Nintendo Switch Software Sales Will Likely See Strong Double-Digit Growth In The Near Term
Nintendo (OTCMKTS:NTDOY) has seen stellar growth since the launch of the Switch console, both in hardware and software sales. Since its launch the company has sold close to 23 million consoles and over 100 million software titles. The company expects to ship 20 million consoles and 100 million software titles in fiscal 2019. We have created an interactive dashboard ~ How Much Can Nintendo Switch Software Sales Grow. You can adjust the Nintendo Switch Software Unit Sales, and Average Revenue Per Unit, to see the impact on the overall Switch software revenues.
Expect Switch Software Sales To See Strong Growth In Fiscal 2019
Nintendo Switch console saw massive demand, especially in the last holiday season, and the company expects demand to continue this fiscal year, as well. In fact, the company for the first time garnered $250 million in weekly sales during the Thanksgiving to Cyber Monday period in the U.S. this year. These trends in hardware sales will bode well for Nintendo’s software sales as well. The company has seen massive demand for its Mario franchise of late, and Mario Kart 8 and Super Mario Party are among the top grossing video games this year. One of the reasons the Switch console gained popularity was due to its immersive games, such as The Legend of Zelda: Breath of The Wild, and Mario games. BOTW was ranked the best game of 2017. Also, the console offers features, such as motion enabled controllers, in a handheld device. These features have led to strong demand for the console. Furthermore, the library for Switch console has been increasing since its launch, and currently there are close to 1,500 games that can be played on the console. These factors are aiding the overall demand for the hardware as well as software sales. Nintendo’s Super Mario Odyssey, Mario Kart 8 Deluxe, and BOTW have sold over 10 million units each. The company will launch Super Smash Bros. Ultimate next week and New Super Mario Bros. U Deluxe in mid-January 2019. These titles should further aid the software revenues in the last fiscal quarter.
We forecast the Nintendo Switch software revenues to grow in the high 40s percent in fiscal 2019 to north of JPY 380 billion, primarily driven by higher unit sales. Note that Nintendo still generates more revenues from hardware, and this will likely change in the coming years with consoles becoming mature. While the Switch software revenues accounted for 35% of the total Switch revenues in fiscal 2018, we forecast the figure to be around 40% in fiscal 2019, and increase further in subsequent years. The software revenues includes packaged, as well as downloadable, versions of packaged software, download-only software, and add-on content.
Note that the video game software market is close to $60 billion in size, with several players, including Nintendo, Activision Blizzard, and Sony among others, that compete to gain share. Activision Blizzard’s Call of Duty franchise still remains the top grosser after almost every new release. Despite Switch being an amazing console, it has restrictions on what kind of games can be played on such a handheld device, and to sustain long term software sales growth, Nintendo will need to vastly expand its gaming library, in our view. Having said that, we believe the software sales will continue to trend higher in the near term, primarily led by a ramp up in demand for the console, as well as Nintendo’s software title releases of popular franchises, such as Mario and Pokemon.
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