Is the Switch Nintendo’s last chance?

Nintendo’s new console, the Switch, has had something of an odd reveal. On the surface it has been a critical and consumer success; its reveal video has been watched over 20 million times, and it has been received warmly by industry critics and fans alike. Many people think the direction Nintendo is going in is the right one; namely, not attempting to compete with the arms race of Sony and Microsoft, rather forging their own path, tailored towards their own fan base. The problem is if Nintendo only sell to their fan base, then it’s quite possible the Switch will fail. And if the Switch fails, that might well be the end for Nintendo as a home console hardware manufacturer.

Arguably, the most important group of people, the Nintendo investors, and future investors, were unimpressed with the Switch. Nintendo’s share price slumped after the announcement of the Switch with many investors wary of the failures of their previous console, the Wii U. Though prices have stabilized since, even industry critics have started to become concerned with the lack of information emanating from the Kyoto-based company over issues like power, resolution and battery length. Finally, a lack of a price, has also led many to become increasingly weary of the possibility of Nintendo’s new console.

There is no doubt that the Switch’s predecessor, the Wii U was a commercial failure. The Wii U has sold a shade over 13.5 million units worldwide, which is a million short of Sony’s handheld Vita. Many people, including Sony, see the Vita as a failure which puts the Wii U’s sales into perspective. But if you look a little deeper into Nintendo’s recent home console sales, you find they have further issues.

Since Sony released the PlayStation they have sold 392 million units worldwide, encompassing the PS, PS2, PS3 and PS4. Across Microsoft’s 3 consoles, the Xbox, Xbox 360 and Xbox One, they have sold 132 million units. By contrast Nintendo have sold 167 million units including sales of the N64, GameCube, Wii and Wii U. If you take the colossal success of the Wii out then you get the far more modest number of 66 million units. Even though Nintendo say they are not competing with Sony and Microsoft, these are still worrying numbers.

Nintendo are a profit making company, they sell software and hardware, principally to make money. The problem is Nintendo’s IP is worth far more than their console sales suggest. Investors know this, which is why the Switch is under so much pressure. Investors are seeing that Nintendo could make more money if they scrapped their home console manufacturer and put their best IP’s on Sony and Microsoft’s consoles. Mario, Zelda, Metroid; Sony and Microsoft would pay through their noses for exclusivity for these games, and the sales would, conceivably, be far more on those platforms simply because of the numbers of consoles compared to what Nintendo, on past statistics, are offering. Which is why investors are so twitchy about Nintendo’s new console, they want to make money.

No one is expecting the Switch to sell Wii numbers. But if it sells Wii U numbers, then Nintendo are in trouble. Anything between GameCube and N64 numbers, around 25 – 30 million units, might be enough. Coupled with Nintendo’s foray into mobile gaming and those numbers are sound, but there is another issue. The Switch is a hybrid console; part handheld, part home console. This suggests that they are going to scrap their dedicated handheld division, which again is sound business sense–More people are playing on mobile and Nintendo want to capitalize on that, by streamlining their consoles to incorporate mobile. The problem is they are removing more hardware sales and piling more pressure on the Switch to facilitate both. And if the mobile idea bombs that leaves the Switch the last man standing.

It seems that Nintendo are looking to streamline their hardware and delve into new markets. They clearly are not interested in their competition—if they perceive they have any—and are more interested in their core fan base. But their core fan base has dwindled due to that competition, and if the Switch only sells to that fan base then it will be perceived a failure. Nintendo’s success came from innovation, and expanding gaming to the masses, the Wii and DS are great examples of that. But more recent attempts have left them in the dust and under pressure. Nintendo are never going to go away, they are too big for that, and their software far too good. It’s not inconceivable though, that the Switch is Nintendo’s last stand for home console hardware manufacture and it will be a shame if the ever evolving console sphere leaves them behind.

 

 

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