At the end of its fiscal year results released Wednesday, Nintendo buried a single pair of sales numbers that are easy to overlook, but show just how far Nintendo has come in the past year with its digital distribution strategy.
According to the company's figures, it sold ¥16.4 billion ($165 million) in software digitally between April 1, 2012 and March 31, 2013, up 109 percent from the previous year's ¥7.8 billion ($79 million).
Much of this increase is probably directly related to the launch of full game downloads for Nintendo platforms, something that competitors have been offering for several years. The Nintendo 3DS got its first full game downloads when New Super Mario Bros. 2 launched in August 2012. And when the Wii U launched in November, it had most of its retail games available for purchase through the eShop right out of the box.
The only major publisher not distributing games through the Wii U eShop is Activision, which has thus far declined to make Call of Duty: Black Ops or Wipeout 3 available for download.
While revenue from these digital downloads more than doubled in value, as a share of Nintendo's software segment, it performed even better. Nintendo's total software revenue was ¥259 billion ($2.6 billion) in the previous fiscal year, making the ¥7.8 billion ($78.4 million) in download revenue a mere 3 percent of their software segment.
In the fiscal year that ended in March 2013, the ¥16.4 billion ($165 million) in download revenue was a 6.9 percent share of their ¥238 billion ($2.4 billion) in software.
Revenue from digital downloads is generally considered to have a much higher profit margin than traditional retail software, sold on a physical medium like a disc or cartridge. In its current state, where Nintendo hopes to turn the ¥36.4 billion ($365.7 million) operating loss into a ¥100 billion ($1 billion) operating profit by the end of the current fiscal year, that kind of high-margin software could be crucial.
Later today, Nintendo's global president Satoru Iwata will make a presentation on the company's latest results and outline plans for the coming year. A fuller commitment to game downloads will likely play a part in that strategy, given the rapid growth of their contribution to the company's bottom line.
Update: During Satoru Iwata's presentation to investors last night, he revealed a bit more detail about digital download revenue. The following figure shows the company's history of revenue from digital distribution.
This figure shows that the digital sales by the company really took off during the last three months of 2012 and the first three months of 2013, represented by the red part of the FY03/2013 bar on the right. That means the company generated approximately ¥11.4 billion ($114 million) from downloaded software during just the last six months.
To put that figure in perspective, the company generated only ¥142 billion ($1.4 billion) from software during that period, which means that the digital download revenue accounted for just over 8 percent of the company's total software revenue.
Or, put another way, the best full 12 months of digital revenue that Nintendo ever had reached ¥11.9 billion ($120 million), from April 2009 through March 2010. During the last two quarters, Nintendo did nearly that same amount in half the time.
Finally, Nintendo is not ready to abandon retail, even for digital sales. According to Iwata's presentation, about one-third of the digital sales of Animal Crossing: New Leaf were made through POSA (point of sale activation) cards at retailers.
That's kind of a neat way to offset operating expenses by creating this higher revenue/profit base with digital downloads. I think that's better for Nintendo and keeps them more popular with their customers.
Nintendo has posted some slightly more detailed chart ("download sales transition") here:
http://www.nintendo.co.jp/ir/en/library/events/130425/03.html
In this chart you can see how strong the increase was in the second hald of FY2012, this means the 11% NOA reported for the first 3 months of 2013 seem to be in line with the rest of the world.
Thanks, Christian. I had the update ready about 2 hours before you posted, but I don't post things like that myself. It looks like the editors added it when the next shift came on.
The rate in October through March as 8%. If the more recent rate is higher -- and it could well be -- then that's certainly a good sign for Nintendo.
As much as I wanted to hate digital download and such, I realized I had an R4 equivalent card for my DS so I could take all my games with me all the time. the 3DS just let me do that without jumping through the hoop of creating my own ROM of the games I have bought (or going to shady websites).
however, I'm yet to get burned with my downloaded games... the first company to do it to me might change my mind with this whole direction - depending on how many games I can't play / download anymore when it goes offline.
http://www.nintendo.co.jp/ir/en/library/events/130425/03.html
In this chart you can see how strong the increase was in the second hald of FY2012, this means the 11% NOA reported for the first 3 months of 2013 seem to be in line with the rest of the world.
The rate in October through March as 8%. If the more recent rate is higher -- and it could well be -- then that's certainly a good sign for Nintendo.
however, I'm yet to get burned with my downloaded games... the first company to do it to me might change my mind with this whole direction - depending on how many games I can't play / download anymore when it goes offline.