Nintendo generates 85% of software revenue from first party titles (and why Nintendo reduced its hardware forecast)

hussien-11 · Jan 31, 2019

Does it really matter that much though? I agree H1 was weak, but the overall result is very strong which made up for that. Reggie said last year that Nintendo make the majority of its yearly sales in the next half of they year.
maybe its different than how PS4 is doing, but is it different compared to past Nintendo systems?

ZhugeEX said:
It's my opinion that one of the reasons behind the weak performance in the first half of the year was due to the first party software output from Nintendo. Whilst it wasn't necessarily bad, the flagship titles were mostly Wii U ports. Labo also launched but underperformed.

I don't really agree with this. Mario Kart 8 Deluxe is a Wii U port and its selling extremely well, its going to end up the second best selling MK of all time.

its just that Donkey Kong and Bayonetta are never system sellers but to a small percentage of people.

Its true that Nintendo is too reliant on first party software to sell their system, but this is how it should've been in those 2 years, because nobody other than them thought this is a good idea or this product is going to be successful. they took full advantage of the success of their platform, especially no one has built new or unique software specifically for the Switch in that period. many of their games are having the best performance they ever had in the market.
they need third parties to diversify and reach a wider base of consumers, but not to succeed, and this is fine.

the percentage is probably going to be less upcoming forward though, but not by very much. a lot of third parties were probably waiting for cartridge costs to come down, and it seems to me like there are a lot more important third party games coming this year.
the road is still long.

NotLiquid · Jan 31, 2019

Harald23 said:
Not just that, lineup for the first 5 months in 2018 was not appealing: besides Labo you had only Wii U ports and Kirby Star Allies as the only original titles.

That's why i'm also a bit concerned about these first months of 2019. At least Nintendo acknowledged in the Q&A how long has been the wait for the next Direct.

Kirby Star Allies did about as well as was to be expected of the series, ports like Tropical Freeze and Bayonetta, I wouldn't be surprised if it actually overperformed based on sales. Nintendo had their release schedule set by the time they committed to their estimate so I don't think those particular games were what they were banking on to drive this year's sales. It's pretty obvious their three big pillars this year were going to be Smash, Pokémon and Labo, and out of those three, only one struck out when it was up to bat.

ZhugeEX · Jan 31, 2019

plusaflag said:
I am not doubting your claim but do you have a source for the former ?

Also, can it be that the revenue figures take in account eShop only titles, but the unit figures don't ? I am a bit lost here.

Not one I can publicly disclose unfortunately.

The revenue figures are overall totals for the company.
The unit figures are just additional data reported by Nintendo. They chose to only disclose numbers for packaged games / Packaged games with digital ver.

Nostradamus · Jan 31, 2019

This has always been the case and Wii is the grand proof of that. The Wii essentially collapsed after the third year exactly because the third parties abandoned it and there was a huge drought from the first party. The same principles still apply today with the difference that this time Nintendo is solely focusing on one platform (thus publishing games at a higher rate) and third parties appear to be doing relatively ok for now. In the end of the day, there are radical differences between platforms. Sony can do just fine without releasing any big games this year while Nintendo can't afford not having sth something big for the holidays.

Glio · Jan 31, 2019

TitlePending said:
Going forward I wonder if Switch sales will be more evenly distributed throughout the year, or continue to be heavily loaded during Q4.

It has always been like this with Nintendo, I do not think it will change.

TheRulingRing · Jan 31, 2019

SageShinigami said:
Maybe, but if the gimmick for this system is "handheld putting out near console quality visuals", it's a good gimmick. Better than good, great. Tons of people double dip entirely because they can now play a game they love "on the go".

I don't really think there are tonnes of people who double dip, that's mostly a hardcore Era thing. Most people would play a game then move on.

Ishaan · Jan 31, 2019

I think something that needs to be pointed out (lest people misconstrue the objective of this thread and what Zhuge is trying to say), is that this is Nintendo's revenue off royalties from the sales of third-party software on the Switch.

It is not units sold of third-party software. We know that indie games (and certain "AAA" games) are selling well on Switch. This thread isn't about that. It's about the fact that Nintendo's own revenue and hardware sales are still largely dependent on their first-party output.

So while we can all agree that the Switch's brand image wouldn't be what it is without a healthy dose of third-party software (being able to play lots of games on the go is its most compelling feature), Nintendo themselves still rely almost entirely on first-party releases to earn revenue off their platform.

NotLiquid · Jan 31, 2019

S I C K O said:
What's coming out in 2019 for Nintendo first party?

Yoshi, Animal Crossing, Fire Emblem, Pokémon and Luigi's Mansion 3 are what we know of.

Of course, only one of those games have been dated, which is why they're going to have to have a Direct soon.

Pancakes R Us · Jan 31, 2019

It's reassuring to see that despite such a high percentage of revenue is from first party software, that indies and third parties are still seeing success. Success enough to keep releasing titles.

Deleted member 8593 · Jan 31, 2019

ZhugeEX said:
It's my opinion that one of the reasons behind the weak performance in the first half of the year was due to the first party software output from Nintendo. Whilst it wasn't necessarily bad, the flagship titles were mostly Wii U ports. Labo also launched but underperformed.

I find this interesting because they published 4 of those million sellers, 5 if you count Octopath Traveler, in that period and Kirby came at the end of Q4. I'd argue that Mario Tennis, Kirby and Donkey Kong outperformed relative to expectations but I guess they didn't really drive hardware.

watdaeff4 · Jan 31, 2019

Ishaan said:
I think something that needs to be pointed out (lest people misconstrue the objective of this thread and what Zhuge is trying to say), is that this is Nintendo's revenue off royalties from the sales of third-party software on the Switch.

It is not units sold of third-party software. We know that indie games (and certain "AAA" games) are selling well on Switch. This thread isn't about that. It's about the fact that Nintendo's own revenue and hardware sales are still largely dependent on their first-party output.

So while we can all agree that the Switch's brand image wouldn't be what it is without a healthy dose of third-party software (being able to play lots of games on the go is its most compelling feature), Nintendo themselves still rely almost entirely on first-party releases to earn revenue off their platform.

Yeah I mentioned that too.

While it's good data we need to make sure that we don't jump to erroneous conclusions

hussien-11 · Jan 31, 2019

ianpm31 said:
Isn't this issue pretty much the same for 2019. A barren schedule in the first half of 2019 at least atm?

Not really. at least, its much better than 2018:

- NSMBUD
- Tales of Vesperia
- Blazblue
- Yoshi's Crafted World
- Mortal Kombat 11
- FFX/X-2
- FFXII
- Trials Rising
- Dragon's Dogma
- Assassin's Creed Collection (leaked not confirmed)
- Team Sonic Racing
- Crash Team Racing

Daemon X Machina, Labo 4 (rumored), Fire Emblem Three Houses, Metroid Prime Trilogy (rumored), Ace Attorney colletion, Resident Evil games... all of those or any one of them could be dated for H12019 too.

Celine · Jan 31, 2019

Yeah, those are dollar sales but even looking at unit sales and just considering Nintendo published million selling game, the picture is the same:
Nintendo first-party games are what is driving Switch popularity.

D.Lo · Jan 31, 2019

Ishaan said:
I think something that needs to be pointed out (lest people misconstrue the objective of this thread and what Zhuge is trying to say), is that this is Nintendo's revenue off royalties from the sales of third-party software on the Switch.

It is not units sold of third-party software. We know that indie games (and certain "AAA" games) are selling well on Switch. This thread isn't about that. It's about the fact that Nintendo's own revenue and hardware sales are still largely dependent on their first-party output.

So while we can all agree that the Switch's brand image wouldn't be what it is without a healthy dose of third-party software (being able to play lots of games on the go is its most compelling feature), Nintendo themselves still rely almost entirely on first-party releases to earn revenue off their platform.

Was going to say this.

Switch software Revenue /= Nintendo's Switch software revenue.

Wander_ said:
anyway, if you look at the top 10 best selling titles of 2018 for ps4 and xbox in the us, they are all titles not available on the switch. monster hunter world, rdr2, call of duty, assassin's creed and so on. it's just this really

Release no big games, get no big sales. It's literally that.

Even Japanese companies who made bank on the 3DS, who get 80%+ of their sales in Japan, and where the Switch will overtake the PS4 within weeks, have jack all.
Emblematic: Konami got a million out of the microbudget Bomberman and what did they do with that? Ported it to the other consoles! lol!

Nostradamus said:
The Wii essentially collapsed after the third year

The Wii sold over 20 million consoles in its fourth year, 15 million in its fifth, and 10 million in its sixth year.

ZhugeEX · Jan 31, 2019

Zedark said:
I agree. When looking at Japanese sales, for example, it's clear that Pokémon and Smash pushed major units, and in the case of Pokémon let's Go, the push seemed rather out of line with the software units sold - Let's Go sold more Switches in its launch week that much bigger Pokémon releases did for 3DS. It's clear that Nintendo's first party games have an incredible impact on hardware performance.

The software for WiiU/Switch compared to DS/Wii is not that surprising to me, though: WiiU is an outlier for anything, and Switch hardly got any third party software - certainly not ones of major sales potential except for FIFA - so it's a self-fulfilling prophecy.

It's also definitely clear that Nintendo is suffering to a degree (not bleeding or anything, just selling less than would be possible) from lacking the third party games that PS4/XB1, considering how much these push systems. In Japan, this effect is exaggerated even more: PS4's are pushed for the most part by third party games (only MHW, FFXV, KH3 and DQXI managed to push major hardware units) and first party is rather insignificant. In the West first party is bigger for PS4/XB1, but even then a game like Call of Duty or Red Dead Redemption can push more units than the biggest first party games. Nintendo not getting any of those titles hurts them during the slower quarters because they simply can't have a major title like Pokémon or Smash during every quarter of the year. As a result, the Switch is left to coast off of the sales power of previously released games and the appeal of the hardware itself, instead of going from major third party game to the next. Nintendo's first party being as powerful as they are is the reason they are so strong in the market, but with third parties fully on board they would be much stronger imo.

Nintendo will be fine on their own - but they would be more successful if they had full support from third parties. I'm hoping that this time they can turn things around somewhat, what with the software performance of third party games on Switch being generally good and Switch selling well.

It's also that none of the software on the system is of a system-selling calibre, tbh (except for FIFA), so I wonder if that can change if Switch were given the chance: launch a COD game on the system, and see if it can push units.

Ishaan said:
I think something that needs to be pointed out (lest people misconstrue the objective of this thread and what Zhuge is trying to say), is that this is Nintendo's revenue off royalties from the sales of third-party software on the Switch.

It is not units sold of third-party software. We know that indie games (and certain "AAA" games) are selling well on Switch. This thread isn't about that. It's about the fact that Nintendo's own revenue and hardware sales are still largely dependent on their first-party output.

So while we can all agree that the Switch's brand image wouldn't be what it is without a healthy dose of third-party software (being able to play lots of games on the go is its most compelling feature), Nintendo themselves still rely almost entirely on first-party releases to earn revenue off their platform.

I agree with both posts here.

Deleted member 1476 · Jan 31, 2019

hussien-11 said:
Not really. at least, its much better than 2018:

- NSMBUD
- Tales of Vesperia
- Blazblue
- Yoshi's Crafted World
- Mortal Kombat 11
- FFX/X-2
- FFXII
- Trials Rising
- Dragon's Dogma
- Assassin's Creed Collection (leaked not confirmed)
- Team Sonic Racing
- Crash Team Racing

Daemon X Machina, Labo 4 (rumored), Fire Emblem Three Houses, Metroid Prime Trilogy (rumored), Ace Attorney colletion, Resident Evil games... all of those or any one of them could be dated for H12019 too.

Honestly not seeing how this is "much better" than 2018. Maybe the new Fire Emblem will be H1 and that's nice, but nothing is confirmed so with what we have right now it reminds me of 2018, a lot.

Visanideth · Jan 31, 2019

Ishaan said:
I think something that needs to be pointed out (lest people misconstrue the objective of this thread and what Zhuge is trying to say), is that this is Nintendo's revenue off royalties from the sales of third-party software on the Switch.

It is not units sold of third-party software. We know that indie games (and certain "AAA" games) are selling well on Switch. This thread isn't about that. It's about the fact that Nintendo's own revenue and hardware sales are still largely dependent on their first-party output.

So while we can all agree that the Switch's brand image wouldn't be what it is without a healthy dose of third-party software (being able to play lots of games on the go is its most compelling feature), Nintendo themselves still rely almost entirely on first-party releases to earn revenue off their platform.

I think this is a good point, but there's still a strong relationship between royalties and sales. Nintendo isn't making so little from third party sales because they have lower royalties than everyone else. And indies doing well on Switch can coexist with this precisely because indies provide (necessarily) less royalties than full priced games.

Zedark · Jan 31, 2019

Maintenance said:
Honestly not seeing how this is "much better" than 2018. Maybe the new Fire Emblem will be H1 and that's nice, but nothing is confirmed so with what we have right now it reminds me of 2018, a lot.

Fire Emblem is actually slated for H1, so not sure why you used the maybe.

Deleted member 1476 · Jan 31, 2019

Zedark said:
Fire Emblem is actually slated for H1, so not sure why you used the maybe.

Fire Emblem was also slated for 2018.

Deleted member 9584 · Jan 31, 2019

freeradical said:
What are they going to do when the run out of WiiU re-releases?

Hopefully Wii and GCN ports. Not having Galaxy 1 + 2 HD yet is a crime.

OmegaDL50 · Jan 31, 2019

S I C K O said:
What's coming out in 2019 for Nintendo first party?

Are you talking for the entire year or just immediate future?

No solid confirmation but these are heavily implied to release this year. Fire Emblem: Three Houses, Yoshi's Crafted World, Luigi's Mansion 3, Daemon X Machina, Animal Crossing, and Pokemon Gen 8.

While not first party. I think Square-Enix releasing a slew of their Final Fantasy games on the Switch will help as well. (Some of these never having portable versions at all)

tyfon · Jan 31, 2019

I did buy my Switch to play Nintendo games, that's true.
Then I bought another for my daughter and another for my wife. And this summer I will buy another for my youngest daughter :)

Mr_F_Snowman · Jan 31, 2019

ghostship said:
In 2017 the official stance was that significant expansion would be difficult because the company would not be able to "nurture" them sufficiently, resulting in too many new employees that don't understand Nintendo's "DNA". They've also said (further back in time, during the Iwata period) that they don't like acquisitions because you only buy the company and the talent can leave.

As an upshot they prefer to work with external partners (presumably they're talking here about NLG, Bamco, Koei Tecmo etc). Clearly they need to step it up a notch, but then the recent Metroid Prime news does highlight the dangers of that approach too.

They are kind of stupid excuses really - they don't need to "nurture" industry veterans and would actually benefit from having some first party studios operating outside of the traditional "Nintendo dna" - lots of incredibly popular genres of games are not even in Nintendos DNA (realistic driving / sports games / first person shooters etc etc) so it would be beneficial to have some studios operating differently

And yes if you acquire a studio talent can leave but then thats the same as any studio at any point in time no matter if you've just acquired them or not. Offer them good working conditions and pay and manage them properly and all the talent stays.

Its a real risky position to be so reliant on your own internal studios and if anything just ramps up the pressure on their current dev teams. A few sub par games / delays can really effect them fiscally to a huge degree so having a safety net of a few more studios seems like a sensible thing to do.

SuperFakerBros · Jan 31, 2019

Maintenance said:
Fire Emblem was also slated for 2018.

Sure but, this time, we've actually seen Fire Emblem and Nintendo has a much better idea of when the game can come out compared to before. When they first announced it, there wasn't even any footage of it. Not that it's impossible for it to be delayed but there's no reason to really bet on that

Deleted member 426 · Jan 31, 2019

I can't teally think of many major third party games that released on Switch to be honest. Lots of late ports at full price...

That'll hopefully change, but I think it's less that Nintendo will always be reliant on first party and more than because Switch was a surprise success, we're still waiting for third party to pick up steam.

Johnny · Jan 31, 2019

Just to put things in perspective. Switch hardware for the first 3 quarters is up 20% year over year. And last year wasn't half bad. And we're still with the launch price. So overall, the hardware is doing quite well. 20M was a crazy target. They'll do roughly 18M which is awesome. Next year price cut + revision = hardware boost.

texhnolyze · Jan 31, 2019

Out of 1500+ third party titles, only 9 sold more than 1 million. Crazy.

Deleted member 31092 · Jan 31, 2019

As a consumer I'm kinda glad of this situation because because Nintendo will always need to push amazing titles to grow as a business, and amazing exclusive titles is why I buy Nintendo platforms every time.

DriftingSpirit · Jan 31, 2019

cw_sasuke said:
CoD, RDR2, MHW2, DB Fighterz (at launch), Far Cry 5, Assasins Creed, Madden, GTA V and and and....all werent on Switch so first partys dominating is a given.

Nintendo is bringing their A game to the plattform - while only a few 3rd Partys were willing or able to do the same. Things should improve next FY though.

I think first party would still dominate those games. They would obviously help Switch quite a bit in slower months but the core appeal of Nintendo consoles are the first party games.

Braaier · Jan 31, 2019

I bought my switch for first party games. Third party games are just gravy. Think this is true for most ppl based on these figures. And that's okay

Deleted member 22585 · Jan 31, 2019

Wow that's impressive. Crazy numbers. Makes sense because most third party titles are smaller games on Switch, so there is not as much competition and gamers are thirsty for those big Nintendo games.

Zedark · Jan 31, 2019

Braaier said:
I bought my switch for first party games. Third party games are just gravy. Think this is true for most ppl based on these figures. And that's okay

Well yeah, but that's truly a self-fulfilling prophecy: no major third parties support the system with big games, and therefore anyone who buys the system will buy it for Nintendo games. It couldn't be otherwise with the current state of things.

Rosebud · Jan 31, 2019

My Nintendo systems are exclusive machines, third party games are too expensive here.

Oregano · Jan 31, 2019

I think price is still a significant factor, especially in Japan. Stuff like Labo and Pokémon had a restricted ability to expand the user base to the younger demographics because price of entry is still so high.

I think Nintendo both needs to get a good cadence of releases and get the actual hardware price down to open it up to the next band of customers.

justiceiro · Jan 31, 2019

Kinda cool that Nintendo don't need anyone but themselves to be successful. But suck a lot that you need another plataform to enjoy something beyond Nintendo. Maybe if next gen Nintendo is successful again, thirds will try harder.

skeezx · Jan 31, 2019

kind of seeing nothing new under the sun in regards to nintendo here. i mean yeah the first party attach is way higher this go around but 2017 was super front loaded and there's still wii u ports to unload

first party's critical, maybe moreso now but generally same song and dance

kitsuneyo · Jan 31, 2019

I'm waiting for Nintendo to start showing that 2nd wave of big Switch games. Feels to me like Smash was the end of the 1st. They need to really support Switch with some great new games if they want another strong year, and I hope they show their hand soon.

D.Lo · Jan 31, 2019

Oregano said:
I think price is still a significant factor, especially in Japan. Stuff like Labo and Pokémon had a restricted ability to expand the user base to the younger demographics because price of entry is still so high.

I think Nintendo both needs to get a good cadence of releases and get the actual hardware price down to open it up to the next band of customers.

Yep I said from day 1 the issue with Labo is it's a great thing for kids, but you need a $300 relatively new console. Same with Pokemon, there's no '2DS' ready for Switch.

Labo still sold a million for the Variety kit alone, but could have done much better as a year 3 thing IMO.

TheThreadsThatBindUs · Jan 31, 2019

I suspect this may in part be affected by two things:

1) Nintendo first party software sells a fucking fuck tonne of units -
When the average Nintendo published game does 10 to 35m units it puts them in a very different position than it would a publisher like say, MS this generation.

2) Obvious lack of 3rd party megafranchises -
The likes of games like COD, BF, GTA, RDR, Destiny etc don't launch on Nintendo platforms.
The few titles that do are generally smaller franchises in terms of sales reach and so will naturally contribute a smaller percentage of platform royalty revenue.

Deleted member 18161 · Jan 31, 2019

They're the only company that could sell people $300 consoles based mostly on their first party games alone imo. It's quite an achievement.

Ganondolf · Jan 31, 2019

Did they provide any figures for Xenoblade 2?

fiendcode · Jan 31, 2019

Oregano said:
I think price is still a significant factor, especially in Japan. Stuff like Labo and Pokémon had a restricted ability to expand the user base to the younger demographics because price of entry is still so high.

I think Nintendo both needs to get a good cadence of releases and get the actual hardware price down to open it up to the next band of customers.

I agree with this and I think it also limited the reach of 3rd party youth/family software. Even a very successful game like Taiko (at 300k+) could've done better when you compare it to the series milestones on DS, Wii and 3DS.

Switch really needs a kid focused lower price revision (a la 2DS) or a significant price cut on the current model (a la 3DS in 2011) to really push into that youth bracket. Ideally they'd time it with Pokémon 8 to really maximize adoption.

Glio · Jan 31, 2019

fiendcode said:
I agree with this and I think it also limited the reach of 3rd party youth/family software. Even a very successful game like Taiko (at 300k+) could've done better when you compare it to the series milestones on DS, Wii and 3DS.

Switch really needs a kid focused lower price revision (a la 2DS) or a significant price cut on the current model (a la 3DS in 2011) to really push into that youth bracket. Ideally they'd time it with Pokémon 8 to really maximize adoption.

I have the feeling that the rumored revision for this year will be Switch Lite and that the original model will come down in price.

I do not think Switch Pro comes out before Lite, it does not make sense.

Hellshy · Jan 31, 2019

TheRulingRing said:
Maybe this is the problem when you rely on hardware gimmicks so much, you end up being a secondary console and miss out on 3rd party sales.

Although 1st party sales have the best margins I imagine, so they're probably not too upset.

Of course they are upset. Think about all the revenue they miss out on from big third party titles. If I was them I would rather be in Sony shoes. Sell a ton of first party titles but also sell boat loads of 3rd party titles.

plusaflag · Jan 31, 2019

ZhugeEX said:
Not one I can publicly disclose unfortunately.

The revenue figures are overall totals for the company.
The unit figures are just additional data reported by Nintendo. They chose to only disclose numbers for packaged games / Packaged games with digital ver.

Alright ! so the actual attach rate is higher than the 5 games per system. And also, could that discrepency explain the recent comment of Nintendo's CEO about the Switch selling software faster than the Wii ? I might misremember but there was some fact he mentioned that raised a few eyebrows. Can't find the thread about it though.

Glio · Jan 31, 2019

Hellshy said:
Of course they are upset. Think about all the revenue they miss out on from big third party titles. If I was them I would rather be in Sony shoes. Sell a ton of first party titles but also sell boat loads of 3rd party titles.

If they were so upset that they would not have released a console like Switch.

Ninjadom · Jan 31, 2019

cw_sasuke said:
CoD, RDR2, MHW2, DB Fighterz (at launch), Far Cry 5, Assasins Creed, Madden, GTA V and and and....all werent on Switch so first partys dominating is a given.

Nintendo is bringing their A game to the plattform - while only a few 3rd Partys were willing or able to do the same. Things should improve next FY though.

A few of those were launch titles for Wii U. The mindset of the general public is that Nintendo isn't the console to go to for 3rd party AAA.

fiendcode · Jan 31, 2019

Glio said:
I have the feeling that the rumored revision for this year will be Switch Lite and that the original model will come down in price.

I do not think Switch Pro comes out before Lite, it does not make sense.

If the revision is a Lite model that means the original will be discontinued entirely. They could maybe launch the Lite model at a lower price though (say $249.99) but I think they really need to get to $199.99 to recapture the youth audience and 2019 is the best year to do that (Pokémon 8, 3DS discontinuation). I think they need a more divergent cost cutting revision that supplements the current Switch or they need both the "2DS" and Lite equivalents to launch this year.

bob smith · Jan 31, 2019

I believe without a doubt that Nintendo would make a ton more money if they did a sega. Zelda and Mario games would sell double what they do now if not more. If you put mario on ps4 and xbox one where the base is so big. I would not be shocked if it was 20+ million in sales. Nintendo games are just fun.
Nintendo seems to have a distinct trend.
Sell a lot out of the gate and for the next 2 years, then completely die due to next to no software.

Jmdajr · Jan 31, 2019

Water is wet.

But hey it's a model that works for them. I don't think it ever changes.

Nintendo generates 85% of software revenue from first party titles (and why Nintendo reduced its hardware forecast)

One Winged Slayer

Senior Analyst at Niko Partners

One Winged Slayer

User requested account closure

Senior Analyst at Niko Partners

User requested account closure

User requested account closure

User requested account closure

One Winged Slayer

User requested account closure

User requested account closure

User requested account closure

Two Pieces

One Winged Slayer

user requested account closure

User requested ban