Nintendo President Tatsumi Kimishima sat down for a Q&A following the fiscal year that ended in March. He was asked a variety of questions ranging from the Switch, Breath of the Wild and even the Animal Crossing mobile game. Here are some of our favorite questions.
I would like to ask about the reasoning behind the number projected for the Nintendo Switch software shipments during this fiscal year (35 million units). While you have stated that you will present new business flows in the future and expect to generate synergy between the smart-device and game software businesses, it seems that the hardware attach rate for the Nintendo Switch software in this fiscal year is low compared to the rate for Wii U from the year of launch through the end of the following fiscal year. What factors influenced this determination – was it because Nintendo Switch launched outside of the holiday season, because you expect download sales to grow, because you plan to bundle major titles with hardware, or because the software lineup is insufficient? Please provide more information on the background for determining the planned shipment numbers for this fiscal year.
Tatsumi Kimishima (President): 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.
Mario Kart 8 Deluxe ended up being a hit and became the fastest selling game in the franchise, despite being a port from the Wii U. It’s worth noting the Wii U had a strong attach rate right out of the gate as well, but we know how that ended up faring for them.
If demand for Nintendo Switch reaches the same levels that Wii did, isn’t it likely that the product will be sold out during the holiday season if you can’t secure sufficient inventory levels by the fall? Are you taking any steps to address this, such as establishing an expandable assembly line?
Kimishima: Our initial plan for the Nintendo Switch hardware shipments for the last fiscal year was 2 million units, but we saw the high anticipation from consumers prior to launch and began additional production, allowing us to ultimately ship 2.74 million units. We are planning to ship 10 million units this fiscal year, and this figure takes into account the fantastic response we have received from consumers. Planning to ship 10 million units means that we actually plan to produce more than that including units in our warehouse and in-transit product. We are not currently producing this full amount all at once. We expect that the number of consumers who want to buy the hardware will increase as we release titles such as ARMS, Splatoon 2 and Super Mario Odyssey, so our current production model takes that into account.
Nintendo has already underestimated the draw the Switch has as it is currently going through a hardware drought, pretty much the same thing that happened with the NES Classic. Nintendo mentions they are planning to ship 10 million units this fiscal year, but they will be producing more than that to keep in warehouses.
Kimishima: 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.
The Legend of Zelda: Breath of the Wild actually has a very high attach rate, close to 1:1 with the game and the Nintendo Switch. Breath of the Wild sales were boosted by being available on both the Wii U and Nintendo Switch.
I’d like to know as much as you can share about the basis for your short and medium-term sales forecasts of Nintendo Switch. In particular, are you expecting 10 million hardware shipments during this fiscal year because that’s the number your total anticipated demand in each region led you to, or are you looking at your software lineup for this period and predicting how much hardware you think you can sell? Also, you have been quoted in the media as saying that you want sales of Nintendo Switch to match the Wii sales. Should we take that to mean that your sales target for hardware is going to be 100 million units? If so, then do you envision Nintendo Switch selling not just one per household, but one per person?
Kimishima: The truth is we want to raise the installed base of Nintendo Switch up to the same level as Wii. As we mentioned during our presentation, Nintendo Switch in America had the fastest start of any Nintendo hardware, despite launching in March. In the video game business, it’s important for consumers to feel that a sales momentum is going to grow, and we are setting a standard with Nintendo Switch to release a continuous string of major software titles from now on. And if our sales go according to our plan this fiscal year, we will be able to see Nintendo Switch gaining the momentum in which it can approach relative parity with Wii afterwards.
The initial forecast only planned on shipping two million units during its launch but actually ended up being 2.74 million units. The plan going forward is to create good games and try to avoid the game droughts that plagued the Wii U. They are also trying to market that since the Switch is portable, you may need more that one per household.
You can read the full Q&A right here. What do you think? Does Nintendo have a strong year ahead?