A study by Research and Markets forecasts the global gaming market to reach $314.8 billion by 2027. If this prediction comes to fruition, it will represent a CAGR of 9.2% from 2022 to 2027. The ever-increasing demand for consoles, gaming PCs, and mobile devices drives this market expansion.
Nintendo is one of the most successful companies in the gaming industry. The company has a long history dating back to 1889 and is responsible for some of the most iconic gaming franchises, such as Mario, Zelda, and Donkey Kong. According to Statista, Nintendo had the best-selling console in 2021, the Nintendo Switch, selling over 25 million units globally.
Despite its success in the console market, Nintendo does have some formidable competitors. This Nintendo competitors analysis will analyze the competitive landscape for Nintendo and highlight some of the company’s key competitors. We’ll cover each company’s financials, competitive advantages, business strategies, and market position.
Bottom Line Up Front
Nintendo competes with console makers Sony, Microsoft, and Sega. Sony is Nintendo’s biggest competitor, with a 64.5% share of the global gaming console operating system market in 2021, according to Statista. Microsoft’s Xbox holds 35.48%, whereas Nintendo has 0.02% of the market. The company competes for user spending with mobile and PC gaming companies, such as Tencent, Activision Blizzard, and Electronic Arts.
List of Nintendo’s Competitors
Nintendo: Company Overview and Revenue Model
Nintendo Co., LTD is a Japanese multinational consumer electronics and video game company headquartered in Kyoto. The company started as a card game company in 1889 and eventually transitioned into the video game industry in the 1970s. Initially, Nintendo was slow to catch on to the video game craze, missing out on the opportunity to release its own arcade game console.
It wasn’t until 1983 that Nintendo released its first home video game console, the Nintendo Entertainment System (NES). The NES became a huge success, becoming a global phenomenon. It opened the door for Nintendo to release subsequent console systems, such as the Super Nintendo Entertainment System (SNES), Nintendo 64, GameCube, Wii, Wii U, and Switch.
In addition to its popular console systems, Nintendo succeeded with its portable gaming devices. The company released the Game Boy in 1989, selling over 118 million units worldwide. The company followed up the success of the Game Boy with the release of the Nintendo DS (2004) and 3DS (2011). In 2019, Nintendo released the Nintendo Switch Lite, a more affordable and portable version of its popular Switch console.
Nintendo went public on the Tokyo Stock Exchange in 1962. As of September 24, 2022, the company had a market capitalization of $49.3 billion. The company has strong leadership, with Shuntaro Furukawa serving as its president since 2018.
The company’s revenue model is based on selling hardware, software, and accessories. It also generates revenue from licensing its IP to third-party companies. For example, it has licensed the Mario franchise to Ubisoft to develop a new game, Mario + Rabbids Kingdom Battle. Although Nintendo does not have a direct stake in its success, it benefits from the licensing fee and the game’s potential sales.
Despite the COVID-19 pandemic, Nintendo’s revenue grew from $12.115 billion in 2020 to $15.990 billion in 2021. The company operates five branches: Nintendo of America, Nintendo of Europe, Nintendo of Korea, Nintendo of Australia, and Nintendo Co., Ltd.
Nintendo Competitors Analysis
Nintendo competes for a share of the gaming and entertainment market. The landscape consists of large and well-financed companies and smaller companies with more focused product lines.
The following is an analysis of Nintendo’s five largest competitors.
1. Sony
Sony is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo. The company operates through five main segments: Electronics Products & Solutions, Game & Network Services, Imaging and Sensing Solutions, Pictures and Music, and Financial Services. Operating as a conglomerate means Sony can spread the risks associated with any one business across several different businesses. Moreover, it holds a dominant position in the gaming market with the PlayStation console.
This strategy gives Sony financial stability and the ability to weather challenging economic conditions. In FY2021, Sony’s net sales were $84.594 billion, an increase of 11.32% from the previous year. Net income was $11.01 billion, up 105.65% from the prior year. The company trades on the Tokyo Stock Exchange and had a market capitalization of $87.368 billion as of September 24, 2022.
Interestingly, Sony’s PlayStation line grew from a failed partnership with Nintendo. The two companies had been working together to develop a CD-ROM add-on for the Super Nintendo Entertainment System. However, after licensing disagreements, the two companies went their separate ways, and Sony developed the PlayStation as a standalone console.
Unlike Nintendo, Sony allows other companies to develop and release games for its consoles. This policy enabled Sony to quickly build a robust library of titles for the PlayStation. Moreover, it helped Sony attract third-party developers, making the console more attractive to consumers. Sony’s strategic partnership with Microsoft also gives it access to the Xbox Game Pass, a gaming subscription service with a library of over 100 games.
Nintendo focuses on a niche market, while Sony goes after the mass market. Quality over quantity is a crucial differentiating factor for Nintendo. The company releases fewer games but focuses on delivering high-quality titles. For example, the Super Mario franchise is one of the most popular and well-regarded video game series. In contrast, Sony’s approach is to release many games and rely on its significant market share to generate sales.
2. Microsoft
Microsoft Corporation is an American multinational technology company headquartered in Redmond, Washington. The company develops, manufactures, licenses, supports, and sells computer software, consumer electronics, personal computers, and related services. Microsoft’s gaming business consists of Xbox hardware, Xbox Game Studios, and Xbox Live. Founded in 1975, Microsoft is one of the oldest tech companies in the world and a fiery competitor of Nintendo in the gaming industry.
The company has strong financials, with FY2021 revenue of $168 billion and a net income of $61.271 billion. Microsoft’s market capitalization was $1.774 trillion as of September 24, 2022. The company is a Dow Jones Industrial Average component and trades on the NASDAQ under the ticker MSFT.
Nintendo and Microsoft have a long and complicated history. The two companies were allies in the 1980s, with Nintendo using Microsoft’s MS-DOS operating system for its NES console. However, the relationship soured when Microsoft developed its gaming console, the Xbox. The rivalry between Nintendo and Microsoft intensified with the release of the Wii and the Xbox 360, as both companies battled for market share.
Microsoft’s competitive advantage over Nintendo comes from its vast resources. The company has deep pockets and can afford to subsidize the loss-making Xbox division. Moreover, Microsoft is a master at using its ecosystem to cross-sell and upsell products. For example, the company offers discounts on Xbox hardware to customers who subscribe to its Xbox Live service.
In Jan 2022, Microsoft announced its intention to acquire Activision Blizzard, one of the largest publishers in the gaming industry. The acquisition is an attempt for Microsoft to enter the mobile gaming market. Activision Blizzard owns some of the most popular franchises, such as Call of Duty and Candy Crush. The acquisition will give Microsoft a competitive advantage over Nintendo in the mobile gaming market.
3. Tencent
Tencent Holdings Limited is a Chinese multinational conglomerate holding company founded in 1998. The company’s subsidiaries specialize in various Internet-related services and products, entertainment, artificial intelligence, and technology in China and globally. Tencent is the world’s second-largest video game publisher by revenue after Sony and one of the world’s largest Internet companies. The company also owns the popular instant messaging service WeChat.
Tencent competes with Nintendo for user attention. The company’s gaming business, Tencent Games, is responsible for developing, publishing, and operating video games. Some of the most popular games published by Tencent include Honor of Kings, League of Legends, and Clash Royale. Although Tencent does not have a dedicated gaming console, the company offers a gaming service called WeGame.
Tencent’s competitive advantage over Nintendo is its vast user base. The company has over 1.1 billion monthly active users on WeChat and its other platforms. Tencent also has a vast army of developers working on new games. The company’s deep pockets allow it to invest heavily in R&D and marketing. In 2021, Tencent made revenues amounting to 174.3 billion Yuan, approximately US$24.4 billion, representing 31% of Tencent’s total revenues for the fiscal year.
Nintendo will need to come up with innovative ways to compete with Tencent. The company must create compelling games to attract users away from WeChat and other Tencent platforms. Ideally, Gamers in China tend to prefer mobile games over dedicated gaming consoles. If Nintendo can tap into this market, it could see significant growth in its user base. Moreover, Nintendo will need to compete with Tencent’s WeGame platform by offering a more compelling gaming experience. Otherwise, gamers will stick to playing games on their mobile devices.
Tencent is a constituent of the Hang Seng China Enterprises Index and trades on the Hong Kong Stock Exchange under the ticker 0700. The company’s market capitalization was $335.971 billion as of September 24, 2022.
4. Electronic Arts
Electronic Arts Inc. is an American video game company headquartered in Redwood City, California. EA develops, publishes, and distributes video games. The company is one of the world’s largest third-party video game publishers by revenue. EA’s popular franchises include FIFA, Madden NFL, Need for Speed, Battlefield, and The Sims.
Founded in 1982, EA is a leading player in the gaming industry. The company has a strong portfolio of popular franchises and licenses. EA also has a network of studios that develop games for different platforms, such as PC, consoles, and mobile devices. In 2021, EA generated revenues of $5.629 billion, representing year-over-year growth of 1.66%.
The company is a component of the S&P 500 Index and trades on the Nasdaq Global Select Market under the ticker EA. As of September 24, 2022, EA had a market capitalization of $32.153 billion. EA and Nintendo have a long-standing relationship. The two companies have worked together to bring some of EA’s most popular franchises to Nintendo platforms, such as FIFA and Madden NFL.
Although EA does not directly threaten Nintendo, the company is a formidable competitor. EA has more than 13 million subscribers to its EA Access service, which allows gamers to play a selection of EA’s games for a monthly fee. The company also has a successful mobile gaming business with popular titles such as Tetris and Sims Mobile. EA indirectly competes with Nintendo in the console space through its partnerships with Microsoft and Sony. The company publishes games for both the Xbox and PlayStation platforms.
Nintendo’s competitive advantage over EA is its strong portfolio of first-party IPs. The company has some of the most popular gaming franchises in the world, such as Mario, Zelda, and Pokémon. These IPs give Nintendo a significant advantage over EA, which relies heavily on licensed properties. Moreover, Nintendo has a much stronger presence in the handheld gaming market with its Nintendo 3DS and Nintendo Switch Lite consoles.
5. Sega
Sega Games Co., Ltd. is a Japanese video game developer and publisher headquartered in Tokyo. The company is a subsidiary of Sega Sammy Holdings. Founded in 1960, Sega is one of the oldest video game companies in the world. The company’s popular franchises include Sonic the Hedgehog, Virtua Fighter, and Yakuza.
If you are familiar with the console wars of the early ’90s, you would know that Sega was Nintendo’s chief rival. The company’s 16-bit console, the Sega Genesis, went head-to-head with Nintendo’s Super NES in the market. Although Nintendo eventually won the console wars, Sega remained a strong competitor.
Sega exited the hardware business in 2001 and now focuses on developing and publishing video games. The company has a strong portfolio of IPs and is especially well-known for its arcade games. In 2021, Sega Sammy Holdings generated revenues of $2.70 billion, a decline from $2.79 billion in 2020. The company’s market capitalization was $2.993 billion as of September 24, 2022. Despite its financial struggles, Sega Sammy Holdings is still a significant player in the gaming industry.
For Sega to reach its former glory, it would have to produce a console that could go toe-to-toe with the likes of Sony and Microsoft. But that’s not an easy task, and it’s one that the company failed to do in the past. The Sega Dreamcast was released in 1999 and was widely regarded as a commercial failure. It also hasn’t found much success in the mobile gaming market.
Nintendo’s Growth Strategy
Nintendo has exclusive rights to some of the most popular gaming franchises, such as Mario, Zelda, and Donkey Kong. In addition, the company has a strong portfolio of first-party titles, such as Splatoon, Animal Crossing, and Super Smash Bros. These exclusive rights and first-party titles give Nintendo a competitive advantage in the gaming industry.
The company’s growth strategy focuses on expanding its customer base and tapping into new markets. To expand its customer base, it released the Nintendo Switch, a hybrid console with unique features that appeal to a broader range of gamers. While it doesn’t have plans to release any more consoles soon, Nintendo has long-term plans to continue developing new games with existing consoles and release new consoles when it believes there is market demand.
Nintendo intends to penetrate the Chinese gaming market through a partnership with Tencent. The Chinese market presents a massive opportunity for the company as it is the largest gaming market in the world. Moreover, the partnership with Tencent will help Nintendo reach a larger audience as the Chinese company has a vast distribution network.
Nintendo’s SWOT Analysis
The following are some of Nintendo’s strengths, weaknesses, opportunities, and threats:
Strengths
- Strong portfolio of first-party IPs
- Innovative products
- Diversified business model
- Extensive distribution network
- Effective marketing
- Strategic partnerships
Weaknesses
- Overreliance on console gaming
- Lack of third-party support
- Weak presence in the mobile gaming market
- Slow response to demand
Opportunities
- The rise in popularity of e-sports
- Increased demand for mobile gaming
- Growing demand for AR/VR gaming
Threats
- Intense competition from Sony and Microsoft
- The rise of digital downloads and streaming services
- Tech revolution
- Increased piracy
Nintendo Competitors Analysis (FAQs)
Question: What is Nintendo’s competitive advantage?
Answer: Nintendo’s competitive advantage is its ability to consistently produce high-quality, innovative products that appeal to a wide range of consumers. The company has a long history of success in the video game industry, and its products are widely recognized and respected by gamers worldwide.
Question: What is Nintendo’s business strategy?
Answer: Nintendo’s business strategy revolves around creating unique and engaging experiences that appeal to consumers. The company focuses on developing new and innovative gameplay mechanics and bringing its classic franchises to new audiences. Nintendo also offers competitive pricing on its hardware and software, which has helped it maintain a strong position in the market.
Question: Is Microsoft going to buy Nintendo?
Answer: There is no evidence to suggest that Microsoft is interested in acquiring Nintendo. However, the two companies have been working together more closely recently, with Microsoft allowing Nintendo to use its Azure cloud gaming service for its Switch console. It’s improbable that Microsoft would purchase Nintendo, as the two companies are very different in their approach to the video game market.
Bottom Line
In this Nintendo competitor analysis, we’ve analyzed the company’s key competitors and examined their strengths and weaknesses. Although Nintendo faces stiff competition from Sony and Microsoft, it has a strong portfolio of first-party IPs and innovative products that appeal to many consumers.
Other players in the video game industry, such as Tencent and Electronic Arts, also present a challenge to Nintendo. Still, the company has remained successful by staying true to its roots and delivering unique gaming experiences. Nintendo must continue adapting to the changing market to maintain its position as a leading player in the video game industry.
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