By using this site, you agree to our Privacy Policy and our Terms of Use. Close
Kyuu on 26 August 2025
Edit Thread
RolStoppable said:
Kyuu said:

Nintendo is facing challenges of their own:

1. They probably will fail to make as much profit per hardware unit as they did with Switch 1, even though it's notably more expensive.

2. Their userbase being physical bias is a problem, because cartridges cost up to $17 to make in addition to the 30% retailer fees. Their outrageous physical prices are an attempt to accelerate the switch to the cheaper (and more profitable) digital. Bluray in comparison is very cheap, plus Sony and MS both have much higher digital ratios.

Decent chance Nintendo consoles' profit margins will fall dramatically this generation even if Switch 2 manages to sell 150 million+ units. 

1. Probably true, but the biggest reason for that is the tariff situation in the USA. Besides, hardware has never been a big contributor to profits, so this isn't going to be especially significant in the big picture.

2. Production costs of cards are covered by higher game prices, so it's not the physical medium that poses a problem. Their physical MSRP in Europe is higher than digital - unlike in America where both cost the same - because European retailers have a habit of undercutting the MSRP. This has made physical games routinely cheaper than their digital counterparts. But when, say, Mediamarkt now undercuts Nintendo's MSRP by €10, then physical and digital cost the same; and that's what Mediamarkt already does.

The biggest threat to Nintendo's profit margins is their decision to make a Mario Kart World bundle where the game is notably discounted, so this fiscal year alone they'll leave money for around 10 million copies on the table, which ranges anywhere between $200-400 million in lost profit depending on how you want to estimate it. But in the long run the higher game prices this generation will keep Switch 2's profitability pretty close to Switch 1's. Third parties surrendering the physical games market to Nintendo for the most part will probably increase the sales of first party software which is the biggest contributor to Nintendo's overall profitability.

Mario Kart World bundles are temporary, aren't they?

I can't say much with confidence. Profit margins might fall significantly behind Switch 1's, and profitability slightly behind. But then again we have no idea how the price trajectory is gonna go this generation or how Nintendo's more price sensitive players will react to the new pricing in the long run. Higher game prices would only cover the high cartridge cost if software sales numbers somehow aren't affected at all (Cheaper software will always reach a broader audience vs a more expensive version of the same software. But Nintendo's natural popularity growth may offset this).