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Nintendo Investors Q&A - Kimishima's thoughts on Switch shipments, the success of Zelda, and profitability


The following information comes from an official translation of Nintendo's recent Financial Results Briefing during their March 2017 Fiscal Year.

Kimishima on shipping Switch units compared to the Wii and Wii U:

We are planning to ship 35 million units of the Nintendo Switch software worldwide this fiscal year. For Wii and Wii U, which launched during the holiday season in November, the attach rates for software through the end of the fiscal year in which each launched (the following March) were 4.9 units and 3.9 units per hardware unit, respectively. Nintendo Switch did not launch during the holiday season, but the software attach rate in under a month following its launch in March was 2.0 units. These differences are due to the timing and cannot be compared directly. Mario Kart 8 Deluxe, which is releasing today, has been highly anticipated by consumers and in fact currently has more momentum than we expected. We believe it is most important to convert this anticipation to sell-through and bring enjoyment to our consumers. Consumers are also looking forward to future titles in the Nintendo Switch lineup, including ARMS and Splatoon 2, so we are aiming for an attach rate of 3.5 units to 4 units over this fiscal year, comparable to that of Wii and Wii U. 

Kimishima on the success of The Legend of Zelda: Breath of the Wild:

We are deeply thankful for the wonderful response to The Legend of Zelda: Breath of the Wild and the fact that we were able to ship more units than we did of the Nintendo Switch hardware. Since The Legend of Zelda series is very popular in Europe and in particular in the U.S., and the hardware launch was in March, we thought that we might end up with different results from a holiday season launch (when a wider range of consumers are likely to make purchases), and so we expected that there may be a high ratio of consumers who purchased this game along with the hardware. The result was exactly as expected in the U.S., but the game is much larger in scale than previous games, and it reached greater popularity than we had expected in Europe and Japan as people tried it themselves or watched others play. Reviews of this game prior to release were also very helpful in communicating its appeal. Ultimately, we were able to achieve these results because of the response not only from fans of The Legend of Zelda series, but also from consumers who had played a Zelda game in the past and wanted to play one again, as well as consumers who had never played a Zelda game before but who heard the buzz and wanted to play. We would certainly like to be able to predict the worldwide popularity of The Legend of Zelda: Breath of the Wild, as you suggest, but we are still not able to forecast to that degree of accuracy. The end result was that the number of units of this game shipped was higher than the number of units of hardware shipped. 

Kimishima on the profitability of the Switch:

We priced the Nintendo Switch hardware to have no negative impact on overall earnings. As for the profitability of the hardware, our production quantities will need to reach a certain level before we see any cost reductions. Volume efficiencies will start to emerge once we produce the 10 million units we expect to ship this fiscal year, but we will not get the benefit of this right away. Looking ahead, we do expect that the number and variety of the Nintendo Switch accessories will help grow our business. With regards to promotional activities, it can be difficult for consumers to really get to realize how compelling the new play style Nintendo Switch offers is through traditional marketing. That is why we have launched new initiatives, including traveling to a variety of different locations to let consumers experience the unique fun of playing Nintendo Switch for themselves, while continuing to advertise proactively in this fiscal year. Our paid online service for Nintendo Switch is scheduled to start in the latter half of this fiscal year. Again, we will not necessarily see results from these different strategies immediately at the outset of this fiscal year, but I believe we will see profitability continue to increase alongside the growth of our business as we move forward according to our sales strategy, especially if we do well during the year-end shopping season. 

Tags: zelda, switch

Comments

jingleboy
Tue May 02 17 10:58am
(Updated 2 times)

I initially read that as "35 million Switch unit" and was shocked. Then I saw it was just software. Durp.

Yeah. I mean, I know Nintendo loves being risky..but 35 million Switch units being sold by this year is overdoing it!

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