Nintendo’s Animals May Be a Covid-19 Netflix Moment

(Bloomberg Opinion) -- Nintendo Co. is getting a boost from the Covid-19 lockdown thanks to its smash-hit new game, “Animal Crossing: New Horizons.” But the unexpected boon of a captive audience differs markedly from the one being enjoyed by Netflix Inc., and the Japanese company’s success needs examining for how well it can keep gamers addicted.

“Animal Crossing” is helping Nintendo push software sales and sell out of its Switch hardware console. The game itself sold 11.8 million units, the second-highest quarterly figure behind “Pokemon Sword/Shield,” which was released in the pre-Christmas peak. That helped the company ship 3.3 million units of the Switch, closing out the fiscal year to March with sales of 21 million, ahead of its own 19.5 million forecast. Yet the longer-term value may be in keeping the handheld games machine relevant. That’s not so clear.

Quarantined consumers around the world have turned to digital entertainment to keep themselves, and their kids, occupied. For Netflix, that means more people signing on for subscriptions. If it’s lucky, the purveyor of streaming video will keep collecting monthly revenue even after lockdowns are lifted, because many consumers will never bother to cancel. 

Nintendo doesn’t enjoy that kind of forgettable revenue stream. 

“Animal Crossing” is a $59.99 one-time buy. The game puts players in a virtual world, starting with their own island upon which they can design a house, grow food, fish in the sea or visit friends. It’s become a social phenomenon and the family-friendly play has made it a godsend for stressed-out, work-from-home parents trying to keep kids occupied.

After the initial purchase, it’s possible that players will want to sign up for a Switch Online subscription, giving Nintendo as much as $20 extra per year, but that’s not guaranteed, nor is it necessary to keep playing. Of course, the console (from $199.99) itself is needed and “Animal Crossing” has spurred such demand for the hardware that suppliers haven’t been able to keep up.

What will be valuable to Nintendo is the reminder to Switch owners that they even have the device. Launched three years ago, it’s a hybrid handheld-cum-console that allows gamers to play on a connected TV, or to pick up and go — hence the name. It’s likely that millions now sit in drawers, alongside old phones and USB thumb drives. Such dust collectors don’t create any further revenue for Nintendo. And, as my colleague Tae Kim noted recently, Microsoft Corp. and Sony Corp. have shinier new consoles coming later this year.

The technological upmanship is less important than game quality and experience. The beauty of “Animal Crossing” is that it doesn’t need leading-edge graphics chips or high-speed internet connections. It’s simple and accessible to the whole family. But Nintendo does need to keep people engaged, not only with the game but with the idea that the Switch is a fun device that will hold their interest in the face of more exciting new hardware options. 

With Nintendo releasing new games and upgrades to existing titles in coming months, one of the most powerful marketing tools will be the device already in consumers’ hands and their desire for something fresh. While the World Health Organization notes that gaming can be a health measure — keeping people at home instead of going out — others note that addiction is also likely to rise. For parents, though, the fare offered by Nintendo makes almost any title a safe choice for keeping kids occupied, and perhaps even educated.

Netflix also knows the value of helping people while away hours stuck inside. It added a record 15.8 million subscribers during the quarter. Yet it also warned investors not to expect such growth to continue. By contrast, Switch may offer longevity that streaming video doesn’t: The device is portable and its games are innately social.

Which means that in coming months, Nintendo may discover that a Switch in hand is worth two in the drawer.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

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