А Supplementary Hybrid Console with Blue Ocean appeal

The first area I will explore is the Hardware and Software Strategy of Nintendo and how it differs from their competition.

Sony and Microsoft are set to go head-to-head as they launch their latest devices, Sony is putting its focus on securing the right IPs, an edge in terms of technology and a huge library of hit IPs through back-wards compatibility. They've announced their 4th business pillar which will be lead by Aniplex and it would focus on growing their animation business overseas. Microsoft's current strategy seems to revolve around Gamepass they are squarely aiming to get people into their ecosystem regardless of where they prefer to play.

The main focus and foundation of Sony's success are narrative-heavy games that showcase the best graphics in the industry. Their main competition in this area is Rockstar* and CD Projekt Red, the two major studios making games with the same scope and graphical fidelity. Sony is in a dominant position and has already started to secure timed exclusivity, exclusive content, and games for the PS5.

Microsoft in the meantime has bolstered their gaming division by the acquisitions of successful gaming companies like Compulsion Games (We Happy Few), InXile Entertainment (Wasteland), Ninja Theory (Hellblade: Senua's Sacrifice), Obsidian Entertainment (The Outer Worlds), and Playground Games (Forza Horizon). These studios aim to bolster their 1st Party line-up and make their Gamepass service more attractive to potential customers. Their major focus in growing their Monthly Active Users regardless if they purchase an X1S or use a PC or Laptop to play one of their Gamepass games.

The price of the PS5 and X1S will play a key factor in determining who between Microsoft and Sony will come out on top.

Nintendo focuses on growing its audience in different demographics

In the meantime, Switch is not competing with PC, Playstation, or Xbox directly, the competition is largely for mind share. But most analysts including those at NPD Group agree that the Switch is viewed as a supplemental device for many owners of other systems within the Red Ocean audience. The main differentiator remains their ability to attract audiences from demographics not associated with the above-mentioned gaming devices.

In the prior generation, Nintendo struggled to support both their handheld and console businesses. The Wii U and 3DS both experience game droughts and difficulties to maintain the market share of their predecessors. Across the two devices, they sold 89.43 million hardware and 487 million software. Within the four fiscal years since the Switch launch Nintendo is already closing in on these numbers while their profits are much higher, currently, the Switch has sold 61.44 million units and 406 million software. This total doesn't include digital-only software so it doesn't pain the full picture. By combining their software output Nintendo has been able to generate hit after hit. While the vast majority of people who purchase the original device play it in both handheld and docked mode.

New Horizon & Ring Fit Adventure driving hardware demand in 2020

Games like Animal Crossing: New Horizon have no competition in terms of mindshare from the biggest video game publishers, the main competition Nintendo faces for the time of female gamers is Mobile & Facebook Games. The newest entry into the franchise has already become the best selling one, selling 22 million copies in just three and a half months. This has made it the fastest-selling exclusive title of all time for Nintendo and sales are not slowing. The game has reached a cultural zeitgeist, being promoted by celebrities while receiving constant updates.

Without any problems, it will be a top-selling game World wide during Black Friday, Cyber Monday, and December. Nintendo makes around 50% of its hardware and software sales during the holiday quarter. This will be the game's first holiday season and we are very likely to get a major Halloween and Christmas updates as part of Nintendo's content strategy for their biggest GaaS title. The Animal Crossing/Splatoon team is extremely versed in maintaining the high popularity of its titles via updates. The number of women and girls buying a Switch during Black Friday or as a Christmas gift will be substantial, while the only major publishers that have anything remotely targetting these demographics are EA(Sims) & Ubisoft(Just Dance). So we can easily expect that they will ship at least an additional ten million copies World-wide for the holidays. Animal Crossing is unlike other game series, there is no violence, the team behind it has a 50/50 gender split, it has no end goal, and this has made it a World Wide juggernaut like to sell over 35 million copies within its first year on the market. Most importantly this game will continue to get additional content for years to come making owners return to their islands as new updates drop.

But even when you get bored of your virtual island there is a varied and family-friendly backlog of great games and experiences ranging from highest-grossing entertainment franchise of all time Pokemon, critically acclaimed games like Zelda: Breath of the Wild or Super Mario Odyssey, a colorful online shooter Splatoon 2, party games like Super Mario Party and of course their mascot racer and fighter - Mario Kart 8 and Smash Ultimate. All these titles have already surpassed 10 million units sold World Wide and continue to sell hundreds of thousands of copies every quarter without a drop in their prices.

While most companies race to the bottom after launch in terms of pricing on various game stores, Nintendo maintains high pricing for its games many years after the launch. This is what has made their gaming business more profitable than Sony's and why they are sitting on huge cash reserves that they can choose to use at any time.

They are also not afraid to experiment & innovate. They dabbled in Edutainment with Nintendo Labo and used what they learned when designing their spiritual sequel to Wii Sports games - Ring Fit Adventure. Fitness games on the Switch so far have not sold a lot, but there are only two currently out on the market - Ring Fit and Fitness Boxing.

Ring Fit has been constantly selling out since launching in October 2019 without much marketing or fanfare. But this game was made by the team behind the Wii Sports/Fit Franchise which sold in excess of 100 million worldwide and Nintendo could always put more marketing muscle behind the IP once it's supply chain problems are resolved. The game is currently only available through resellers on Amazon across the world and being sold at least 25% premium, as this is an ideal product for scalpers due to its limited quantity and unmet demand. Much like Wii Fit, there are definitely expectations that once Nintendo is able to get supply under control this might be one of their top-selling games this year. Currently Ring Fit has sold 4 million copies worldwide & the sales could explode this fall with additional updates, marketing, and most importantly supply.

If you are looking for a title to drive demand this holiday New Horizons Game-as-a-Service model and additional content, marketing, and supply for Ring Fit Adventure can drive that demand without a big holiday title. This will be topped off by Bandai Namco developed Pokemon Snap which is set to release this year. Another third-party Platinum Games is working with Nintendo on Bayonetta 3, likely to also launch this FY but this project is not expected to be one of the big selling exclusives on the system.

Finally, we are still waiting for a date for the sequel of the critically acclaimed Breath of the Wild. COVID might be the only reason not to expect this game to launch by March 2021. As Nintendo isn't afraid to change their schedule and delay a big holiday title until it's polished, Animal Crossing: New Horizon for example was supposed to be a Fall 2019 title but ended up releasing in March 2020.

Momentum will continue and I expect more games that appeal to the new demographics buying Nintendo's hardware such as a successors to Wii Sports, Rhythm Heaven, Style Savvy & Tomodachi Life.

In my next article, I would look at how Nintendo's new-found dominance over the Japanese Video Game Market could benefit them in the coming years.

• Dominating the Japanese Market
• Scaling Production through new Products
• Diversifying their Supply Chain and overreliance on China
• Being the Platform of choice for Indie Developers