We can criticize Nintendo all we want for refusing to cave to everyone’s collective desire for an open-world Pokémon game that’s more like The Elder Scrolls V: Skyrim but the world’s oldest video game company has a reason to ignore outside noise – whatever it’s doing right now and what it’s been doing for years works.
Toyo Keizai, a Tokyo-based book and magazine publisher that specializes in economics and business, calculates that Nintendo is now Japan’s wealthiest company, boasting a staggering $11 billion in cash reserves and virtually zero debt. This financial stability, a remarkable feat in today’s economy and particularly turbulent gaming industry stems from the massive success of the Nintendo Switch and its games, coupled with the earnings from the Super Mario Bros. Movie.
Standing in stark contrast to market contemporaries, this highlights the effectiveness of Nintendo’s strategic business operations and prudent financial decision-making, which have allowed it to accumulate significant liquidity without resorting to the more common industry practice of debt financing.
Never conforming to societal norms, Nintendo’s approach to video game development has always diverged from its peers. The company typically eschews the pursuit of hyper-realistic graphics, which often necessitates a large workforce dedicated to detailing every aspect of a game’s environment. Instead, Nintendo opts for stylization over realism, a decision that not only sets its titles apart aesthetically but also contributes to cost savings in game production. This is reflective of Nintendo’s broader philosophy of emphasizing innovation and efficiency over the raw graphical power that dominates the priorities of many AAA game developers.
Of course, while such liquid assets indicate financial health, it’s often best utilized in ventures and investments offering higher returns. In the face of inflation and market growth, holding onto cash may lead to a depreciation of value over time. Nonetheless, its conservative and debt-averse financial strategy has merit. It can afford to comfortably navigate a particularly turbulent time within the industry where others are laying off employees by the hundreds if not thousands.
However, it isn’t all good news for Nintendo. Despite its massive cash flow, it isn’t immune to the usual trappings of finicky investors as its share price recently experienced a slide following news of a delay to the successor of the Nintendo Switch, as reported by Bloomberg.
The reports suggest that the delay is to ensure a robust lineup of games for the new system’s launch, a critical factor for the console’s success. Even so, Nintendo remains a formidable and key player in the industry, with the Switch’s sales figures cementing its place as one of the best-selling consoles of all time.
As for the rest of the gaming industry, many are struggling with skyrocketing development costs. Sony, in particular, is feeling the financial burden of projects like Marvel’s Spider-Man 2 costing $300 million to make. The unsustainability of such business models, especially as the prices of games haven’t increased proportionally to cover these rising costs, is forcing companies to cut costs and seek revenue elsewhere. In Sony’s case, it vows to aggressively approach multiplatform releases of its exclusives, which has already paid dividends with the success of Helldivers 2, now one of the most-played games on Steam of all time.
