The other thing that's interesting is that they're expecting a 8.9% reduction in Switch hardware unit sales and a 10.7% reduction in software unit sales, but only a 5.6% reduction in net sales. With Switch hardware and software accounting for the vast majority of their net sales, that would indicate they're expecting an increase in average selling price on either hardware or software or both. This would be very unusual for the tail end of a hardware cycle, to say the least.
In fact, we can do some very rough maths on it. Looking at hardware and software unit decreases in their forecast, we would probably assume a net sales forecast somewhere around 1.5 trillion yen, or lower than their actual forecast by 100 billion yen, or 770 million USD (using very rough estimates here). This means they're expecting around 100 billion yen of revenue to come from something other than just selling more software or hardware units.
This revenue could be from a few different sources:
1. Increased ASP of Switch hardware
2. Increased ASP of boxed software and digital versions of boxed software
3. Increased sales of digital-only software (this isn't included in the 210m estimate), Switch Online, etc.
4. Increased revenue from anything other than Switch consoles and software.
I'll go through this list in reverse, just to get the easy ones out of the way first. First is the "everything else" category, which includes Switch accessories, licensing and mobile revenues, playing cards, etc. On the Switch accessories category, I'd fully expect this to track hardware and software sales, and be down or stable year-on-year. I was about to say it could be licensing revenues from the Mario movie, but I just remembered it had been pushed back to April 2023, so just outside the FY. Their "Mobile, IP related income, etc" was 53.3 billion yen this past FY, so it would need to triple to account for the extra 100 billion, which I don't see happening.
Digital-only software I'd expect to track pretty closely with boxed software, so down or stable YoY, but Switch Online could well increase, as I expect them to increasingly push the service. However, I don't think it will be close to accounting for 100 billion yen in additional revenue. If we look at the data on page 13 of
today's briefing slides, we can get the following figures for this past FY:
Total software sales: 844.1 billion yen
Digital software sales: 359.6 billion yen (42.6% of software sales)
Digital sales of boxed software: 202.1 billion yen
Download-only software, add-on content, and Nintendo Switch Online, etc.: 157.2 billion yen
So if Switch Online revenues account for about 30% of the last segment, they would need to triple to account for an extra 100 billion of revenue. That seems like a stretch. I could definitely see it accounting for part of this extra revenue, but only a relatively small part.
On the boxed software side, I would find it very unlikely that ASP would increase substantially towards the tail end of a console's life cycle. Usually I would expect the opposite, as customers pick up discounted older software, although Nintendo is still able to sell millions of copies of MK8 each year for $60, so I don't expect much discounting any time soon. However, we do have the numbers, and we know that they sold 235.07 million units last year of boxed software and digital versions thereof, and we know from above that they made 686.9 billion yen of revenue form those, so the ASP in the last FY was 2,922 yen for boxed software. This is about $26 going by the average FY exchange rate from their financial report. Keep in mind this excludes retailer and distributor margins, and includes third party software where Nintendo only see a smaller portion of the revenue.
If we account for the discrepancy entirely by increasing the ASP of boxed software, it would have to jump to 3,397 yen, or about $29.50 going by the exchange rate Nintendo are using for their projections. This is a 16% ASP increase, which seems pretty unlikely YoY outside of any change in pricing strategy (ie hiking everything up to $70), and again doesn't really align with expectations for a console towards the end of its life. Consider as well that one of Nintendo's big releases this FY is Switch Sports, which is selling at around 33%
lower price than most of their titles. That doesn't really align with internal projections of a big jump in software ASP.
Then, finally we come to console sales. We know from page 5 of the slides that hardware sales accounted for 48.4% of total "dedicated video game platform" this past FY. It's not 100% clear if this includes accessories, but I don't think it does, as on page 4 is specifies that "dedicated video game platform" comprises of hardware, software and accessories, which would imply accessories are not part of hardware. If that is the case, then Nintendo received 793.4 billion yen for the 23.06 million Switch units sold last FY. This comes to an ASP of 34,405 yen, or $306.26 by their average FY exchange rate. We also have numbers for FY21 in the same slides, where hardware was 52.7% of 1.7 trillion yen, or 895.9 billion yen, and over 28.83 million units, that comes to 31,075 yen ASP.
This is a 10.7% YoY ASP increase in yen, and part of this increase last FY was due to exchange rates, as EUR and USD gained 5.5% and 6% respectively on JPY over the year. Japan accounted for 21% of their sales last FY, so exchange rate fluctuations accounted for probably a bit under 5% of the ASP increase. The rest was a combination of the new OLED model, and the Lite accounting for a smaller proportion of sales.
For this coming fiscal year, if we're to assume the missing 100 billion yen is all hardware ASP increases, then we take the 793.37 billion of last year, subtract 8.9%, add the 100 billion, and divide by 21 million hardware units. This gives us 39,179 yen ASP. This is a 14% increase YoY. Their forecasts include a slightly higher JPYUSD FX rate than last FY (by 2.3%), and a slightly lower JPYEUR FX rate (by 4.2%), so it doesn't look like they expect this to be driven by FX movements.
Last FY Nintendo released a new, more expensive model and saw a sharp decline in sales of their cheapest model, and saw FX-adjusted hardware ASP increase by around 6-7% YoY. This FY, if there's no dramatic increase in revenue from other areas (which seems unlikely), they seem to be projecting as much as a 14% increase in hardware ASP YoY. That's hard to explain without either Nintendo stopping sales of one or both of the Lite or standard Switch models (not particularly likely), or new Switch hardware that has a higher selling price than the OLED model.
There is also one other area the revenue could come from that I left out of my list of 4 items above; sales of gaming hardware that isn't the Switch. Nintendo only lists Switch sales forecasts, and if they release a device that they don't consider part of the Switch family, then it wouldn't be included in the forecasts. If a Switch 2 (or whatever they call it) comes out this FY, and they don't do any GBC funny business about counting it with the original Switch, then it would account for additional sales over and above the forecasts. Therefore this doesn't necessarily mean an increase in ASP, although there's nothing to imply ASP one way or the other, given we don't have estimates of sales numbers of the hypothetical new device, and may appear alongside price drops of the existing Switch, which would muddy the waters there as well.
TLDR: It's very hard to reconcile Nintendo's projections on hardware and software sales with their projected revenue, unless either (a) a new model in the Switch family is released and sold for a higher price than the OLED model or (b) a new console that's not part of the Switch family is released, which may or may not be sold for a higher price.
, would be better. 
