How does Nintendo convince its fans to buy 3rd party games?

[ICStats]

padib said:

ICStats said:

MaskedBandit2 said:

lol of course they do.  They need the licensing revenue.

Bingo.  Think about it, why be a platform holder if you don't need licensing revenue?

Hardware is a very low margin business, or in video games a loss leading business.  The reason to be a platform holder is that everybody has to pay you to sell their games on it.  If they don't want / need licensee revenue and they just rely on Nintendo games for profit, it would be better to go 3rd party and not bother with their hardware platform.

Since they are in the platform business, they absolutely need 3rd party to increase revenue and to increase sales of their platform.

Nintendo is the greatest selling manufacturer and is saving tremendously on licensing fees themselves by being a manufacturer.

Again, the revenue argument goes both ways (for Nintendo and for 3rd parties).

Sure, if their platform is a best seller then they are saving tremendously by owning it themselves.  On the other hand if their platform is selling tremendously bad, they have a giant opportunity cost.

Let's say they could get 100% attach rate on a game for simplicity.

- On Wii U they would get 5.9M x $35 per-game =  $206.5M (saved $41M on licensing)
- On PS4 + XB1 they would get 14.5M * ($35 - $7 licensing) = $406M (opportunity cost of being exclusive)

The opportunity cost of exclusivity is 10X higher than what they have saved on licensing costs by owning their hardware.