(Bloomberg) -- Nintendo Co.’s Switch console is cool.
Now the company has taken the important step of monetizing that chic with recurring revenue. In doing so, it should be able to replicate the success of Sony Corp., and then some.
At just $3.99 per month, Nintendo Switch Online will be less than half the price of Sony’s PlayStation Plus ($9.99) when it launches in September. Both companies also offer long-term discounts — $19.99 for 12 months at Nintendo, and $59.99 for Sony. Nintendo’s package includes online play, cloud backup, a smartphone app and special offers.
Analysts and some consumers may slice and dice the two to conclude that Sony isn’t the bad deal it appears because it offers more. But that’s barely the point. Nintendo is smart enough to provide a budget option pitched at families: $34.99 a year with access for up to eight account holders.
The incremental cost of one more user is probably negligible whether through the standard package or the family option, but the upside is immense. In addition to recurring revenue, Nintendo joins Sony in getting paid to induce loyalty.
Apple Inc. learned years ago the value of having a consumer’s credit card on file, with businesses from Amazon.com Inc. to Netflix Inc. and Spotify Technology SA profiting since then from reducing friction in the payments process. At Netflix, for example, you pay every month without even opening your wallet.
That’s why Nintendo’s move to a subscription service should be lucrative. The price is not only low, but so is the barrier to consumers spending money. And just as for Sony, Amazon, Netflix and Spotify, many Nintendo customers will soon forget they’re forking out cash on a regular basis.
With that, Nintendo flicks the switch on a really lucrative revenue stream.
©2018 Bloomberg L.P.