Marketing / Organizational Strategy / Product Development / Technology

What Will the Nintendo Switch’s Impact be on the Company’s Financials and Overall Direction?

Nintendo Switch console and controller

The Nintendo Switch, Nintendo’s ninth-generation gaming console, is set to release on March 3, 2017. Image Credit: BagoGames

On January 12th, Nintendo unveiled the release details of its new gaming console, the Nintendo Switch. After the unveiling, its stock price fell 5.75% on the Tokyo trading market.  Most analysts don’t believe it differentiates itself enough from its main competitors, Microsoft and Sony. Its just another example of Nintendo’s troubling performance that has followed the meteoric rise of the Nintendo Wii.

The dip in stock price isn’t necessarily a sign of things to come but it definitely displays the monumental importance of this upcoming release, which will take place on March 3rd. Nintendo’s eighth-generation console , the Wii U has sold a measly 13 million units. For comparison, Sony’s eighth-gen console, the PS4 has sold 53.4 million units.

The Wii U’s performance is even worse when compared to its predecessor, the Wii, which sold 101 million units and the Wii’s portable counterpart, the Nintendo DS, which sold 154 million units. The Wii U’s portable counterpart, the Nintendo 3DS has sold a respectable 61 million units, but the poor performance by the Wii U has been a significant drag on revenue. Additionally, Nintendo’s highly anticipated smartphone game “Super Mario Run” fell far below revenue expectations, despite nearly 40 million downloads. Nintendo stock did briefly spike when Pokemon Go was in its prime, but investors then realized that Nintendo did not actually make the game.

Nintendo has been a heavy slide since the aging of the seventh-generation of gaming (Wii generation). If the Switch is not successful it could lead to heavy investor pressure for  the company to switch focus from original gaming hardware to smartphone/tablet gaming software. This could mean Nintendo would shift from being the innovative gaming system manufacturer it has been since the 1980’s, to becoming a company that leverages its gaming brands such as Super Mario to create smartphone games that resemble pricing structures like Candy Crush or Clash of Clans.

If the Switch does fail, pressure to make that change would be a reasonable investor reaction, but from a gamer perspective it would be a shame to see a company that has had such an effect on the gaming world fall to that point. So what should we expect to see happen to Nintendo stock going forward? Time has shown that it is often difficult to predict a gaming console’s performance ahead of time. But certain factors can help one predict.

What games are accompanying the console?

The next installment of the famed Zelda franchise, “The Legend of Zelda: Breath of the Wild,” will release alongside the Switch. The game is highly anticipated and will surely help drive up sales of the device at launch. The trailer below shows off the games graphics, innovative gameplay and an expansive, open world.

If you have a nerdy affinity for Nintendo games like I do, you likely understand the hype the trailer has created. It’s important for gaming systems to have games that pair with it at release so that gamers buy the console at its release and immediately begin playing. In this regard, Nintendo brings a great pairing to the table at its release. However, not many other notable games are coming at immediate release. It seems the hope for Nintendo is that the anticipation of “Breath of the Wild” will be enough to drive sales at release.

Other notable games are coming later in 2017 as well. “Mario Kart 8 Deluxe” is expected to release in late April. The Mario Kart franchise has sold over 100 million copies in its different installments since its introduction to the second-generation Super Nintendo in 1992. It’s been a cash cow franchise that tends to drive interest in Nintendo consoles, so its smart of Nintendo to release it soon after the system’s release. Additionally, “Super Mario Odyssey” is expected to arrive during the 2017 holidays. It builds off of elements from the popular “Super Mario Galaxy” and brings in elements of open world city play similar to the “Grand Theft Auto” franchise.

This just covers a few of the games to release for the Switch in 2017, but hopefully it displays the exciting graphics and gameplay of the switch combined with the anticipation of certain games coming with the system.

Excitement and anticipation have been thrown around a lot in this article, but it might be one of the most important aspects to the system’s success. The Nintendo Wii was highly anticipated for its active-gaming setup, and became one of only five consoles in video game history to eclipse the 100 million units-sold mark. The teasers of the Switch and its games throughout 2016 have generated buzz, far more buzz than the Wii U ever generated. And for whatever reasons, gamers seem to be excited about the Switch. I personally was considering buying either an Xbox One or Playstation 4 and cutting ties with Nintendo before the announcement of the Switch. It now has me thinking about returning to what is widely considered the first video game giant.

Sources:

http://www.businessinsider.com/nintendo-switch-will-sell-2-million-consoles-2016-10

http://www.polygon.com/nintendo-switch/2017/1/15/14280604/nintendo-switch-pre-order-gamestop-ebay-gray-market

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