Few companies have capitalized on the global pandemic like video game pioneer Nintendo. While lockdown orders forced people into their homes, Nintendo sales soared. In addition, over the past 5 years, Nintendo has expanded into a number of new markets such as mobile games and theme parks. 

However, despite the fact that many video game developers are early adopters of digital technology, Nintendo was initially resistant to embrace what we now think of as “digital transformation.” For instance, they only launched their first mobile game in 2016 and their first subscription model in 2017. In fact, their determination to hold onto their pre-digital, 90’s era business model was so intense, they almost went bankrupt in the mid-2010’s.  

However, in subsequent years, Nintendo has pulled their act together and is now holding their own in the digital world. Here’s a look at some of the ways Nintendo has embraced change without, for the most part, sacrificing what made them so successful in the first place: creativity and imagination. 

Digital Monetization

In 2014, Nintendo began completely reworking their business model and, similar to Nike, Coca-Cola and countless others, began expanding their direct to consumer (DTC) business. To start, handheld devices and home consoles would no longer separate entities, but integrated into a “hybrid console.” They also rolled out a monthly membership option for Switch players that gives members access to free games, additional features (such as team battle experience) and the ability to save their games on the cloud. 

As one analyst put it, “With the release of the Switch and the online cloud membership (Nintendo Switch Online/Nintendo Account), the company is further pivoting their business model from releasing hit driven consoles into building an online software platform with regular iterative hardware releases.”

Nintendo also helped pioneer what’s known as an “unfolding system,” where game players pay extra to unlock new adventures, features or lands as they’re developed. This allows Nintendo to continuously update existing games while also driving profits. 

Though Nintendo may have been late to the mobile gaming party, they achieved remarkable success with cutting-edge games such as Pokémon Go and Animal Crossing. However, mobile games still only make up a small percentage of its total revenues and some of the company's more recent releases have flopped. 

Instead of focusing on creating incredible player experiences, Nintendo made the ultimate digital transformation mistake and over-monetized the game. In between the high volume of microtransactions required to effectively play, many of the company’s mobile games were considered to be of low quality and appeared cheaply made. 

With the incredible success of twitch, it’s understandable why Nintendo may be hesitant to continue investing in mobile games, a sector where profits are considerably lower and hard earned. However, seeing as though mobile is poised to become the dominant gaming system in years to come, Nintendo could be making a grave mistake by divesting in this area. 

As for other initiatives, in March of 2021, Super Nintendo World - a tech-infused theme park designed to simulate  life-sized, living video game- opened at Universal Studios in Japan. Similar to Disney World, all visitors are equipped with a Power Up Band - a mobile-app enabled wristband that enables guests to interact with the world around them. 

While these wearable devices help enhance the guest experience by allowing them to engage with the park’s various AR-enabled attractions, they also generate a wealth of data for Nintendo to mine. 

Despite the risk associated with physical theme parks, companies invest in them because they offer unparalleled innovation opportunities. For example, the Circle-Vision 360° cameras, Unreal Engine 3D creation platform and countless virtual reality technologies were developed and tested at Disney World by its team of Imagineers. 

Future Outlook

One major challenge Nintendo faces  is the global semiconductor shortage. In fact, it's likely that this shortage will push them to delay the release of the upgraded Switch Pro. Though Nintendo has weathered chip shortages in the past, with the future of gaming software in general up in the air, many experts predict they will focus more on IP and software development in years to come.