Nintendo Switch sends Nintendo stock price higher
Nintendo’s first handheld console will be remembered by everyone, even those that didn’t use it. The Gameboy range that started with the big grey block and purple buttons was first released in 1989, and over the years has evolved to include colour, dual-screens and even 3D graphics. It is the third best-selling console of all time, other home consoles include the NES, SNES, N64, GameCube and the Wii.
Will the Switch spark a Nintendo renaissance?
However, in March 2017 (in true Nintendo style) the company released a new breed of machine: a ‘hybrid’ that can be played at home on the TV or on the move using its own portable tablet-like screen.
Since its release, the Nintendo Switch has become the fastest-ever selling console in the US, superseding the previous record held by its predecessor (the Wii), and beating Nintendo’s (usually conservative) forecasts. However, Sony’s PS4 is still the fastest selling console within the first 24 hours of being released.
While the Wii is Nintendo’s most successful home console ever, the console that followed, the Wii U (with the major difference being the introduction of a touchscreen gamepad), was a flop. To put the immediate success of the Nintendo Switch into context, the 4.8 million units sold in the US during the first nine months comfortably exceeded the 4 million Wii U’s sold over the machine’s entire five-year lifespan.
Nintendo’s targets also paint a rosy picture. After selling about 12 million worldwide in the first nine months, the company is hoping to push that figure up to 14 million by month 12, and aims to sell another 20 million units in the following year. If achieved, that would match the run-rate of PS4 sales over the first four years of its life.
The company has also signalled that it sees legs in the Nintendo Switch, having hinted it could develop the console beyond its usual life cycle of just five to six years, possibly stretching that out to seven or maybe even ten years.
There is also the possibility that Nintendo could finally set down its first roots in China, where it has historically not sold its consoles. A deal with Chinese conglomerate Tencent could see one of the most popular mobile games in China, ‘Honor of Kings’, made available on the Nintendo Switch. However, the game would only be available outside of China as there are not currently any firm plans to sell the Switch in the country. Still, the deal is seen as a possible precursor to the Switch being launched in China in the future, which could be a game-changer for Nintendo.
The release of the Nintendo Switch has pushed the company’s shares to their highest level since the financial crisis, with shares more than doubling since its release. Nintendo shares soared 189% in the year after the Wii was released in November 2006, hitting their all-time high in November 2007 before following the wider market lower when the financial crash hit.
Nintendo 3DS console still going strong
The original Nintendo DS – which introduced two screens to handheld gaming – was launched in 2004, a month before Sony released the PSP. The DS is Nintendo’s most successful console ever, and the best-selling handheld console of all-time. Since evolving into the Nintendo 3DS – adding 3D graphics – the console has continued to do well.
Although global Nintendo DS hardware and software sales declined following the release of the Switch, sales in the core US market seemed unaffected. Volumes actually grew year-on-year and the device saw good demand over the Christmas period.
Nintendo’s competitors, Sony and Microsoft, have little to no interest in handheld gaming consoles
In short, both companies have lost interest in the market because of one major deterrent – smartphones.
Only a month before handing in his resignation last year, Andrew House, the global chief executive for the PlayStation business, made it clear that Sony has no intention of rivalling the Nintendo Switch. Speaking at the Tokyo Game Show in September, House said the hybrid console demonstrates Nintendo has a 'different approach and strategy', adding that Sony have not seen the handheld gaming market outside of Japan and Asia as a ‘huge market opportunity’.
While Sony’s original PSP went up (and lost) against the Nintendo DS, the company’s updated version released in 2011 has battled against the Nintendo 3DS. The PS Vita is a sleek, industrious-looking handheld console that tried to sell the notion of having your PlayStation in your pocket, including all the multimedia functions. While the original PSP was a moderate success, the PS Vita has not done as well – enough so that Sony doesn’t think it can build upon it like it has done with its core console.
However, Sony did make a move last year that seems to have been prompted by the Switch, and as the name suggests, its ability to allow users to seamlessly switch gameplay from the TV to the tablet. Sony launched a new promotional campaign in the likes of Japan, where it enjoys more success with the PS Vita than in western markets, boasting the console’s ability to match Nintendo’s ‘switching’ capability between the TV and handheld console.
Microsoft has never taken the plunge into the handheld gaming market, but it did have a console in the pipeline (how far down the pipeline is unknown) that would have had a rather questionable name, the ‘Xboy’. Phil Spencer, before he was promoted from overseeing Xbox to his current role overseeing all gaming hardware and games, said in early 2017 that Microsoft believed 'phones would take almost all of the mobile gaming market mostly'.
Mobile vs console: are smartphones a threat or an opportunity to handheld gaming?
Smartphone gaming is big business, and growing. Statista forecasts almost 64% of the US will use their phone for gaming by 2020 – growing from just shy of 56% in 2016 and just 41% back in 2013. Users are also spending increasing amounts on mobile games. Americans on average spent $77.6 on mobile games in 2016, a huge 27% leap from two years earlier.
Sony and Microsoft may see the growth in mobile gaming as a reason not to launch a handheld console. But the pair, as well as Nintendo, are already utilising smartphones – and all three see an opportunity hiding within the threat.
Selling apps offers a ridiculously low margin compared to selling games for consoles. But there is money to be made – King has lived up to its name with its landmark title Candy Crush, which is reported to be bringing in $2.2 million each day as of January 2018, according to Statista.
Smartphones must provoke mixed feelings for the Sony team. While its Xperia smartphone gives the company a foot in the door, it is closing quickly as its market share continues to dwindle. It also severely hit Sony’s digital camera business, which was once the pride and joy of the business.
Sony has made attempts at utilising smartphones to boost its gaming division, but the 63% plunge in smartphone sales in 2017 versus two years earlier has not helped its vision come to fruition.
Through the many models of Xperia, Sony offers Remote Play, which essentially allows you to link your PS4 to your phone, which can then be used as a screen to allow gameplay using a normal controller. Sony also has PlayLink, allowing users to use their smartphones or tablets as controllers to play more party-style games on the TV, targeting the more social gamers that are more akin to Nintendo’s cute and cuddly gameplay.
Microsoft’s presence in the smartphone market is now almost non-existent after the market share of its Windows phones sank to less than 1% in early 2017. The firm does facilitate cross-device multiplayer modes with its smartphone app (useable on any device regardless of make), but predominantly the platform is based around connecting players to the community and improving the multimedia side of its console.
Nintendo, with no hold over the smartphone market, has arguably been the most successful of the three – and once again it has its intellectual property (IP) to thank. The mania around Pokemon Go, released by Niantic in partnership with Nintendo and the Pokemon Co, demonstrated the impact smartphone games can have, and did well to promote other Pokemon games for Nintendo’s consoles. However, it may be surprising to know that another game was even more successful, Super Mario Run.
Nintendo's plunge into mobile gives shares a new lease of life
Sony leads charge in mobile gaming with ForwardWorks
Sony, however, is the one to have made the biggest commitment to mobile gaming since forming a new studio in 2016 named Sony ForwardWorks, which has since released one smartphone game which saw success in Japan. While the focus is currently on Japan, reports from the country earlier this year suggested the division’s second game (that will be released in 2018) will also be pushed into other Asian countries like Taiwan, Hong Kong and Macau. The west may have to wait a while.
Sony’s reasoning for sticking to Japan, and possibly wider Asia, can be partly explained by the games being released. While the first game, Mingol, is based on golf, the second on the verge of being released, Sora to Umi no Aida, is firmly targeted toward the anime and manga communities. ForwardWorks has also partnered other developers on games, but again only in Japan.
Does Nintendo have the edge over Sony and Microsoft in mobile gaming?
When you look at the type of games played on each of the three big platforms, Nintendo’s characters (and format) are the only ones that you could mistakenly believe were designed for the small screen, matching the soft, colourful, family-friendly nature shared by the most popular titles like Candy Crush and Fruit Ninja. The ‘shoot-em ups’ and intense graphics of the most popular PlayStation and Xbox games look like they will have a tougher time translating to smartphones.
Following the success of Super Mario Run, Nintendo has released other smartphone titles, but at a slower pace than planned. However, the next title reported to be coming out, either this year or next, is a big one for the company – Mario Kart Tour. The Mario Kart series has been one of the most successful in Nintendo’s portfolio. This also highlights the company’s ability to cross-promote characters and games across different platforms, like it has done with Pokemon. Of all the people worldwide that bought a Nintendo Switch in the first nine months of release, about half of them bought Mario Kart 8 Deluxe, which was even a huge success for the Wii U, despite the console’s poor performance.
Nintendo’s IP gives it a better foundation to open up work with third-party developers, the ones that have the lion’s share of the smartphone gaming market.
Has Nintendo found its core console?
If Nintendo can keep the momentum behind the Switch alive, then the company may have a console that can last, and one that taps into everything Nintendo has tried to do over the last 30 or so years – blending the best of both home and handheld gaming, that brings out the best of its loveable characters.
But if it isn’t, maybe all is not lost. Nintendo and its peers still need to figure out how to fully monetise smartphone games and get the most out of them. But if Nintendo can use the advantages its IP offers, then maybe the transition to smartphone games could rid the need for the company to once again head back to the drawing board and come up with its next futuristic console.
But is Nintendo likely to stop innovating and ditch the hardware? I doubt it.
While you can almost guarantee that Sony’s next big surprise will be a PS5 that starts to utilise Sony’s huge interest in virtual reality, and that Microsoft will follow a similar route with the even more originally titled Xbox Two, predicting Nintendo’s next creation is impossible.
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As for handheld gaming, Nintendo is now the only one committed to providing people with a dedicated console. While smartphones can satisfy the casual gamer, there will always be room for a handheld console to meet the needs and wants of hardcore gamers.
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