardboard-based toy construction to RV cars blended with Mario Kart. Not every new product has been a major success, but Nintendo is continually experimenting with its technology and ideas, so the more it spends on R&D the more likely we are to be surprised each year.
The Mario movie may just be the beginning
Next year, all going to plan, will bring us a fully fledged Mario movie. It’s the first full Mario movie since ‘that live action flick’, and it’s going to be a pretty big cultural event in gaming. Nintendo has made noises about “looking into” more animation projects, and though we’ve seen some excellent promotional animations over the past decade, it does seem likely that Nintendo will aim to make a greater impact in the movie (and perhaps TV) space.
If there was any doubt about Nintendo’s interest in this area, a smaller line in the financial results may settle the matter. It was confirmed that Nintendo is nominating Illumination founder Chris Meledandri as an ‘Outside Director’, which will likely be ratified in June. To be clear, outside directors are typically brought on board to advise and guide on key topics, which Meledandri can certainly offer. Illumination is the company producing the Mario movie, having developed a number of very successful animated movie brands, included the likes of Despicable Me.
Here’s what Nintendo’s said about the appointment:
Mr. Meledandri, the founder of Illumination Entertainment, has extensive experience as a film producer. We would like to nominate him as a new Outside Director with the expectation that he will appropriately supervise our companyʼs management from an objective perspective, while providing valuable advice to our organization, based on his broad experience and insight gained as a leader in the field of entertainment.
Our current group of Outside Directors consists of experts such as lawyers and accountants, and as members of the Audit and Supervisory Committee, they contribute to enriching the audit and supervisory system of our company through their broad insight into our corporate management. However, Mr. Meledandri is expected to be nominated as an Outside Director who will not serve as a member of the Audit and Supervisory Committee.
It’s clear Nintendo is keen to broaden its role in the entertainment industry, and this board-level move is an indication of that. It also highlights that the company is clearly happy with progress on the Mario movie project.
Evergreen titles outperformed new releases
When reflecting on the last financial year, it’s possible that – in between gleefully rolling around in mounds of crisp bank notes – Nintendo will reflect on some minor disappointments with new game releases. Now to be clear, the company had a spectacular year in overall software sales, with the grand total (first- and third-party) being 230.88 million units, a huge 36.8% increase on the previous year. That’s a lot of Nintendo Switch game sales.
When you look at the Nintendo game sales, however, the power of evergreen releases shines through. Animal Crossing: New Horizons was the best-seller, but it had less than two weeks of sales in the last financial year, so it was pretty fresh for these figures. Other newcomers to do well last year were Super Mario 3D All-Stars with a little over 9 million sales, which had a limited-time release that undoubtedly drove demand to a degree, and then Super Mario 3D World + Bowser’s Fury reached 5.59 million sales despite only arriving in February.
After that, however, the upper reaches of the list is full of older titles. Ring Fit Adventure certainly enjoyed the benefits of gamers stuck at home and looking to keep fit, and a range of titles no doubt performed well as new Switch owners scooped up highly regarded and visible titles. Familiar brands that also suited the zeitgeist of 2020’s unique circumstances sold millions of copies, ranging from The Legend of Zelda: Breath of the Wild to Super Mario Party.
Other new releases have had mixed fortunes; 3.7 million sales for Hyrule Warriors: Age of Calamity is a record for the Musou series of games. Sales a little over 3 million for games like Clubhouse Games: 51 Worldwide Classics and Paper Mario: The Origami King aren’t to be sniffed at, but in the context of a whopping year they were outgunned by various veterans on the Switch scene. 1.5 million copies for Xenoblade Chronicles: Definitive Edition is likely considered solid considering its a more niche IP, though Mario Kart Live: Home Circuit managed just 1.27 million in that list; we’d love to know what Nintendo thought of that internally. While a neat idea and a lot of fun for the right audience with a convenient space to play, it was quite expensive and never going to get close to recreating the buzz of a full Mario Kart game for the system.
Evergreen software sales have always been key to Nintendo consoles and that’s true again with Switch, albeit with some incredible numbers in these boom years.
Those are some of our key thoughts and takeaways from the Nintendo financial information so far; let us know what you think in the comments!