Nintendo Q2 FY22 Report

It was another solid quarter for Nintendo, unless judged against the same time period as last year when everyone was staying home, following orders and Animal Crossing: New Horizons was all the hype.

Net Sales were down 18.9% to 624.2 billion yen and net profit was down 19.4% to 171.8 billion yen when compared to Q2 FY21.

Digital sales also cooled down a little to 45 percent down from 47 of the companies total software sales for the quarter down from 171.5 billion yen to 144.2. Nintendo noted the decrease in digital sales came mostly from versions of games that were available as retail versions as well, meaning people are just going out more again. Sales of download only titles increased as well as Nintendo Switch Online sales, which would have to be attributed just to the extra 8.28 million customers in the Switch ecosystem now, because the service is quite stagnant when this quarter ended which was before the expansion pack became available.

Even though most categories were down, it doesn’t appear to be much cause for concern because there were many factors that contributed to the success of Nintendo in 2020 and matching that was almost always going to be an unreachable goal. One area that actually seems like a minor problem to me is that first party software sales accounted for only 70% of total software sold, when that number has always been much closer to 80%. In Q2 FY21, first party sales accounted for 81% of total software sold. This is an area to watch closely because Nintendo gets by on underpowered hardware and contstant ports of older titles because of their first party lineup. If that number begins to shrink consistently then cause for concern would be just.

Nintendo Software Report Q2 FY22

When looking at the micro level of the report and zooming in on software there were a few items of note.

The only new, and I use that term loosely, release for Nintendo that made waves in the second quarter was The Legend of Zelda: Skyward Sword HD, which would sell 3.6 million, which doesn’t seem that fantastic as the majority of game sales come within the first few weeks of release or at longest the first month. The figures for Skyward Sword are for about two and half months and likely won’t get drastically higher which could be a sign of a few things. It could be sign that Skyward Sword just isn’t loved as well as many of the other titles in the Zelda franchise or people could be finally getting tired of these lazy ports that cost full price.

In comparison Links Awakening sold 3.13 million during the quarter is was release but there is a big difference. Links Awakening sales figures only consider around three week before the reporting period ended back in 2019. You could make the argument that Links Awakening sold as well as it did because it was older and many people hadn’t experienced that lucid dream of a game or maybe because this was a game that was fully remade from the ground up, using only the foundation of that game as a reference. As of the companies fiscal report from last quarter, Links Awakening has sold 5.49 million copies to date.

The other recent comparable would be the port of Super Mario 3D All Stars. Super Mario 3D All Stars sold 5.21 in a similar time frame to links awakening. In just under two weeks, the Mario compilation, that many felt was lacking in quality and quantity sold 5.21 million copies. As of March 31, Super Mario 3D All Stars was able to sell 9.01 million copies and will no longer be able to be purchased after March 31, 2021.

My reasoning for comparing these recent two ports is that the both sold staggeringly well in their first two weeks when the majority of sales rush in. Skyward Sword was available for purchase for almost a full quarter and was arguably the only major release for Nintendo during Q2. Looking at many lists online from popular outlets, many rank Skyward Sword in the upper half of the Zelda entries, which leads me to think that fans might finally be speaking with their wallets that they don’t want lazy ports anymore.

As for the sales of other noteworthy titles, it would seem that Mario Golf: Super Rush is a big disappointment. Released just before the start of the second quarter, Mario Golf has sold 1.94 million copies to date. To give a little perspective on how well or unwell this title sold, in a similar amount of time available for purchase, MiiTopia sold 1.37 million units.

For me personally, Mario Golf Super Rush wasn’t the game that I wanted. I wanted something closer to ToadStool Tour or Hot Shots Golf but with a little Nintendo flair, instead they tried to incorporate too many new modes including speed golf and battle golf, which were praised by critics but those modes lack the longevity. Those modes are played a few times with friends and then forgotten about. A high skill ceiling career mode similar to other golf games provides the challenge of returning time and again.

It also didn’t help that the amount of content at launch was quite bare. The silver lining is that Camelot has continued to support Mario Golf with meaningful updates since launch that include new courses and modes but none that will be able to grab mainstream attention like the chance it had at launch. Its not a big leap to say that we won’t be seeing another Mario Golf for a very long time, even if this game had sold well there was still a strong chance that we wouldn’t see a new entry for at least a decade.

In terms of total software sales for the quarter, they had a strong showing with 93.89 million games sold, which is only down 6 percent when compared to the same quarter in 2020. This is impressive due to the Animal Crossing release last year and the nearly no massive first party titles during the first half of the current fiscal year.

Nintendo Hardware Report Q2 FY22

Hardware sales were down 34% compared to the same time frame in 2020 but that is very expected as Animal Crossing: New Horizons had just launched before Q2 last year, which is clear that it was a system seller with almost 35 million copies of the game sold to date. It was also just at the beginning of the ongoing pandemic and everyone was reigniting their love for video games.

Total Nintendo Switch units sold for the second quarter were 8.28 which is down from 12.53 for 2020 but up from 6.93 for 2019. If you view 2020 as an aberration for sales data then the good news is that hardware sales are looking good. The bigger problem that is apparent when looking at hardware sales is not the total because as mentioned, its still higher than pre pandemic levels and there is a massive shortage on parts to build the systems, but the issue looks to be the strong slowdown for Switch Lite sales.

Switch Lite Sales for Q2 were only 1.82 compared to 4.17 in the previous second quarter. Not only were Lite sales down 43 percent from last year but they only accounted for a little over 20% of total Switch units sold during this quarter.

Total Switch units sold to date is now 92.87 million units, bringing the Nintendo Switch up to the companies 4th best selling console of all time behind the Wii, Game Boy and DS and should easily surpass the Wii by the end of the fiscal year.

Nintendo Projections FY22

Q2 does cover typically the slowest time of the year for many gaming companies, as it runs from July 1 to September 30 and with this slower period, Nintendo has adjusted their projections for the remainder of the Fiscal Year 22. Hardware sales have been reduced from 25.5 million units to 24 million units and software has been modified from 190 million units to 200 million units.

Many analysts view their reduced hardware forecast as negative, which its not great but they are also increasing software by 10 million. If you do some rough math in your head this still works out to a much greater amount of money coming into the company, even though they didn’t adjust the revenue that much. Net Profit was adjusted from 500 billion yen to 520. . I assume this is because of the massive amount of extra cost that it takes right now to purchase chips and deal with logistical issues.

Back to their projections selling more games than the previous fiscal year and almost selling as much hardware means they are very happy with the early performance of their new hardware iteration, the Nintendo Switch OLED.

When it comes to the ten million units increase in software sales and net profit being up 10 billion yen that is based the strength and variety of their upcoming first party software list between now and March 31, 2022. You already have WarioWare, Metroid Dread and Mario Party Superstars that have been released and early indications and reviews are all great. Early reports for Metroid are very positive and encouraging that Metroid Dread should go on to become the best selling game in the series and prove to Nintendo that people want more Metroid despite the underperforming sales of the series.

Looking at the releases over the next few months, its going to be a lot of Pokemon with Brilliant Diamond and Shining Pearl releasing first and then the next all new instalment in the series: Pokemon Legends Arceus. Considering that Lets Go Evee and Pikachu have sold almost 14 million and Sword and Shield sold almost 23 million it would be safe to assume similar sales for the remakes and the new entries. Possibly even greater because of the larger player base of the Nintendo Switch in 2021.

Advance Wars Reboot Camp and Kirby and The Forgotten Land are wildcards for Q4 because they might not be released before the end of the quarter. If they do, I would expect a decent level of Nintendo success for Advance Wars of around 2-4 million total sales and Kirby would likely go on to become the best selling game in Kirby history as the game looks very interesting and a large departure for what a Kirby game is.

Despite the chip shortages that Nintendo has seemingly been hit very hard by and the financials backing the dwindling interest in the Switch Lite, Nintendo doesn’t have any plans to focus specifically on building one version of the Switch. “We have no plans to focus our supply resources only on the OLED model. The three models each cater to different needs of customers’ This could just been a PR response from Furukawa, the president of Nintendo during an interview with Bloomberg.

In simple terms of dollars, the Switch OLED costs more money to buy meaning more money in the pocket of Nintendo. Based on earlier reports that it uses outdated Samsung OLED displays that the company was able to get at a very reduced rate and the fact that most of the internal components are the same as the original model, it would seem to make the most sense to focus manufacturing on the OLED model. It’s also the newest Switch meaning that it appeals to the most people as gamers always want the latest and greatest but it appeals to existing Switch owners looking to upgrade and also potential Switch owners.

Overall, another quarter with great results for Nintendo when you consider all of the factors involved with the logistical issues and the lack of massive first party releases. If you take Nintendo at their word and if the Switch is only around half of its life cycle then when the inevitable chip shortage comes to an end and Nintendo is once again able to stay ahead of supply issues then things should look even better. Especially if there are still new iterations of Switch to come in the following years that people are hungry for like the speculated Switch Pro.