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Nintendo bets heavily on the holidays

While Sony and Microsoft have spread sales over the year, Nintendo is laser-focused on the holiday season - and this year it needs every Switch sale it can get

There's been a slightly surprising amount of consternation over Nintendo of America president Reggie Fils-Aime's assertion this week that Nintendo does around 60% of its business in the holiday quarter. In some quarters this seems to have raised eyebrows simply because it seems improbably high. In others it's ignited yet another tiresome round of the endless argument over whether Nintendo is "for kids", with the heavy holiday quarter loading being taken as evidence that the firm's hardware and software are largely purchased by parents as gifts for children.

The very existence of this argument is bewildering, given that Nintendo is perfectly open about seeing itself as a toy company first and foremost. It also ignores the enduring popularity of things "for kids" among adult audiences and the fact that adults, too, tend to receive gifts from one another around the holiday season - although perhaps not the kind of adults who spend too much time ranting on the Internet about other people's gaming preferences.

"To hit its targets, a holiday quarter that racks up an enormously disproportionate amount of the year's sales will be essential"

Perhaps Fils-Aime's goofy onstage persona at Nintendo events has lulled people into a misconception that he is not to be taken seriously in his corporate pronouncements, but it really shouldn't surprise anyone that these figures were not pulled from thin air. However, the numbers may reflect more about Nintendo's aspirations for this year than they do about its historical performance. While the granularity of the financial figures in Nintendo's annual reports leave a little to be desired, one thing we can say is that at no point since the launch of the Wii has the holiday quarter (the three months ended December 31st) ever accounted for 60% of the company's annual sales. The figure is high, for sure - in many years it hovers around 50% - but it's not quite at the level Fils-Aime suggested.

That doesn't mean he's wrong. The figures in the annual report are global figures, meaning that they encompass territories where holiday gift-giving is far less of a major retail boom than it is in North America. If half of Nintendo's global sales are accounted for in the holiday quarter, it wouldn't be at all surprising if that number hits 60% in the United States on occasion, especially given that both Thanksgiving and Christmas offer major sales spikes during that quarter in the US. Hence I don't think Fils-Aime misspoke or pulled out an unsupported figure. Rather, I suspect he was speaking as Nintendo of America boss, rather than as a representative of Nintendo globally.

The thing is, though, that Fils-Aime's statements will naturally be taken in the context of Nintendo's incredibly high aspirations for Switch sales this financial year. The company maintains that it's going to sell 20 million units of the console by the end of March 2019, a goal which it's still a fair way from accomplishing as of its most recent global installed base announcements. To hit its targets, a holiday quarter that racks up an enormously disproportionate amount of the year's sales - say, oh, around 60% of them - will be absolutely essential.

"Where are the holiday system-sellers for Sony and Microsoft, especially given that the holiday season does indeed skew young?"

In fact, a little back-of-envelope (or hastily-compiled-Excel-sheet in this case) calculation suggests that on the basis of the performance of the June and September quarters, the December and January quarters will need to account for about 75% of that sales target between them - and historical performance suggests that 60% in a bumper holiday season followed by eking out the last 15% in the New Year is about the only way to reach that lofty goal.

Regardless of whether Nintendo's actual holiday season numbers account for 60% or something shy of 50%, these are remarkably high figures for holiday weighting. The obfuscation of unit sales figures by platform holders over the years (with Microsoft being the current guilty party) makes it a little tricky to make a direct comparison, but it seems unlikely that any platform holder other than Nintendo has approached this kind of holiday-heavy weighting in their quarterly figures in recent years. Sony's holiday quarters typically account for somewhere just shy of 40% of annual revenue - more than other quarters, but not that much more. Microsoft's figures are likely broadly in line.

Nintendo will drive towards its high targets with the rapid release of new Smash Bros. and Pokémon games

Nintendo will drive towards its high targets with the rapid release of new Smash Bros. and Pokémon games

What makes Nintendo so incredibly holiday-heavy in a way that other companies aren't? To some extent it's undoubtedly down to the nature of the company's products, which are family-friendly and make for ideal holiday gifts, but there's also an extent to which it's a self-fulfilling prophecy.

How can a company that chooses to launch its first full Pokémon title for a home console only a few weeks before its new Smash Bros. game, all in the weeks around Thanksgiving and Christmas, not end up being holiday heavy? These are titles which would have done amazingly well at any point in the year - and given Nintendo's almost unique ability to retain the value of its software for months if not years, they probably wouldn't have been discounted by Christmas either. The decision to launch them in this period was a conscious choice that's pushing a lot of the firm's eggs into this holiday basket.

"Nintendo is making an effort to triangulate on the Christmas market, launching two of the most important titles in its portfolio within weeks of one another"

That's a very different decision from the one Microsoft and Sony have made in recent years. The other platform holders have actually been moving their big guns away from the holiday quarter. As the console generation has worn on, that's left this quarter looking surprisingly anaemic in terms of system-selling software for PS4 or Xbox One. In fact, there's an odd disconnect between the software that consistently sells well in November / December and the software that actually sells hardware. The Nth instalments of Call of Duty, Assassin's Creed, FIFA or Battlefield will all do great numbers in the software charts, but they are primarily selling to a pre-existing console installed base.

Where are the holiday system-sellers for Sony and Microsoft, especially given that the holiday season does indeed skew young? Sony's biggest system-seller of the year, at least in the holiday quarter, is almost certainly Spider-Man, which has been on shelves for months. I'm not sure that Microsoft really has a major holiday sales driver this year, though I'll wager that the Minecraft Xbox One bundles will remain a solid favourite on that front. Red Dead Redemption 2 will be a big game over the holiday quarter of course, and will likely sell some systems, but it's not a particularly great fit with the demographic for Christmas sales.

None of this is to say that this will be a tough Christmas for Microsoft or Sony - indeed, it'll likely be a bumper year all round - but it does point to those companies making a conscious decision to rebalance their quarterly sales away from the holidays. Part of that is likely in deference to the third-party publishers upon whom they rely; the publishers of the aforementioned Call of Duty, FIFA, Assassin's Creed and Battlefield franchises would really rather not have their annual cash cows forced to face down a direct challenge from a first-party juggernaut like Spider-Man or Crackdown. Equally, though, there's an understanding within Sony and Microsoft that the timing of their system-sellers isn't all that important. Time and again, it has been shown that these games loom large enough on the cultural and commercial landscape to sell strongly at any time of year.

Nintendo, on the other hand, is taking the opposite tack. It is making a sterling effort to triangulate on the Christmas market, launching two of the most important titles in its portfolio within weeks of one another and hoping to break all sorts of hardware sales records in the process. It's a tough set of targets to meet, but given the early returns from Pokémon Let's Go and the insane levels of anticipation for Smash Bros., the strength of the company's hand in this quarter shouldn't be underestimated.

Nintendo's hardware, software and branding is a solid fit for the season and it's been a long time since a console entered Christmas with a lineup of system-selling titles like that. It'd be a risky gambler indeed who would bet against them hitting those targets.

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Latest comments (1)

Bob Johnson Studying graphics design, Northern Arizona University15 days ago
A few things.

1) 40% in the holiday quarter for Sony means twice as many sales in that quarter as any other if you split the revenue evenly across the other 3 (to put things into perspective.) So I disagree Sony doesn't do much more in the holiday quarter than other quarters.

2) Also the 40% from Sony is worldwide I assume. AS you said Nintendo worldwide was not more than 50% from some quick number crunching. Certainly these two are not as far apart as you're implying especially given you think Sony's 40% in the holiday quarter isn't much more than their other quarters. :)


3) I think Nintendo would have spaced Super Smash and Pokemon farther apart if development timelines allowed. My take is development times of 1 or more ran long and resulted in those titles being closer together than they would have chosen in a perfect world.

4) I don't think Nintendo stacks the holiday really any more than anyone else. In 2017, 4 of NIntendo's 5 biggest releases were released before July. But they definitely try and have 1 big title at the very least between late October and Xmas. Sometimes it is 2.

5. I doubt they meet their estimates but they should still do pretty well. They have strings to pull in the form of promotions during the xmas quarter to the end of March. And they've been pulling them here in the US with a MK bundle at the same pricepoint.
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