Nintendo is on the rise, and its not due to the pandemic

Concerns that an end to the Covid-19 pandemic may be bad for Nintendo’s business appear to be allayed by record numbers produced during the March quarter.

While the Japanese games maker forecast operating income for the coming year at 13% below analyst estimates, its habit of low-balling expectations means we should take such predictions with a grain of salt. Instead, data for the company’s traditional post-holiday ebb indicate levels of player momentum not enjoyed by rival Sony, which reported last week.

Shipments of Nintendo’s Switch games consoles climbed 44% for the period to 4.7-million units. That’s admittedly a huge but expected and unimportant drop from the peak December quarter. The fact worth focusing on is that this is the strongest level ever turned in for the January to March period since the Switch was released four years ago. 

Crucially, that strength was also seen in software sales, where shipments of games titles climbed 31% to again produce a record for the period. Another metric that should stir optimism is a solid software-to-hardware ratio, in which 11.6 games were sold for every console shipped. This tells us that consumers remain engaged with the platform, helping create ongoing revenue.

Contrast this to the PlayStation. On April 28, Sony reported its own low-season figures showing the drop-off we’d expected. Yet the quite large decline in software titles had me concerned that the new PS5, released in November, was already losing its lustre among consumers. A slight drop in subscribers to the PlayStation Plus service also got my attention as it indicates loyalty may be waning.

Nintendo’s data, on the other hand, is a sign that any strength or weakness in the gaming sector may be platform-specific, and thus not necessarily due to the return to relative normalcy from the Covid-19 pandemic that some countries have been expecting this year.

There are two final things to keep in mind. First, management warned that a shortage of chips may affect Nintendo’s ability to produce consoles. In addition, rumours abound that a new version of Switch is in the works, which could revitalise both hardware and software sales while also causing a temporary lull as consumers hold off on new purchases until its release.

Looking ahead, this set of numbers shows that whatever the state of the pandemic, the game isn’t over for the Japanese giants.

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