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Forums - Sales Discussion - Furukawa: Other regions grew by a huge 152%(YoY driven by Asia)

Q7: Regional sales in the "Other" region (as shown on page 4 of the Financial Results Explanatory Material) increased significantly, but I'd like to hear about sales trends in these "other" regions individually, like mainland China and Australia.

Furukawa: 
Nintendo uses this term primarily to refer to Australia, New Zealand and regions of Asia
outside Japan. Looking at growth in regional sales compared to the same period of the previous fiscal year, we see that whereas sales grew by 67% in Japan, 61% in the Americas and 72% in Europe, sales for the "other" region grew by a huge 152%.
We hear from Tencent that, in mainland China, Ring Fit Adventure got off to a great start when it was released by them on September 3 and it continues to sell well. In some cases, Ring Fit Adventure is driving sales of the Nintendo Switch hardware.
Sales in the Asia region excluding Japan were 6.7 times higher in the fiscal year ended March 2020 compared to the year ended March 2017, when Nintendo Switch was launched. At the time of the Nintendo Switch launch, it was only available in the "other" regions of Hong Kong, Singapore and parts of the Middle East. Since then, the sales regions have broadened to include South Korea, Taiwan, mainland China (sales by Tencent) and other parts of Southeast Asia. In looking at how our sales in the Asia region have grown to be a larger part of our business, we are now able to release many Nintendo titles at the same time they debut in the major markets of Japan, the U.S. and Europe, as we have been trying to more efficiently localize our software with more languages in accordance with the increasing sales in regions such as South Korea and Taiwan. Talking about software sales in the Asia region, in addition to the previous extremely strong showing by the Pokémon franchise titles, the sales numbers are also growing for evergreen Nintendo titles, and now a wide range of consumers have begun purchasing Ring Fit Adventure and Animal Crossing: New Horizons. In Australia, sales of Nintendo Switch are growing steadily at a similar rate to the good performance in Japan, the U.S. and Europe.

https://www.nintendo.co.jp/ir/pdf/2020/201106e.pdf

Nintendo's localization efforts paying off in a big way in Asia. 



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Very interesting. I didn't know that Nintendo is really entering South Korean and Taiwan for the first time. This definitely explains why "Other" is such a fast growing category.



For sure entering new markets is going to be huge for Nintendo in the coming years, I remember a few years ago it was notable when the Switch sold 50K during the December it launched in South Korea, in 2019 they sold 386K, if they are selling 150% that this year it translates to 750K for 2020. In Taiwan during 2019 they sold 200K which with the same increase would amount to 450K for 2020.Taiwan and South Korea accounted for 2.7M software sales in 2019, so those two nations could contribute to around 4M software sales this year. 

I do wonder how much of a cut Tencent is getting in China, seems Ring Fit Adventure is a smash hit there and Animal Crossing isn't doing too shabby either. According to recent articles Switch is catching up on the PS4 and demand is growing. Due to China's strict censorship and Nintendo's nonoffensive nature, a lot of their titles get released there. The video game market there is set to grow considerably in the coming years there. So if South Korea & Taiwan are contributing over 1 million units to their total per year, wonder what China will look like by next year.

At some point, it might even become popular in places like South America, Eastern Europe, India - Nintendo just needs to have some marketing presence there, a more localized price for the games/console and supply chain partners. One of the reasons I expect the Switch to breeze past 150 million mark fairly quickly.

Will be interesting how Third Parties can capitalize on this in 2021, I'd imagine Harvest Moon, Monster Hunter Rise, Age of Calamity, Bravely Default 2, Rune Factory 5, SMT V all have a pretty great shot to do some extremely impressive numbers for their makers in the coming year. Also would be happy for Platinum if Bayo 3 is a Nier-like success. The localization efforts and having multiple languages at launch and global release dates would be a huge opportunity for any publisher, Age of Calamity would be the first game to demonstrate this for Koei, one of the reasons I expect it ship 5 million just this quarter.  

Last edited by noshten - on 11 November 2020

noshten said:

(...)

I do wonder how much of a cut Tencent is getting in China, seems Ring Fit Adventure is a smash hit there and Animal Crossing isn't doing too shabby either. According to recent articles Switch is catching up on the PS4 and demand is growing. Due to China's strict censorship and Nintendo's nonoffensive nature, a lot of their titles get released there. The video game market there is set to grow considerably in the coming years there. So if South Korea is contributing over 1 million units to their total in a couple of years, wonder what China will look like by next year.

(...)

There's no good reason to get excited about China, because their game approval process is so slow that barely anything gets released. It will be very hard to build momentum, so it will take a long time until Switch has enough of a back catalogue in China to go mainstream.



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RolStoppable said:
noshten said:

(...)

I do wonder how much of a cut Tencent is getting in China, seems Ring Fit Adventure is a smash hit there and Animal Crossing isn't doing too shabby either. According to recent articles Switch is catching up on the PS4 and demand is growing. Due to China's strict censorship and Nintendo's nonoffensive nature, a lot of their titles get released there. The video game market there is set to grow considerably in the coming years there. So if South Korea is contributing over 1 million units to their total in a couple of years, wonder what China will look like by next year.

(...)

There's no good reason to get excited about China, because their game approval process is so slow that barely anything gets released. It will be very hard to build momentum, so it will take a long time until Switch has enough of a back catalogue in China to go mainstream.

Most Nintendo games get approval, one of the reasons we no longer having such scalper issues for Ring Fit Adventure worldwide is because it launched officially in China in September. Those two games are enough to maintain momentum for the next year coupled with all the evergreens a gamer can buy in China that already localized. 

It was noted by Niko Partners that Switch is already catching up to PS4 Lifetime sales. 

https://venturebeat.com/2020/11/03/niko-partners-mobile-games-reign-in-china-while-internet-cafes-slump/

Overall we will see the impact of China in the next two quarterly reports by Nintendo, Koei, Marvelous but 150% growth is not driven by just South Korea and Taiwan. I think you are underestimating how Tencent pushing Ring Fit or Animal Crossing being so huge with women will impact the video game market in China. I actually expect console adoption to accelerate in the coming years there. Tencent already has a stake in a lot of Japanese companies, so I'm sure the approval process for the likes of Age of Calamity, Harvest Moon, Rune Factory 5 etc. is not going to be that difficult. Age of Calamity already has Chinese localization, the case is probably the same for Harvest Moon and Rune Factory 5.

The bigger get would be if Monster Hunter Rise launches in China, that could be a pretty huge game for Capcom. If they manage to release the game in China while the Switch is red-hot, it could be a recipe for an unprecedented year for the company. In the past they had worked with Tencent to bring over MHW but that was halted by the new approval process, so Monster Hunter would be something very new for the vast majority of Chinese gamers 

https://phys.org/news/2018-08-monster-hunter-china-video-games.html

https://www.theverge.com/2019/8/2/20751368/nintendo-switch-china-tencent-launch-partner

https://www.bloomberg.com/news/articles/2020-05-25/tencent-to-become-largest-shareholder-in-japan-s-marvelous 



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noshten said:

It was noted by Niko Partners that Switch is already catching up to PS4 Lifetime sales. 

https://venturebeat.com/2020/11/03/niko-partners-mobile-games-reign-in-china-while-internet-cafes-slump/

We already discussed that article last week.
https://gamrconnect.vgchartz.com/thread/243715/nintendo-switch-set-to-become-console-market-leader-in-china/

Mobile and PC is still the big market in China. Console software sales are just 1% of the total game software revenue in China.
Maybe Switch can tap that mobile market, and overcome the stigma generated in that market during the console ban.



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The_Liquid_Laser said:
Very interesting. I didn't know that Nintendo is really entering South Korean and Taiwan for the first time. This definitely explains why "Other" is such a fast growing category.

Yeah, sony uses the worldwide distributions since PS2, middle east, Oceania and far east was all dominated by sony. Nintendo grew our distribution in slow paces; 7ht generation expands the Europe and Americas. Now expands to Asia. But Nintendo yet zero presence in Nordic countries and the middle east. 



Based on the article you posted it's expected that close to 8 million consoles might be sold until 2024, personally, I think that's underestimating the Switch especially if Tencent is pushing more Japanese games on the local market. Perhaps game pricing might be different in China, but we are talking about substantial sales, in South Korea the tie ratio is 1:3/1:4 so if we apply that to let's say 6 million Switch consoles in China until 2024 - that translates to 18 to 24 million additional software sales. I think the potential for the Switch in China is much higher as it's fast replacing the US as the biggest potential market for entertainment products. One of the reasons for example that some movies are making bank by being approved & released in China. There would be a similar situation for games, so PG games from Japan that are able to make it through the approval process will see huge growth in the coming years. One of the reasons I highlighted Marvelous & Capcom's relationship with Tencent, is that these are some of the companies that would gain the most out of the Switch success with their current planned line-up.

We are going to see a major recalibration in the coming years because of Nintendo becoming the market leader for console gaming in most of Asia. Consoles had huge competition from PC and mobile gaming in Asian markets like South Korea, Taiwan and China. Internet cafes were huge before the pandemic hit in most of China, Taiwan, SEA region. I'm inclined to think that the other reasons consoles have been lagging behind in Asia is because of their form factor and western focused design which assumes you have a lot of space and a TV where you live. Having both a Lite model and something that can connect to a monitor provides much better options. The fact that most AAA games would never get approval in China is another thing to consider. Finally we also have the recent focus of the Chinese goverement to address gaming addiction. Switch has always had a parental app, so by design it provides control over gaming behaviour - while the majority of Nintendo 1st Party games don't contain gambling mechanics.

In the past, Nintendo hasn't really had a device or the needed partnerships in place to get a foothold in China. Right now they are riding on a high due to games and a device that resonated so well with the region. COVID, coupled with Animal Crossing and Ring Fit has accelerated demand and has been able to drive a 150% increase YoY when in 2019 they were already selling over half a million in Taiwan and South Korea alone. China is the second-biggest video game market in the World, in terms of just PC and Mobile it's probably the World's biggest market, so even if we are looking at a 1% to 5% increase of the current market size by 2024 that basically means very substantial opportunities for growth, that shouldn't be underestimated. I think this will be noticeable during their next quarterly results when the numbers come out for Ring Fit, New Horizon, and hardware sales in the Other region.



Great to hear; Switch is killing it in Japan and North America, but Europe and ROTW is where they have room to improve, so it's nice to see them making progress on that front.



Bet with Liquidlaser: I say PS5 and Xbox Series will sell more than 56 million combined by the end of 2023.

IMO, the "Other" region for the Switch will be the X-Factor region that will determine whether or not the Switch becomes the greatest selling console of all time. It's already a given that the Switch will sell close to DS/PS2 numbers in Japan and NA and Nintendo has reached a point in those NA and Japan where there isn't much more room for expansion. However, places such as Eastern Europe, much of Asia/Middle East, as well as South America there is nearly an endless market of people Nintendo can tap into, and it those regions will be the key in determining whether or not the Switch outsells the PS2/DS.Right now the Switch numbers are looking extremely promising in the "Other" category. The Switch is already less than 400k units from surpassing the Wii in the other category while only being 3.5 years old and the Switch is now really beginning to hit it's stride with a 30Million year. The best selling console of all time in the "other" category for a Nintendo system was the Nintendo DS, with 12 Million sold. The Switch is already at 9 million and it seems inevitable the Switch is going to surpass it at this point which is amazing, and who knows how much of that market the Switch will penetrate since we've never seen a Nintendo system grow this fast in such a large region. If everything goes right, the Switch might be a smash hit more than we could ever imagine in the "other" category. I really believe the Switch could be the first console to really be a smash hit in the "other" regions, maybe even more than PS. I believe this because the Switch is so versatile and that what makes it so appealing to so many gamers. China is more into mobile gaming and while the Switch and mobile gaming are still far apart in several ways, maybe the Chinese consumer will be more interested in the Switch since it is really one of the first mainstream powerful portable device that could play console like games anywhere just like mobile gaming. IK that the Switch library will be limited in China thanks to strict regulations against mature games. However, Nintendo games for the most part are family friendly unlike Sony, so we're more likely to see the Switch in China build a stronger library than PS4 in China and thus will likely be the most popular console in China. I really believe the Switch could gain a pretty sizeable market in China if everything goes right. And I'm happy Nintendo is going through the efforts of localizing their products across different regions and expanding Nintendo, they could've easily been content with the current Switch sales in NA,Japan, and Europe, but they're really trying to expand their market, and it's working out for them as the "other" category is growing exponentially for them, growing even more than NA,Japan, and Europe YoY, which shows that sales aren't just fluking cause of AC or the Pandemic, but Nintendo is really expanding in the "other" region