Nintendo has just presented their results for FY2017. Amongst other things, the Switch appears to off to an impressive start, shipping 2.74 million units in March (with the lack of stock in key sales regions at the end of April, I think it is safe to assume they have sold much of that stock). Based on these results, Nintendo predicts that they will ship 10 million units FY2018 (April 1 2017 - March 31 2018). The matter that we will discuss here is whether or not the Switch is well positioned to meet that target. Moreover, if you believe that they are well positioned, what adjustments can they make to their strategy so that they can meet their goal?
To start things off, I believe that they are overall well positioned, but there is one threat and a few adjustments that I believe they need to take into consideration. I will provide a break down of the points they are well positioned in, the large threat to the system, and the few other adjustments that could help it.
Areas where they are well positioned in:
1. Unique and compelling hardware proposition to gamers and families: The Switch is not a stationary home console and it is not a traditional handheld system. It is a system that is less powerful than a home console but far more portable and can provide a home console-like gaming experience pretty much anywhere and in various ways. In addition, the system comes with a dock and two controllers that should make it instantly usable in multiplayer situations for families.
2. Good advertising: The system's advertising has pretty much been on point. They have risen above confusion surrouding the advertising for 3DS and Wii U (the former largely made many think that the system is simply a DS that lets you play DS games in 3D as opposed to a new system; the latter made people some people believe that the Gamepad was a tablet-like addon for Wii). Everything from the initial reveal trailer, to the Super Bowel ad, to the slogans on their site are on point on explaining what the system is and what makes it unique. Showing people playing console quality titles like Zelda, MK8, and Skyrim pretty much anywhere also further drives home their point.
3. Decent software lineup: The Switch's first year line up so far is decent. There are a lot of ports and remakes, but that is not unusual for the initial year of any system. In fact, I believe home console ports and remakes make a lot of sense for Switch because it lets you take these games anywhere with you, which is a big reason to bring older games on stationary systems to it. The system's first year right now consists of a port of a critically accallaimed and popular Zelda game, a remake of an entry in the evergreen Mario Kart franchise, ARMS which is a new IP, Splatoon 2 which is the followup to the successful Splatoon series, a new 3D Mario game which tend to sell well, and Xenoblade 2 which is a niche game but one that still has a decent base. On top of that, there are important essential third-party releases as well in the form of FIFA, Minecraft, Skyrim, NBA2K18. Now this line up is not perfect and there are ways Nintendo could adjust it to make the goal of reaching 10 million in the first year more attainable.
Area that is a threat to the system:
1. Price and bundle: To be blunt about it, I believe the price of the system ranges from being barely acceptable in some regions to ludcaris in other regions. In the US, the system is priced about the same as a PS4, which I believe is barely acceptable. My reasoning is not because PS4 has better graphics, because I can counter that with Switch being a portable. However, PS4 has a larger line up and it has non-gaming media features that the Switch does not at the moment. Moreover, the PS4 comes bundled with Uncharted 4, whereas the Switch is not bundled with anything. In Australia, the system is priced at $470 (whereas PS4 with Uncharted 4 costs $350) which is the ludacris price I was talking about in the other regions. It does not come as much of a surprise that the system has not been supply constrained in Australia since early April (demand has most likely significantly decreased since launch in Australia). The price of the system in other regions fall between Australia's ludacris price and US's barely acceptable price. This is going to become an even larger issue when we approach the holidays and MS and Sony both reduce the cost of PS4 Slim and Xbox One S (I project by $50 USD for both; but could be as high as $100 USD); I think the system will have great difficulty competing if Nintendo continues to keep the price as is (or does not reduce it enough), and as such I believe it will be very difficult for Nintendo to come even close to 10 million units at this price (right now my ultra-conservative prediction based on the price and the fact that we do not have a baseline of sales for the system due to it being supply constrained in many places and there has not been sufficinent tracking, hence why the prediction is more conservative, is that they will around 5.5 million units; but they can easily sell way more with proper price adjustments). A good, albeit still risky scenerio, is for Nintendo to price the system at $250 USD (or 50 insert-local-currency cheaper than a PS4 Slim) with a bundled game for the holidays. The best case scenerio would be to sell the console by itself at $200 and a bundle with a game for $250.
Another reason why I am concerned by the price is because previous portable systems like 3DS and Vita ran into difficulty maintaining their respective momentum at $250 (the 3DS responded very well to a price cut, Sony waited way too long to make one and the system could not regain much momentum from it). The Sony case with the Vita is especially important to look at because as with the Switch, the Vita was originally marketed as a portable system capable of offering home console experiences; but to many people the price was still not justifiable.
Adjustments that should be made (in order of most to least important):
1. Mainline Pokemon: Mainline Pokemon games move systems and sell a great deal themselves. Having one in the launch year, even if it is a remake or a third-edition of Pokemon Sun and Moon, could still do wonders for the system and make the price at least more justifable. Things like Smash 4 port and Metroid teaser would also help, but mainline Pokemon should be prioratized.
2. Monster Hunter: Again will have a similar effect as Pokemon but in Japan.
3. More third-party ports of older console games: The Switch may not be powerful enough to decently run many newer games, so I expect to see very few new AAA titles for the Switch from third-parties. On the other hand, the portability of the system could lend itself to being a great place for third-party ports of older games such as GTA V or Tomb Raider (2013 and 2015). GTA V, in particular, could convince people to pickup the system because there is a big case to be made about being able to play a game like that on the go, no to mention it still has great legs.
4. Non-gaming features: I think a few non-gaming features like a proper browser with video playback support and some streaming apps could convince some people to pick a Switch over a multimedia tablet (particularly when you take the game factor into account as well).
5. Virtual Console and remakes/ports of older games: this is more of a minor point, but there are quite a few people interested in Nintendo system for nostalgia and being able to play older Nintendo games (and maybe even other non-Nintendo platforms) on the go could provide purchasing incentives to some. Of course, VC and porting should not be done by Nintendo studios that focus on making new games but should delegated to smaller parts of the company like NERD (the people at Nintendo that work on various system and developer features on Nintendo systems, as well as DS/Wii VC on Wii U and NES emulator for NES Classic Edition) or a third-party.
With all of that being said. Do you guys think that Nintendo needs to do something to attain their goal of 10 million Switchs FY/2018? Or do you believe that they are well positioned to achieve said goal?
