The Nintendo Business Model In A Nutshell

Nintendo is a Japanese consumer electronics and video company founded in 1889 as Nintendo Karuta – a manufacturer of decorated, hand-made playing cards. By the 1980s, the company made significant investments in a rising technology: video games. It then produced popular titles like Donkey Kong and, later on, Super Mario Bros. Today Nintendo generates revenues through video game franchise sales, e-commerce, and the Unfold System.

Value PropositionNintendo offers a range of value propositions for its customers: – Iconic Gaming Franchises: Nintendo is known for its iconic gaming franchises like Mario, Zelda, and Pokémon, providing unique and beloved gaming experiences. – Innovative Hardware: The company designs innovative gaming hardware, such as the Nintendo Switch, which offers a versatile gaming experience in both handheld and console modes. – Family-Friendly Content: Nintendo’s games and consoles often appeal to a wide range of audiences, including families and younger gamers. – Nostalgia and Legacy: Nintendo taps into nostalgia by revisiting classic titles and characters, appealing to longtime fans. – Local Multiplayer: Nintendo emphasizes local multiplayer experiences, promoting social and cooperative gaming. – Quality and Fun: Nintendo’s games are renowned for their quality and fun factor, ensuring an enjoyable gaming experience.
Core Products/ServicesNintendo’s core products and services include: – Gaming Consoles: The company designs and manufactures gaming consoles, such as the Nintendo Switch, Nintendo Switch Lite, and Nintendo 3DS. – Game Software: Nintendo develops and publishes game software for its consoles, including first-party titles like Super Mario, The Legend of Zelda, and Animal Crossing. – Online Services: Nintendo offers online services, such as Nintendo Switch Online, which provides access to online multiplayer, retro games, and cloud save data. – Accessories and Merchandise: Nintendo produces gaming accessories and merchandise featuring its popular characters and franchises. – Mobile Games: The company develops mobile games for smartphones and tablets, extending its gaming reach. – Content Licensing: Nintendo licenses its characters and franchises for use in various media, including movies, merchandise, and theme park attractions.
Customer SegmentsNintendo’s customer segments include: – Gamers: Individuals of all ages who enjoy gaming and seek unique and entertaining gaming experiences. – Families: Parents and children looking for family-friendly gaming options that are suitable for all ages. – Hardcore Gamers: Enthusiasts and dedicated gamers who appreciate Nintendo’s exclusive titles and innovations. – Casual Gamers: Individuals who enjoy gaming occasionally and prefer accessible and fun experiences. – Collectors: Fans and collectors who purchase Nintendo merchandise and limited-edition products. – Mobile Gamers: Smartphone and tablet users who play Nintendo’s mobile games.
Revenue StreamsNintendo generates revenue through several revenue streams: – Hardware Sales: Revenue is earned from the sale of gaming consoles and handheld devices. – Software Sales: The company generates income from the sale of game software, including first-party titles and third-party games. – Online Subscriptions: Nintendo earns revenue from online subscription services like Nintendo Switch Online. – Accessories and Merchandise: Income is generated from the sale of gaming accessories and merchandise featuring Nintendo characters. – Mobile Games: Revenue comes from in-app purchases and microtransactions in Nintendo’s mobile games. – Content Licensing: Nintendo earns royalties and fees from licensing its characters and franchises for various media and merchandise.
Distribution StrategyNintendo’s distribution strategy focuses on accessibility, partnerships, and innovation: – Retail Distribution: Nintendo products are available through retail stores, both physical and online, ensuring accessibility to consumers. – Digital Distribution: The company offers digital downloads of games through its eShop, providing convenient access to digital content. – Online Services: Nintendo provides online services like Nintendo Switch Online to enhance the gaming experience and generate recurring revenue. – Partnerships and Licensing: Nintendo collaborates with partners and licensees to extend its brand into various media and merchandise, such as movies, toys, and theme parks. – Innovation: The company continually innovates with its gaming hardware, introducing unique features and gameplay experiences. – Marketing and Promotion: Nintendo invests in marketing and promotion efforts to build excitement and anticipation for its games and hardware releases.

History of Nintendo

Nintendo is a Japanese consumer electronics and video company headquartered in Kyoto, Japan.

The company was founded in 1889 as Nintendo Karuta – a manufacturer of decorated, hand-made playing cards. Nintendo would produce these cards for over seven decades, but sales fell after the cards became associated with gambling and Japanese organized crime.

In 1950, 22-year-old Hiroshi Yamauchi took control over Nintendo and expanded the product range to include toys and amusement arcades. Over twenty years later, Yamauchi made a significant investment in an emerging technology: video games. The popular title Donkey Kong was released in 1980, catapulting the company to the global stage.

The even more successful Super Mario Bros. was released five years later, named after the landlord who owned Nintendo’s American headquarters. The success of the game was nicely complemented by the release of the Game Boy in 1989, the first handheld electronic game console. This pioneering success has been built upon with the subsequent releases of consoles including the Super Nintendo Entertainment System, Nintendo 64, Nintendo DS, GameCube, Wii, and Nintendo Switch. 

Today, the company continues to be an innovative player in gaming and consumer electronics. Profits in 2020 were 376.6 billion JPY, or approximately $3.6 billion.

Nintendo revenue generation

Traditionally, console-based home entertainment companies make money via the continual creation and licensing of games.

Let’s take a look at how this plays out for Nintendo.

Video game franchise sales

Nintendo is well-known for regularly adding too many of its video game franchises with periodic releases. For example, the Super Mario franchise has been running since 1985. 

This strategy builds brand loyalty and allows the company to charge a relatively high price for its products.


Nintendo sells gaming consoles, games, and gaming accessories via their online store. 

Games are also available for purchase directly from the gaming console interface. By allowing users to download games with an internet connection, the company saves money on the distribution and physical production of games.

Unfold System

The Nintendo Unfold System is an evolution of the franchise sales model.

Instead of Nintendo paying developers to make and release new titles, the onus is on the consumer to pay to expand a single game. An unfolding game differs from expansion packs or franchise titles in that entire parts of the game are hidden and locked at release. As the customer becomes more invested, they pay Nintendo to unlock additional features, adventures, or lands.

For the company, this is seen as a far less risky strategy than franchising. Rather than building a new game on the same platform as the existing game, Nintendo simply keeps the existing base and charges the customer for any new features it develops.

In theory, the Unfold System expansion method can be used indefinitely. Games may have no endpoint and a new version may only be necessitated by a console upgrade.

Smash Bros: Ultimate

The fighting game Smash Bros: Ultimate is already utilizing the Unfold System. Users must now purchase a season pass to take part in each game iteration – otherwise known as a season.

In 2019, the first season was charged at $24.99. This fee gave players access to exclusive items, stages, and five new characters. The following year, the game was unfolded further to incorporate a second season that was charged at $29.99 for six new characters.

Pokémon – which Nintendo owns a 32% stake in – has also added new lands and adventures using this revenue strategy.

Nintendo in numbers

In 2018, Nintendo’s revenue was 1.055 trillion yen. The company’s revenue increased to 1.2 trillion yen in 2019. Nintendo’s revenue continued to grow in 2020, reaching 1.308 trillion yen. The company experienced a significant increase in revenue in 2021, amounting to 1.759 trillion yen. In 2022, Nintendo’s revenue was 1.695 trillion yen, slightly lower than the previous year but still reflecting strong performance.
In 2018, Nintendo’s net income was 134.09 billion yen. The company’s net income increased to 200.34 billion yen in 2019. Nintendo’s net income continued to grow in 2020, reaching 236 billion yen. The company experienced a significant increase in net income in 2021, amounting to 527.95 billion yen. In 2022, Nintendo achieved its highest net income in the given period, amounting to 530.5 billion yen.
In 2018, Nintendo had a total of 5,501 employees. The company’s employee count increased to 5,944 in 2019. Nintendo’s workforce continued to grow in 2020, reaching a total of 6,200 employees. The company experienced further growth in its employee count in 2021, with a total of 6,574 employees. In 2022, Nintendo had a total of 6,717 employees, marking its highest employee count in the given period.

Key takeaways

  • Nintendo is a video game and consumer electronics company headquartered in Kyoto, Japan. The company was founded in 1889 as a manufacturer of decorative, hand-made playing cards.
  • Nintendo makes money by creating and licensing video games. The company has been particularly successful in building brand loyalty via high-quality franchise releases.
  • Nintendo also sells access to additional game features as part of its Unfold System. Instead of paying developers to build new games on the same base, players pay Nintendo to expand access within a single game.

Key Highlights

  • Founding and Evolution: Nintendo was founded in 1889 as Nintendo Karuta, a manufacturer of decorative playing cards. Over time, the company expanded into toys and arcade games.
  • Video Game Ventures: In the 1980s, Nintendo entered the video game industry with successful titles like Donkey Kong and Super Mario Bros. This marked the company’s significant shift towards gaming.
  • Console Successes: Nintendo released a series of popular gaming consoles, including the Game Boy, Super Nintendo Entertainment System, Nintendo 64, Nintendo DS, GameCube, Wii, and Nintendo Switch.
  • Revenue Streams:
    • Video Game Franchise Sales: Nintendo’s main revenue source is its video game franchises. It regularly releases new titles in established franchises like Super Mario, building brand loyalty and charging premium prices.
    • eCommerce: The company sells consoles, games, and accessories through its online store, as well as offering game downloads directly via the console interface.
    • Unfold System: Nintendo introduced the Unfold System, where players can expand a single game by paying for additional features and content. This approach reduces the risk associated with building entirely new games.
  • Financial Performance:
    • In 2022, Nintendo’s revenue was 1.695 trillion yen.
    • Net income reached its highest in 2021, at 530.5 billion yen.
    • Employee count grew steadily, with the highest count of 6,717 employees in 2022.
  • Innovative Strategies:
    • Nintendo’s Unfold System, exemplified by games like Smash Bros: Ultimate and elements of Pokémon, allows players to purchase access to new features, characters, and content within a single game.
  • Brand Loyalty and High-Quality Games:
    • Nintendo’s success has been built on its ability to maintain brand loyalty through high-quality and innovative game releases, especially within its iconic franchises like Super Mario.

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