- [Narrator] This is what Nintendo originally was.
Yes, it was a playing card company.
And this is Nintendo today.
- [Mario toy] "It's-a Me, Mario!"
- [Narrator] Consoles,
theme parks,
even movies.
So, what has driven the $44 billion empire?
This is "The Economics of Nintendo."
Nintendo is different from its competitor's,
Sony and Microsoft.
Thanks, in part, to its low-cost hardware.
Microsoft's Xbox makes no profit on its hardware.
- Consoles are actually sold at a loss in the market.
So when somebody goes
and they buy an Xbox at their local retailer,
we're subsidizing that purchase
somewhere between a hundred and $200 with the expectation
that we will recoup that investment over time
through accessory sales and storefront.
- [Narrator] And Sony only recently began
to make a profit on the PlayStation 5.
Then there's Nintendo.
- The technology is usually five or six years behind
in terms of state of the art.
But that means that they're cheaper to produce
and that means that Nintendo
is much, much more profitable on their hardware business.
- [Narrator] About half of Nintendo's profit in 2022
came from hardware sales.
They've dominated the market
when it comes to handheld consoles.
One of its big successes, the Game Boy, launched in 1989.
- Nintendo was really early to the party with handheld.
They're kind of credited with inventing the console,
although they were probably third or fourth.
- [Narrator] The Game Boy had a longer battery life
compared to some of its competitors.
Four shades of gray, nuanced gameplay, and had Tetris,
one of the top selling video games of all time.
Eventually, Nintendo's Game Boy
became the third most sold console in the company's history,
selling 119 million units to date.
The company continued to innovate,
releasing new hardware for its games,
from the GameCube, Nintendo DS, the Wii,
and to its most recent success,
the Switch, with more than 122 million units sold.
- [Sarah] You can play it at home
like a console on your big screen TV,
but you could pick it up and take it on the go.
And it becomes a handheld device, and that's pretty novel.
We haven't really seen anything
that's hybrid like that before.
- [Narrator] Sales of the Switch device and its games
accounted for about 94% of Nintendo's sales revenue
in it's 2021 fiscal year.
And today, it's the second bestselling game console
in Nintendo's history,
and continues to be a driving factor of its revenue.
The success of Nintendo's consoles
is also due to its software.
In other words, its games.
In 2022, Nintendo had 19 first party titles
that sold over a million units each,
exclusive to its consoles.
- The difference between the others and Nintendo
is that Nintendo historically has produced
about 50% of all the games sold on its hardware system.
And the other guys
are typically under 10% of the games sold on their systems.
So they make make a small fraction of the software
that's played on PlayStation and Xbox,
and Nintendo makes more than half.
- [Narrator] Case in point,
Animal Crossing: New Horizons, release in April, 2020,
created higher demand for the only console carrying it,
the Switch.
- [Sarah] Nintendo makes games exclusively
for the most part for its own devices.
If you want to play a Nintendo game,
like Legend of Zelda, you need Nintendo hardware.
- [Narrator] In fact, Nintendo's first party games
generate over 70% of its sales.
Its best sellers in 2022
were all Nintendo first party games.
And the type of content Nintendo makes
is also different than its competitors.
- [Sarah] Let's keep in mind,
Nintendo characters are very cute.
- [Mario toy] "It's-a Me, Mario!"
- [Sarah] Nintendo is known
for making family friendly games for the most part,
so it appeals to a different crowd
than some of the other publishers.
You won't see blood or gore, or foul language.
But even Nintendo a couple years ago
dabbled into the shooter genre.
When we think of shooters, right,
we think of Call of Duty, Fortnite.
They take a very family friendly approach with Splatoon.
It's a shooter, but you're shooting paintballs.
- [Narrator] The company's next iteration,
bringing these family friendly characters to a larger arena
and building another generation of fans.
In February, 2023,
Nintendo opened its first theme park outside of Japan.
And in April, it's releasing a Super Mario Brothers movie
starring Chris Pratt.
- It's-a Me, Mario.
- That's smart,
because that's gonna expose the Nintendo brand
to hundreds of millions of people
who haven't ever owned a Switch.
I don't think that Nintendo is necessarily worried about
whether somebody who goes to the theme park
will buy a Nintendo console or buy a game,
but they want those people
to be aware of the Nintendo brands,
and they want them to know who Mario is, and who Zelda is,
and who Yoshi is, and who Pickmin is.
- It is risky to start a new franchise,
and sometimes new properties just don't resonate,
but they have plenty, a very deep library,
and they've stuck with that for the most part,
and iterated on it and modernized it.
We'll probably be playing Legends of Zelda
for another 20, 30 years.
Mario is probably not going anywhere.
You know, he's just gonna live forever,
and keep that mustache,
and keep everyone happy for many years to come.
(upbeat music)