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Is Nintendo Switch really as successful as we think it is?

Review of the Year: We look at a landmark 12 months for Nintendo

Success typically depends on expectation.

How well you think you will do and how you end up doing dictates our reaction. That's why Resident Evil 7 can sell 4 million copies and be described as 'disappointing', whereas a strategy game can shift 250,000 units and be called an unmitigated success.

In that regard, Nintendo Switch is an unquestionable triumph.

Nintendo had set itself a target of 2 million consoles sold by the end of its first month and ended up selling 2.74 million, having to fly in stock to try and meet demand (at great additional cost). The firm raised its full year projections to 10 million and then, three months later, raised projections again to 14 million for its financial year. By the end of March, Nintendo expects to have shipped 16.74 million Switch consoles worldwide.

"The market expectation is that the Switch will effectively replace Wii U and its 3DS sister machine"

So it has utterly smashed its own expectations but, just as significantly, it outshone everyone else's estimations, too. IHS expected Switch to sell 4.4 million units by the end of 2017 (it did that by the end of July), SuperData was slightly more optimistic with a 5 million prediction (it passed that shortly afterwards). Both analysts felt they had been optimistic, as both numbers were higher than what the Wii U managed.

Daniel Ahmad at Niko Partners took to Twitter to suggest that it isn't impossible for Switch to ship 10 million units in its first year. Even that optimistic analysis is likely to be beaten.

Nintendo's strategy and pitch just worked. The initial weak software line-up and high priced accessories and games didn't have the negative impact many had predicted, partially due to the quality of The Legend of Zelda: Breath of the Wild. The decision to spread out releases throughout the year turned out to be a brilliant one, with the console continually in the news with critically acclaimed software such as Mario Kart 8 Deluxe, Arms, Splatoon 2, Mario + Rabbids and Super Mario Odyssey.

There's no denying it, Switch (along with PUBG) is this year's success story.

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Nintendo Switch beat every expectation

Yet, seeing as we're taking a closer look at the key topics of 2017, perhaps it's worth considering a slightly contrary view of where Switch goes from here.

Nintendo has stated that the Switch is a home console, and you can see why; the games feel like home console titles, and according to Nintendo's own data, most gamers are playing the device on the TV at least occasionally. In fact, the data did show that 30 per cent of the audience primarily play in handheld mode, but it's not clear exactly where they are playing (because if they are anything like me, they're probably playing from the comfort of their sofa).

This means the market and media has been comparing Switch to Wii U, and seeing as that console was a big flop, the comparisons look favourable. Switch has already more than doubled Wii U's first year and will likely have passed its lifetime sales number before the end of 2017.

"3DS shipped almost 17m units by the end of its first year. That's pretty much identical to what Nintendo Switch is expected to do"

However, the market expectation is that the Switch will be Nintendo's only console hardware release for some time, effectively replacing Wii U and its 3DS sister machine (although the 3DS continues to have a retail presence at this moment). Comparisons to 3DS are less favourable. 3DS had a lower price point, yet it suffered a troubled first few months, and still shipped almost 17m units by the end of its first year. That's pretty much identical to what Nintendo Switch is expected to do.

Indeed, over the course of the Wii U/3DS generation, Nintendo will have sold around 85 million consoles - and this is a generation widely seen as a disappointment for the company (as a comparison, Xbox 360 and PS3 both sold around 84 million consoles each).

Comparing Wii U and 3DS to Nintendo Switch is not completely fair, of course. The product is very different to both devices, there will have been a significant cross-over between the Wii U and 3DS audiences, and 3DS' price point was (and is) significantly lower. In addition, Nintendo's investment in smartphone games may effectively replace its legacy handheld business over time.

Nevertheless, if Nintendo wants to have a bigger generation this time around, then it needs to beat 85 million. The 100 million Switch sales figure that Nintendo has casually suggested in its financial calls now looks more like a genuine sales target. It's been a decent first year, but we are a long way away from reaching those figures.

In addition, with a reliance on one console, Nintendo will be hoping for a higher spend per user on Switch than what it has achieved previously. This is going to require a stronger slate of software and digital add-ons that extends beyond its first few years; not just from Nintendo, but third-parties, too.

"Nintendo will be hoping for a higher spend per user on Switch than what it has achieved previously"

There are a few positive signs here. Nintendo's first party slate has been good thus far, and independent developers are achieving strong results from the eShop. Yet there are also multiple warning signs.

IHS estimates that around 20 per cent of Switch software sales are digital, which is far below PS4 and Xbox One. With physical retail under threat, that creates a real challenge for Nintendo moving forward in terms of reaching its consumers. The Switch's small internal storage space has not been friendly for gamers that like to download, either.

What's more, the costs of the cartridges are high. This has prevented some developers from creating physical product (because it forces the price of the game upwards), and has also made things challenging for bigger third-party publishers. Indeed, we've seen numerous third-party ports to Switch that have been priced significantly higher than their counterparts on other machines. This is an issue when you consider that Switch has been attracting a sizeable core gamer audience - the sort of consumer that may already own a PS4, PC or Xbox One - which will impact sales of games such as Doom or Skyrim.

The lack of flexibility on pricing is one issue that will hinder Nintendo's efforts in trying to pull in more third-party support.

There's no doubt that 2017 has been a good year for Nintendo. Switch has sold in large quantities, and products like the SNES Mini are selling faster than they can be made. It's a positive position for the company to be in.

However, 2018 will be just as crucial. It is the year Nintendo needs to keep the pressure on in terms of big Switch launches (the current release slate is lacking, although there's almost certainly a new Nintendo Direct on the horizon), it'll need to ramp up its digital business significantly, and it will want to find some consistency in the smartphone market.

Only then can we feel confident that the troubles of Nintendo's recent past have been put firmly to bed.

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Latest comments (10)

Klaus Preisinger Freelance Writing 4 months ago
Wii sales came to a crawl after five years, they were 90 million at that time. That makes an average of 18 million sales per year. Sony just announced 70 million sales after four years, which puts them at an average of 17.5 per year with a product priced between 300€ to 400€ over its lifetime.

The Switch certainly started strong enough to play in that league, but whether sales can be sustained for another four years is a tough question. It depends on whether you see Nintendo on the same level as Sony or not.
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Richard Browne VP Production, Leyou Technologies4 months ago
The continued success of the Switch is entirely down to Nintendo's slate of titles, how regularly they arrive and how much penetration they can make into the family / casual market. Third parties aren't going to support the Switch, the compromise from PS4/Xbox One to Switch is an expensive one, nobody wrote an engine ground up to run on all three. In addition to that the PS4/XBox One market is largely 18-35, while those people will quite possibly own a Switch as a second console any mainstream title they'll buy for their main console at home. Publisher's know that which is why they're either on the sidelines, dipping their toes or being funded to port older titles.

Comparisons to the Wii are way off in my belief, that platform was a total anomaly in terms of time and place and demographic. The other factor that's interesting is that local retail still has Switches in stock, albeit aided by Nintendo nearly shutting off supply through the middle of the year to stock pile that's a big difference.. It's clearly selling well but you couldn't buy a Wii for TWO Christmas's at retail without lining up, this is the Switches first Christmas and there isn't anything like the frenzy associated with it. Now you can argue their Switch supply is definitely outstripping their Wii supply and they stage managed the Wii better but there is a very demonstrable difference here in the US at least.

If I were Nintendo I'd be looking at 25m and then 50m ; talk of 85m of 100m is fantasy land.

(note I fully reserve the right to eat crow in 2020).

Edited 3 times. Last edit by Richard Browne on 11th December 2017 6:13pm

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Adam Campbell Game Production Manager, Azoomee4 months ago
@Richard Browne:
Third parties aren't going to support the Switch, the compromise from PS4/Xbox One to Switch is an expensive one, nobody wrote an engine ground up to run on all three.
Idk about this. Its interesting for example that Bethesda including iD are throwing their titles at the platform, where they didn't support Nintendo in any capacity for the last three generations. You have interesting examples like the 'Snowdrop Engine' from The Division being used to power Rabbids with amazing results.

Then, the two biggest middle-ware platforms Unity and Unreal fully support the Switch. It looks like for a lot of companies you have the comfort that one of the major engines supports the hardware already, if not, there's plenty of proof that its not the biggest stretch to adapt to the Switch if developed for Playstation or Xbox (at least for larger studios).
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Robin Clarke Producer, AppyNation Ltd4 months ago
Selling more hardware units than the Wii is not Nintendo's absolute measure of success for the Switch. The landscape has changed in ten years, and they'll be making significantly more revenue per user thanks to digital distribution - and not targeting the ultra-casual end of the market. Third parties will support any platform where there's an active audience.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.4 months ago
It just hit 10 million units sold to consumers in the first 9 months of sale. It really is as successful as we think it is.

http://www.businesswire.com/news/home/20171212005456/en/
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Jeff Kleist Writer, Marketing, Licensing 4 months ago
@Adam The third party ports all have 360 versions, and Carmack made I’d tech very scalable

When they run out of 360 games they’re in a lot of trouble for third parties
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Richard Browne VP Production, Leyou Technologies4 months ago
@Adam Campbell: As Jeff points out Bethesda ported older games with less requirements horsepower wise ; and I can tell you point blank Bethesda aren’t supporting the Switch out of the goodness of their hearts, Nintendo funded them.
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Klaus Preisinger Freelance Writing 4 months ago
EA will tell you, the money is not made with higher resolution textures for FiFa.
Bluehole will tell you "yes, our success is all about copying existing AAA, right?"
nVidia will tell you all the most played PC titles run best on a 1080Ti
Firaxis will tell you "wtf, how did we get robbed at the VGAs by a lesser clone of our game?"

Gone are the days where core games ridiculed waggle games for their grandmothers. This years Nintendo came out with multiple sincere game of the year contenders and it paid off.
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Christopher Dring Publisher, GamesIndustry.biz4 months ago
@Robin Clarke: Indeed, hence the paragraph starting: "Nintendo will be hoping for a higher spend per user on Switch than what it has achieved previously." Digital uptake still a bit slow.
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Adam Campbell Game Production Manager, Azoomee4 months ago
@Jeff Kelist @Richard Brown

Doom 2016 and Wolfenstein are not Xbox 360 games and neither is iD Tech 6 engine. Ubisoft's Snowdrop engine doesn't support the old consoles either.

When Nvidia made the Tegra K1 and X1 architectures, they included a full fat desktop class OpenGL implementation as well as using the same architecture as desktop GPUs. Its no surprise that now adapted for the Switch you're able to port games designed for similar architecture.

Like I said, at least for bigger studios porting to the console isn't as much of a stretch as people suggested, and more and more are starting to see the possibilities.

UE4 and Unity as I mentioned also fully support the hardware. I remember Square-Enix even suggesting that Unreal could be a route to porting games to Switch where its in-house tech isn't particularly optimised. Why not?
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