Nintendo case competition

Noah Hechtman

Tiffany Hill

Ed Larkin

Radha Vishnubhotla

Lauren Zwick

Leveling Up

AGENDAWhy is Nintendo Struggling?Proposed Solutions:

• Mobile Games• NintendoGo• Heroes of Nintendo

Financial SummaryConclusion

Mobile Games NintendoGo Heroes of Nintendo ConclusionAnalysis2

Mobile Games NintendoGo Heroes of Nintendo ConclusionAnalysis

Defining the Problems

Nintendo

No foothold in any industry

Lack of connectivity

Underutilization of competitive advantage

Loss of relevance

in the industry

3


Solutions

4

No foothold in any

industryLack of

connectivity

Underutilization of competitive advantage

Mobile Gaming

NintendoGo

Heroes of Nintendo


Mobile Games

5


The Dying Industry

• Handheld gaming industry is becoming insignificant

• Transition to the mobile

6


Classic Games Go Mobile

• More appeal for casual gamers• Ease of play • Sold for $6.99

7


In-App Purchases• Types:• Extra features• Enhancements to

gameplay• Profits• $3.50 average purchase• $2 million in 2016

8


NintendoGo

9

NGO


“Xbox Live has helped sell a lot of consoles and created a lot of loyalty”

- Matt Rosoff (Analyst of Directions at Microsoft)

Benefits of Online Gaming

10


• Attracts wider range of gamers

• Growing Industry• Compounded annual growth rate:

18%• Increase global presence• Games market growth up to 23%

Significance

11


Implementation• Modeled off of Xbox Live:• 1 month subscription -

$9.99• 3 month subscription -

$24.99• 12 month subscription -

$59.99• Released with the NX• 1 year revenue: $273

million

12


Heroes of Nintendo

13

?


Competitive Advantage

14


Genre Breakdown of Video Game Sales

• Family friendly, adventure role-playing game

• Similar to Skyrim and Lego Star Wars

15

2 of the top 5 gaming genres


Improved Graphics

16


The Game

• Expanded market• Increased gameplay time• Reimaging their brand• 2016 revenue - $900 million

17


FinancialsMobile Games

NintendoGo

Heroesof Nintendo

Costs Revenue$6 million

$180 million

$85 million

$273 million

$280 million

$900 million

Expected Profit: $1.2 billion

18


2015 2016 2017 2018 2019 $-

$200

$400

$600

$800

$1,000

$1,200 Ne

t Inc

ome

(in m

illio

ns o

f $)

Projected Net Income

19


Nintendo is leveling up…

20


AppendixMobile game

financials

In-app and Overall

Mobilevs DS

Xbox Live Comparison

NX Sales Assumptions

NintendoGo Projections

HoN and Skyrim

Assumptions

Detailed Financials

SG&A Financials

21


Apps #1-3 2016 2017 2018 2019Price of App $7 $7 $7 $7

Number of downloads per app 12,500,000 6,250,000 3,125,000 3,125,000

Revenue of apps $265,500,000.00 $131,250,000 $6,562,500 $65,625,000Total costs $6,000,000 $0 $0 $0Profit $259,500,000 $131,250,000 $6,562,500 $65,625,000

App #4 2016 2017 2018 2019Price of app - $7 $7 $7

Number of downloads per app - 12,500,000 6,250,000 3,125,000

Revenue of app - $87,500,000 $43,750,000 $22,505,000Total costs - $2,000,000 $0 $0Profit - $85,500,000 $43,750,000 $22,505,000

App #5 2016 2017 2018 2019Price - - $7 $7

Number of downloads per app - - 12,500,000 6,250,000

Revenue of App - - 87,500,000 43,750,000Total costs - - $2,000,000 $0Profit - - $85,500,000 $43,750,000


In-App Purchases 2016 2017 2018 2019Number of app users: 37,500,000 50,000,000 62,500,000 62,500,000Percent of people who buy in-app purchases 1.5% 1.5% 1.5% 1.5%Number of in-app purchase per year 562,500 750,000 937,500 937,500Average price of purchase $3.50 $3.50 $3.50 $3.50Profit from in-app purchases $1,968,750 $2,625,000 $3,281,250 $3,281,250

Overall mobile gaming 2016 2017 2018 2019Profit $261,468,750 $219,375,000 $139,093,750 $135,161,250

Number of App downloads= 52,958*rank^(-(0.944))

Rank of App= exp(-1*(computer ranking of app/Carr’s ranking of app))

-exp is the simple truncated ordinary least squared regression


Nintendo DS 2015

Number of copies sold 1,500,000

Cost per device $250

Total cost $105

Revenue $375,000,000

Profit $217,500,000

Mobile vs. DS

Overall mobile gaming 2016 2017 2018 2019Profit $261,468,750 $219,375,000 $139,093,750 $135,161,250


Xbox LiveMembership Length Price Subscribers Revenue

1 month $9.99 3,125,000 $31,218,7503 months $24.99 9,375,000 $234,281,25012 months $59.99 12,500,000 $749,875,000Total - 25,000,000 $1,015,375,000

Xbox Units sold (2002-2010)

Xbox Live Subscribers

73,000,000 25,000,00034.25%

12.50%

37.50%

50.00%

Online Gaming Subscribers by Package

1 month 3 months 12 months


Wii 2011 2012 2013 2014

Total units sold 20,130,000 44,957,988 67,447,987 84,637,986

NX (projection) 2016 2017 2018 2019

Units sold per year 20,130,000 24,830,000 22,490,000 17,190,000

Price per unit $350 $350 $350 $350

Revenue per unit $310 $310 $310 $310

Profit $805,200,000 $993,200,000 $899,600,000 $687,600,000

NX Sales Assumptions


NintendoGo ProjectionsNintendo Go 2016 2017 2018 2019

NX units sold 20,130,000 24,830,000 22,490,000 17,190,000

Subscribers per year 6,893,836 8,503,425 7,702,055 5,886,986

Development costs $180,000,000 - - -

"1 month" revenue $8,608,678 $10,618,652 $9,617,941 $7,351,374

"3 months" revenue $64,603,861 $79,687,722 $72,177,883 $55,168,418

"12 months" revenue $206,780,611 $255,060,233 $231,023,140 $176,580,145

Total revenue $279,993,149 $345,366,606 $312,818,964 $239,099,936

Profit $99,993,149 $345,366,606 $312,818,964 $239,099,936


Skyrim (Heroes of Nintendo) 2012 (2016) 2013 (2017) 2014 (2018) 2015 (2019)

Number of units sold 15,000,000 3,500,000 3,500,000 1,270,000

Cost per game $60 $60 $60 $60

Total cost $85,000,000 $0 $0 $0

Revenue $900,000,000 $210,000,000 $210,000,000 $76,200,000

Profit $815,000,000 $210,000,000 $210,000,000 $76,200,000

Heroes of Nintendo Assumptions and Projections


($ in millions of dollars) 2015 2016 2017 2018 2019Net sales $4,581 $6,366 $5,974 $5,825 $5,343Cost of sales $2,793 $3,882 $3,644 $3,553 $3,259Gross profit $1,788 $2,482 $2,330 $2,272 $2,084Gross margin 39% 39% 39% 39% 39%R&D expenses $527 $643 $372 $372 $370SG&A expenses $1,581 $1,697 $1,426 $1,426 $1,424Operating income $206 $785 $904 $846 $660Non-operating income $383 $383 $383 $383 $383Non-operating expenses $2 $2 $2 $2 $2Ordinary income $587 $1,166 $1,285 $1,227 $1,041Extraordinary income $31 $31 $31 $31 $31Extraordinary losses $18 $18 $18 $18 $18

Income before income taxes and minority interests $600 $1,179 $1,298 $1,240 $1,054Total income taxes $251 $349 $299 $291 $267Income tax 5% 5% 5% 5% 5%

Income before minority interests $348 $831 $1,000 $949 $787Minority interests in income $0 $0 $0 $0 $0Net income $348 $832 $1,000 $949 $787


SGA expenses 2015 2016 2017 2018 2019Research and development expenses $527 $643 $372 $372 $370Advertising expenses $456 $456 $456 $456 $456Salaries, allowences and bonuses $180 $180 $180 $180 $180Depreciation $48 $48 $48 $48 $48Retirement benefit expenses $53 $53 $53 $53 $53Provision for bonuses $5 $5 $5 $5 $5Provision for allowance for doubtful accounts $3 $3 $3 $3 $3Other, misc. $309 $309 $309 $309 $309

Economy & Finance

Nintendo case competition