Introduction

Nintendo’s strength has always come from a simple idea: start with a mechanic that feels fun and build the rest of the game around it. Everything else, from hardware decisions to character design, exists to make that mechanic better. That is their value proposition and their moat.

Recent product launches proved that the model still works. In its first reporting period, the Switch 2 sold 5.82 million units and shipped 8.67 million games. Mario Kart World, as another example, sold 5.63 million copies in the same window. That kind of attach rate is rare in any market segment.

Bananza is just the latest example of this. The team began with a destruction mechanic, tested it until it felt right, and only then built the rest of the experience. When the original Switch hardware could not handle their vision, they moved to Switch 2 to deliver the full design. 

But what’s behind Nintendo’s strategy? Here’s my take on it.

Strategic positioning

Nintendo plays in what is largely a blue ocean within the broader games industry. If you’re not familiar with the terminology, think of it as a market space with little or no competition, where a company essentially creates new demand rather than compete over existing demand (aka a red ocean). That’s the beauty of their mechanics-first, mass-appeal games built around their own hardware.

Nintendo is not trying to outdo Sony on cinematic fidelity or Microsoft on subscription ecosystems. They own a segment built around mechanics-first games for the mass market. These games are instantly accessible, deeply engaging, and universally appealing.

It is a position that is hard to copy. You need a culture that puts mechanics ahead of marketing beats, genre conventions, or tech showpieces. Most studios are built the opposite way. And there is a direct link between this design philosophy and financial resilience. By locking in the mechanic first, Nintendo keeps production cycles lean and budgets in check. If the mechanic works, it can live across sequels, spin-offs, and even hardware innovations, which spreads R&D costs over years. 

A good example of this is the 3D Mario games and the jump mechanics pioneered way back in Mario 64. hat single design decision has carried through every 3D Mario since, paying off the original investment many times over. 

Ultimately, this strategy keeps margins high, revenue predictable, and risk low(er). It also funds the next round of experiments without taking on excessive financial risk.

Competitive context

By contrast, Sony leans on prestige storytelling and fidelity. Microsoft plays for scale with Game Pass and platform reach. Mobile wins on speed to market and sheer audience size, but it sacrifices depth. Indie developers can match Nintendo’s creativity, but not the reach, polish, or trust built over decades. 

Nintendo isn’t trying to win those fights. They’ve built a lane where profitability starts at the hardware level and the audience expects mechanics-first games. Switch Online brings in over 1.19 billion dollars a year, and films, theme parks, and mobile licensing add another 600 million. That kind of stability means Nintendo can take creative risks without betting the company on a single release.

Market segments

Now the target market is where the real magic happens.

Nintendo’s audience works like a relay. Families bring the early surge that makes a new console feel like an event. The regular players keep the revenue steady with DLC, events, and subscriptions. Creators make sure old games never really disappear by streaming, speedrunning, and modding. Parents then pass the brand down so the next generation starts where they did (I’m already preparing my newborn to pick up Mario Kart once he’s old enough). This mix gives Nintendo both the launch spikes and the long tail that most competitors never manage to pull off.

Case study: Donkey Kong Bananza

Let’s look at the latest AAA release from Nintendo.

Bananza’s design goal was simple. Create satisfying chain reactions of destruction. Everything in the game serves that mechanic. The animation timing, the way objects break apart, and even DK’s looks were chosen to make the mechanic clearer and more rewarding.

In early prototypes the team attached giant Mario Odyssey boss hands to a Goomba just to test the destruction system. It looked absolutely ridiculous but it worked. That willingness to experiment quickly and without overthinking is part of Nintendo’s culture. It also keeps scope focused and resources aimed at the one thing that makes the game worth building, which is why these projects can stay profitable without losing their edge. When the original Switch could not handle the performance target they moved the game to Switch 2. The mechanic is the heart of the experience. Compromising it to fit the platform would have weakened the game.

Enabling culture and organisation

Perhaps the most important (and fascinating) part of understanding Nintendo’s success is the culture underpinning its strategy.

A culture that actually makes room for innovation is non-negotiable if you want meaningful product development. From developer interviews and Bananza’s development path, here’s what stands out:

• Allow for experimentation and to build small prototypes, even if most get scrapped
• Let hardware and software teams work together from day one (no silos!)
• Reuse proven systems like engine components, asset pipelines, or even UI frameworks, so more time goes into new ideas
• Keep budget aside for moonshot concepts that could shape the next hardware cycle

Each point builds on the last, and if one falls away, the pace slows, risk-taking fades, and the model gets harder to sustain. I’ve seen countless times in my own work when leadership cut one of these pillars, and the development speed slowed down almost overnight.

Wrapping things up

Interesting things lie ahead for Nintendo. Their strategy is rooted in their core value proposition, which is that games should simply fun to play.

The Switch 2 will give Nintendo space to experiment. The risk, however, is leaning too hard on safe sequels. But as long as Nintendo continues their strategy of taking a mechanics-first approach into new IP, genres, and games, then the rest of the industry will be chasing them.

Appendix: Sources

• Nintendo Investor Relations (June 30, 2025)
• GamesRadar+ (2025)
• GadgetGuy (2025)
• Nintendo “Ask the Developer” interview (2025)