Why Nintendo Are The Richest Videogame Company In The World

Nintendo makes more profit per employee than Goldman
By Robin Harding in Tokyo
Published: September 16 2008 03:00 | Last updated: September 16 2008 03:00

The programmers of Super Mario Galaxy will generate more profit this year than the average Goldman Sachs banker has ever managed.

According to calculations by the Financial Times, the average employee at Japanese video games maker Nintendo is on track to earn more for their company this year than the average Goldman Sachs employee did in 2007, the investment bank's best year yet.

Nintendo also makes more per employee than internet group Google.

For an electronics company to make more per employee than a highpowered investment bank is exceptional, and the figures highlight how profitable Nintendo, a company with fewer than 3,000 permanent employees, has become after the success of its Wii and DS consoles. Before tax and before pay, the average Goldman employee generated $1.24m in profit last year, based on the company's accounts.

But after Nintendo upgraded its earnings forecast recently, the FT estimates each staff member will produce more than $1.6m in profit this year.

Assuming that most of Google's overhead expenses are salaries, the equivalent figure for the internet company would be about $626,000 in 2007.

If Nintendo achieves its net profit target of Y410bn ($3.9bn) this year it will also rival Goldman's pre-tax return on equity, a measure of how well a company uses its shareholders' capital.

Nintendo said that, if anything, the figures underestimated its profitability per employee because it accounts for some salaries as research & development spending.

The FT was unable to deduct these to calculate Nintendo's true profit-before-pay.

Nintendo is able to make so much money with so few people because it relies on outsourcing.

All manufacturing of the Wii is outsourced, and even high-profile games such as Mario Party are developed externally, with oversight from Nintendo producers. In spite of their profitability, however, there is unlikely to be an outbreak of programmers driving Maseratis to work at Nintendo's headquarters in the southern suburbs of Kyoto.

Whereas at Goldman the mean employee walked away with compensation of $660,000 in 2007 - about half of the profit they generated - the average salary at Nintendo was just $90,900. The rest goes to shareholders.

Nintendo and its staff remain humble - another contrast to the 'Masters of the Universe' at big investment banks - in spite of the pressures of running a company that now has a market capitalisation of $64bn.

"We are not experiencing success," says one long-time Nintendo employee, with no sign of dissatisfaction, "just increased overtime".

Alvin Flummux wrote:And to think people were doomsaying before the Wii.

Zartan wrote:If only we had all invested in Nintendo when the Gamecube was being pulled off shelves. I wonder how much the share difference is between then and now.

MCN wrote:

Zartan wrote:If only we had all invested in Nintendo when the Gamecube was being pulled off shelves. I wonder how much the share difference is between then and now.

I believe Invincible did exactly that.

Alvin Flummux wrote:

MCN wrote:

Zartan wrote:If only we had all invested in Nintendo when the Gamecube was being pulled off shelves. I wonder how much the share difference is between then and now.

I believe Invincible did exactly that.

How wealthy is he now? Anybody know?

TheTurnipKing wrote:Considering what they make for shareholders, it's no wonder that Nintendo have never been taken over.

Peter Crisp wrote:That may be but all he has on that yacht is rubbish party games and 9000 copies of Wii Play.