Smash as a Service

Since Super Smash Bros release 19 years ago, video games have evolved. One such mutation, for better or worse, is the creation of “Games as a Service”. It has become a hot new term from the industry that basically equates to games constantly updating and adding new content paid for by additional paid content and add-ons. While I think analyst overblow it, it has grown due to the amount of revenue these games can generate. Nintendo, too, has been stepping into this market and I think the newest Smash will be the next game to try Nintendo’s unique take on this model.

Splatoon Model

Nintendo’s first foray into Games as a Service was really Splatoon. The game launched with a single player campaign and a few maps, weapons and items. Over time, the game was updated to include more maps, weapons and gear. The game also featured “Splat Fest” events where players could choose a team and fight for items and glory.

Splatoon has been Nintendo’s most successful new IP, which the original game selling close to 5 million copies on the Wii U. Already, Splatoon 2 has surpassed it selling 6 million units. The model has worked so well that it has been tried with other games. ARMS also had extra content after launch and still gets the Splat Fest equivalent Party Crashes. It even had a Global Testpunch similar to Splatoon’s Global Testfire. Mario Tennis Aces may follow a similar path as it already received a Pre-launch tournament.

Given that Nintendo has done this with many of their other titles, I fully expect they will continue this with the new Super Smash Bros. The game will have its own “TestSmash”, constant free updates and online events.

Why This Matters

When I bring this up, the comment I often get it “why would Nintendo want to make the DLC free. Wouldn’t they want to make more money.” The answer is two fold.

First, Nintendo sees this as a way to increase hardware sales. In discussing how Nintendo plans to increase sales in the second year, the company said the following:

We are providing more downloadable content and hosting events that build excitement for our games to give consumers a fresh sense of enjoyment and extend the time they spend playing the titles they have purchased. The way Splatoon 2 is being played in Japan is an example of how efforts on the game software side can also impact the use of the hardware. The vertical axis of this graph depicts the number of active users over the passage of time across the horizontal axis. Normally, hardware use tends to drop off to a certain extent after the holiday season, but with Splatoon 2, the weekly number of active users remained high even beyond the start of the new year. Activity in Splatoon 2 is particularly high in Japan, but that same trend is now also being seen in other markets, so we intend to continue to focus on this area.

Nintendo’s goal is to keep customers engaged with the system. Essentially, Nintendo wants consumers to use Switch more. As an aside, Nintendo notes that they “intent to focus on this area,” so it's clear they will use a similar strategy going forward.

The other, more important reason Nintendo is willing to give Smash content away for free is because they have a better way to make money: the Nintendo Switch Online.

Consider Sony. The company has made a killing this generation with Playstation Plus and its been one of its biggest drivers for revenue (and its not surprising why Nintendo is now going toward paid online). In Fiscal Year 2017, Sony made 270 billion yen from Networking Services (most of which was made up from Playstation Plus subscriptions) and comprised 43 percent of total Game and Network revenue. Moreover, network sales have continued to grow and has become an incredible source of revenue for the company.  (source: https://www.sony.net/SonyInfo/IR/library/presen/er/17q4_supplement.pdf_)

To really show how profitable this move is, lets do some math. In Japan, the service will cost 2,400 yen. And in fiscal year 2015 (when Smash Bros DLC came out), download sales were 43.9 billion yen. In order to make that same amount, Nintendo only needs 18.3 million users to sign up at 2,400, a number that wont be too hard to reach over the Switch’s lifespan. Also keep in mind that the 2015 fiscal year also had DLC for Mario Kart 8 and Fire Emblem Fates, so that amount wasn’t all Smash Bros. Nevertheless, Super Smash Bros Brawl sold 13 million, so you can see why Nintendo will want to launch the service alongside Smash. And the DLC will need to be free in order to keep people playing and paying. Just as Splatoon has done, Smash with additional characters and online events is a great way to keep the cash rolling in. While it may seem counterproductive to give the DLC away for free, its clear Nintendo can make far more by having Super Smash Bros become more service oriented.

Conclusion

Given that Nintendo wants to increase hardware sales through increased engagement and the fact that online subscriptions have the potential to generate massive wealth, I expect Smash Bros will follow a similar path to Splatoon. The game will have constant updates and online events. Essentially, it will follow a similar trend to the company’s other multiplayer games like ARMS and Mario Tennis Aces. I expect there will be fewer guest characters as it will be far cheaper to use their own characters, and there will also be fewer new characters compared to other titles. And, of course, all the new characters will be free.