Nintendo illustrates the growing importance of online to its business model

It was once mocked for its reluctance to embrace online, but Nintendo boss Satoru Iwata has told investors that the company has well and truly embraced the internet revolution.

Iwata confirmed that 80 per cent of Wii Us are now connected to the internet, making it the most connected Nintendo console ever released.

Although that’s no surprise as Nintendo only heard about the internet for the first time in 2012, RIGHT? Moving on…

The serious consequence of this, aside from the added benefits it offers gamers, is that Nintendo can now make a good fist digital retail. And the early results are promising.

[Digital] sales in the last fiscal year more than doubled from the previous year and became the highest ever, surpassing the record high three years ago,” Iwata told investors. The deployment of add-on content last year and the digital download sales of packaged software we started last July are contributing to the current sales growth.

With regard to Animal Crossing: New Leaf we released in Japan last November, many consumers have chosen its download version partly because the game is one that you can enjoy every day over a long period of time.

The other reason is the short supply of the packaged version of the game for a long time as its sales pace was unexpectedly high, but we could not increase production due to its special memory chip. We are very sorry about this, but we think a considerable number of consumers chose the download version as an alternative to the packaged version.”

But it’s not just playing catch up – Nintendo is actually taking the lead when it comes to the sale of digital goods at retail.

Since last July, we have been continuing to make both packaged and download versions available,” he added. A characteristic of our digital business is that we have also sold download versions at retailers in the form of POSA (Point Of Sales Activation) cards on the shelves. Thanks to the fact that retailers do not have to stock actual inventory, some convenience stores, including 7-Eleven, have made POSA cards available.

We intentionally adopted different methods because, as we mentioned before, we thought that one of the biggest hurdles is the limited exposure of the digital download products. If only the consumers who proactively visited the Nintendo eShop were aware of the digital download software that we deployed, there would be no chance that our digital business would dramatically expand.

And Nintendo has also cracked another myth – that consumers won’t fork out for a digital game if it offers no cost saving compared to physical.

Some might be sceptical about how much downloadable software would be sold at retail stores without any discounts from the suggested retail price of the packaged counterpart,” he explained. Actually, however, as you can see, more than two-thirds of the download version of Animal Crossing: New Leaf has been sold through retailers.

It is not necessarily correct to stereotypically position digital business as an enemy to retailers. Some of the consumers who bought the download version at a retail outlet might have had no knowledge of the Nintendo eShop before. Others might have had some psychological barrier to making online purchases, but chose the download version because they were able to make a payment at a retail store.

In addition, we have recently started trying to have retailers put download-only software, not the download version of packaged software, on their shelves. I will keep you updated on our progress in future presentations.”

There are long-term benefits to this strategy, too, with Nintendo data suggesting that once a gamer has tried downloading software they are far more likely to do so again.