Ever wonder why Nintendo is so protective of their intellectual property? Curious as to why Valve is content with managing Steam instead of developing the next Half Life? Why are console makers pushing for digital downloads as opposed to physical copies? Well, it’s all about the money. Let’s dive in.

Several years ago, Unreality Magazine published an article that provided a generic framework for how a $59.99 video game is splint among retailers, publishers, developers, and console owners. The article is dated, and the percentages have shifted; however, the framework provides keen insight into the questions asked above. Here is the split based on 2011 figures:

Right away we can begin to understand why Nintendo, Microsoft, and Sony have been steering consumers towards digital releases of their video games. By owning the digital storefront, the console maker can capture the percentage of sales normally reserved for retailers. A shift to digital sales gives Nintendo, Microsoft, and Sony tremendous bargaining power when negotiating revenue sharing; therefore, the 20 percent dedicated to physical retailers has more than likely (significantly) decreased.

We can also see why Valve has largely foregone developing video games in favor of managing its Steam application. Based on a report from Statista, over 62 million new users downloaded Steam in 2017 alone. While Valve undoubtedly is not earning 20 percent for each video game downloaded, the Steam platform is less costly and much easier to manage than the development cycle of the next Half Life installment.

Let’s get into 2018. VGChartz tracks the global year-to-date sales of video games, which provide some insight into just how valuable first-party development is for Nintendo. The current YTD sales figures are as follows:

Title	Developer	Publisher	Console	YTD Sales
God of War	Sony	Sony	Sony	4,917,414
Monster Hunter World	Capcom	Capcom	Multi	4,338,372
Far Cry 5	Ubisoft	Ubisoft	Multi	5,208,184
Spider-Man	Insomniac	Sony	Sony	3,552,950
Mario Kart 7 Deluxe	Nintendo	Nintendo	Nintendo	3,038,880
Super Mario Odyssey	Nintendo	Nintendo	Nintendo	2,390,491
The Legend of Zelda: BOTW	Nintendo	Nintendo	Nintendo	2,015,092
Splatoon 2	Nintendo	Nintendo	Nintendo	1,977,242
FIFA 18	EA	EA	Multi	1,591,677
Kirby Star Allies	Nintendo	Nintendo	Nintendo	1,562,406

Sony has two console-exclusive titles in the top five of year-to-date sales, which should bode well for the company’s profitability. Sony, Microsoft, and Valve will each earn their respective share of multi-platform games, but a breakdown of approximate revenue form the list above highlights the value of Nintendo’s IP.

Company	Developer $	Publisher $	Console $	Total
Nintendo	$ 98,856,999	$ 197,713,998	$ 131,809,332	$ 428,380,329
Sony	$ 44,256,726	$ 152,466,552	$ 121,507,176	$ 318,230,454
Capcom	$ 39,045,348	$   78,090,696	$                     –	$ 117,136,044
Ubisoft	$ 46,873,656	$   60,935,310	$                     –	$ 107,808,966
EA	$ 14,325,093	$   28,650,186	$                     –	$   42,975,279
Insomniac	$ 31,976,550	$                     –	$                     –	$   31,976,550

Despite only having one game in the top 5 of year-to-date sales, Nintendo earned well over $100 million more than Sony by acting as the sole developer, publisher, and console owner for its games. Although the landscape will shift as sales figures for Red Dead Redemption 2, Fallout 76, Call of Duty Black Ops IIII, and other fall games are released, Nintendo’s intellectual property remains a dominant revenue stream.