Nintendo has its best quarter since 2008, but it needs to be more like Disney
The Bank of Nook gets paid... Nintendo just dropped its best quarterly earnings in 13 years. The 131-year-old gaming legend brought in an expectation-crushing $2.2B in profit last quarter, and raised its annual forecast for the second time (#MarioFlex). Nintendo shares jumped 7% on the holiday Switch-mania:
- Nintendo sold a record 11.6M consoles last quarter, even though Switch has been out for nearly five years. Sales jumped 7% from a year earlier.
- Now it's expecting full-year sales of 26.5M units. But some analysts are saying that's modest, since it has already sold more than 24M Switches.
Sweats. Mask. Switch... In 2020, the Switch wasn't just a gaming console... it was a lifestyle product. There were three strong winds at Nintendo's back positioning it for a blowout year:
- Animal Crossing: New Horizons. The long-awaited blockbuster title was an instant hit that boosted both hardware and software sales.
- Perfect timing: New Horizons dropped in March 2020, right when pandemic lockdowns hit. The virtual island game filled with (very) colorful animals was a perfect escape.
- Competitive edge: While Sony's PlayStation 5 and Microsoft's Xbox faced production/logistics setbacks that limited sales, Nintendo was able to deliver on demand.
Nintendo should pull a Disney... because it might have just hit peak console (Switch saturation is real). That's why Nintendo wants to monetize its characters outside of hardware/software. Disney is a master at this: it makes money off its characters in movies, sequels, and spin-offs — but also through theme parks, cruises, toys, and merch (Elsa-themed everything). Nintendo could benefit from a similarly self-reinforcing ecosystem. Unlike other major console-makers, it designs most of its own games (85% of them). Nintendo could cash in on that precious IP in a number of ways, including the upcoming Super Nintendo World theme park in Japan.