Nintendo Co Switch sold better than expected after global home confinement helped Animal Crossing become the console’s fastest-selling title.
The Kyoto-based game maker’s operating profit tripled to 89.5bil yen (RM3.63bil) in the March quarter after it moved 13.4 million copies of the game in the six weeks since its launch. Animal Crossing became the breakout hit of the quarter after millions worldwide sought refuge in its virtual cartoon world. That helped Nintendo sell 21 million Switches in the year ended March, beating its own estimate and Morningstar Research’s expectation of roughly 20 million units.
Still, Nintendo joined fellow tech corporations in sketching out a cautious outlook for the year ahead, largely because of uncertainty over the Covid-19 pandemic’s impact on production and services. It forecast a 15% slide in operating profit, a decline in Switch console sales to 19 million and a drop in Switch game sales to 140 million. The company continues to wrestle with component shortages for its console but now expects disruptions to fade away over the summer, President Shuntaro Furukawa said.
"We expect the Covid-19 impact on our production to go away by summer, and our 19 million sales forecast is based on that. But we will revise the forecast if the virus impact is set to persist longer than we currently expect,” he told analysts on a call. "There’s a risk that we may need to delay releases of the games we plan for this fiscal year. But, at this point, we don’t expect any major delays,” he added.
For now, Nintendo is riding the surprise popularity of Animal Crossing: New Horizons, which helped propel a 40% rally in Nintendo’s shares since their low in March, adding more than US$16bil (RM69.19bil) to the Japanese company’s market value. Arriving at a time when people were looking for ways to connect with friends while staying at home, the marquee title – in which players adopt cartoon avatars to interact with each other and set up their own isles – has proven a haven from the outbreak.
Furukawa said the game’s momentum took even Nintendo by surprise, catching on first among younger women who were earlier franchise devotees before spreading to a much wider audience via word of mouth.
Some analysts regarded Nintendo’s year-ahead forecasts as on the conservative side. "Fiscal year 2020 software sales, if normal conditions, should be at least 180 million to 200 million. The 140 million figure could be a sign from Nintendo that there would be release delays of major titles,” said Hideki Yasuda, an analyst at Ace Research Institute.
Animal Crossing’s popularity has made the Switch hard to find almost everywhere in the world. The company asked suppliers to boost Switch production to about 22 million units for the current fiscal year, Bloomberg News reported in April.
Still, a lack of components across the manufacturing sector could weigh on plans, while demand may subside once Covid-19 fears recede. Rivals Sony Corp and Microsoft Corp plan to launch new consoles for the holiday season. Nintendo, which launched the more affordable Switch Lite in September, said earlier this year it doesn’t plan to release any additional new hardware in 2020.
Nintendo’s also struggled in past years to take advantage of the global smartphone gaming boom, and it’s yet to communicate a clear strategy for competing in the online sphere. On Thursday, Furukawa signaled the company would focus on developing revenue from existing mobile games rather than try and keep its pipeline stocked with new titles.
"Nintendo’s results are impressive but management is implying that the Switch has peaked,” Serkan Toto, CEO of Kantan Games Inc. "What is really strange is that Nintendo expects less software sales despite a massively expanded install base. So either Nintendo is being comically conservative, or they expect Covid-19 to have a massive impact on demand or their internal software pipeline. It’s also concerning that Nintendo’s mobile as well as first-party pipeline for the second half of 2020 is empty.” – Bloomberg
Did you find this article insightful?