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February 1, 2021

Nintendo capitalizes on lockdown as Covid gives people more time to play

By MarketLine

Nintendo, one of the top global players in game consoles market, reported its April-December 2020 profit surged to JPY376.6bn ($3.5bn) from JPY196bn in the previous year. Its nine-month sales increased by 37% to JPY1.4 trillion ($13.1bn). The company expects a JPY400bn ($3.7bn) profit for the fiscal year through March 2021, up from JPY258.6bn ($2.4bn) in the previous fiscal year. It had earlier forecast a profit of JPY300bn ($2.8bn).

Although the spread of Covid-19 and related lockdowns introduced by the governments globally have hurt many businesses, the gaming sector has fared well from the start, offering much sought for home-based entertainment and ways for people to connect remotely through online games.

While shutdowns are badly impacting live sports and movie-going, the global game industry is dominating other entertainment mediums in revenue terms. The global video game industry is estimated to top $179.7bn in revenue in 2020.

Animal Crossing made Nintendo Switch the best-selling console amid the pandemic

The pandemic related lockdowns have boosted user engagement with video games, which have become more appealing alternatives to movies and sports with their fun interactive narratives and competitive edge.

Nintendo’s success was largely fueled by the popularity of its game software, which managed to tap into various lockdown trends. Its most popular game –  Animal Crossing: New Horizons, lets users interact in a virtual world, which appeals to people who cannot meet up face-to-face. The game became one of the biggest hits in 2020, breaking the console record (set by Call of Duty: Black Ops IV) for premium launch downloads. The social aspects of the game resulted in one household buying multiple Switch devices, further boosting the console’s appeal for consumers.

Meanwhile, Nintendo’s Ring Fit games benefited from the home exercise trend. Other software enjoying healthy demand included “Mario Kart 8 Deluxe” and “Super Mario 3D All-Stars,” according to the company.

The big seller for Nintendo in terms of hardware was the Switch console. In the April-December 2020 period, the company sold 24 million Switch consoles, including regular Switch and Switch Lite. Around 12.5 million devices were sold during the first two quarters of the fiscal year, while the third quarter sales nearly doubled. After this fourth year of holiday season Switch sales, cumulative sales total 74 million consoles.

Other top industry players also recorded sales growth in 2020. Sony is expected to end the year with the second-most sales, at 10.9 million units, comprised of 7.4 million PS4 consoles and 3.5 million PlayStation 5 consoles. Microsoft is forecast to come in third with 5.6 million shipments, including 2.8 million Xbox One consoles and 2.8 million Xbox Series X consoles.

Lockdowns and high tech provide further growth prospects and boost competition

With the new year, the rise of the gaming industry is not expected to slow down. The continuing lockdowns and cutting edge technology support the growth of the gaming market. As of February 2021, Switch sales are still going strong, compared to the same period a year earlier.

The video game industry is on the cusp of a brand new generation of hardware, software and services, as Microsoft and Sony released their next-gen consoles at the end of 2020. Although the high-end models of both consoles are more expensive than their predecessors, both companies said that economic repercussions from the pandemic would not impact sales, as the gaming industry has historically proven to be recession-free.

However, the top players are also cautioning that there may be constraints in manufacturing and shipping due to the pandemic if the lockdowns continue.