Shadow1980 said:
Nintendo as a company is indeed profitable right now, but their profits are in decline. Don't forget that back when the Wii & DS were doing very good Nintendo was profitable, but by time they hit their transition to the next generation they were in a rough spot. They went from setting a new record profit in FY2008-09, but just two years later, in the 2010-2011 fiscal year, their net profit had declined by 66% from where it was in FY2008-09. The 3DS had just debuted at the very end of that fiscal year, and the Wii U wasn't until the following year, so the decline in profits was likely solely due to falling Wii & DS sales. That shows how quickly profits can drop in the face of declining sales. While they have mobile and digital revenues to fall back on (NSO has been a big help) and the Switch is very back-loaded for a Nintendo system, declining hardware and software sales are impacting their profitability, and the longer they put off a new console, the worse things are going to get. Again, waiting as late as Q4 2025 could very well result in FY2024-25 sales getting uncomfortably close to some 30-year lows. Even if they only have one year where they have bad profits due to declining sales, that one year could still hurt shareholder value. Often times, it really is as simple as "line goes up=good, line goes down=bad." Yes, a new console release is risky, but I think it's pretty much a given that Nintendo's next system will be a Switch 2, with essentially the same form factor, just with a significant power jump. This isn't 2000s Nintendo, where, on the heels of their last conventional console being their worst-selling at the time, they decided to move in an unconventional direction with the Wii. That worked out for them, but they went in yet another unconventional direction with the Wii U, which, thanks in large part to poor messaging/marketing, ended up being a huge flop. New console releases were far more risky for Nintendo than for Sony & MS for a good while because they were making risky decisions with their hardware. They went from the Wii's motion controls (big hit), to the Wii U's tablet controller (big flop), to the Switch's "hybrid" form factor (big hit). They even made a huge gamble with the N64 by assuming that cartridges had a future for home consoles. They did not. The expense and low data capacity of the N64's carts turned off many third parties, who flocked to the PlayStation in droves. That simple choice in format forever changed the landscape of console gaming, to the point where Nintendo stopped making "conventional" home consoles. But they always had their handhelds to fall back on. Despite consecutive gen-over-gen declines in home console sales in both Gen 5 & Gen 6, between the Game Boy Color and Game Boy Advance Nintendo managed to have total hardware shipments consistently over 20M from the late 90s all the way up to FY2005-06. The DS was itself a bit of an unconventional gamble, but Nintendo's stated intent for the system was for it to be a "third pillar" and not a direct successor to the GBA. However, it ended up becoming super popular back in 2006 and became Nintendo's flagship handheld by default, with no conventional single-screen handheld coming along to replace the GBA. Even if the Wii flopped (which back before its release some analysts predicted it would), the DS would have more than made up for it. They actually played it more or less safe with the 3DS, which kept the same basic form factor as the DS, but it was hurt by factors like a launch price that was way too high for the kind of system it was (though to be fair, it still sold almost as much as the GBA globally, and the DS arguably over-performed and therefore we shouldn't have expected the 3DS to replicate that in full). Nintendo no longer does separate, distinct home consoles and handhelds, so they don't have that fallback anymore. Putting all their eggs in a single basket with a "hybrid" system, something I don't think they'll be able to backtrack on any time soon, means they kinda have to play it safe from now on. I honestly think the days of "Innovative, risk-taking Nintendo" are more or less over for the time being, and that they are stuck making successively more powerful iterations of the Switch for the foreseeable future. And that wouldn't be so bad, as the Switch worked out very well for them. So long as the games are there, the price is reasonable (I'd say no more than $400; the Switch's U.S. launch price is $375 adjusted for inflation), and they do a good job with the marketing, they can expect at least 100M units each generation from now on until society tires of consoles. |
Some of you guy's take aways are quite suprising to me. Makes me wonder how old you guys are :)
I currently still own every single major nintendo console from the NES onwards (sorry VR boy, didnt fall for it). And firstly i can tell you every single console nintendo made was VERY innovative... the only conservative one was the gamecube (which i loved) which was widely derided and a pretty bad flop for them.
i know that in looking back those prior consoles seem pretty basic and standard... but at the time that rounded shoulder button having SNES controller was legitimately novel, the diamond pattern buttons and the best dpad ever made.... a radical improvement... and the N64 controller is hands down the best controller ever made, never has a better left hand analog stick and trigger config come close to that .... the gamecube was a pale immitation.
If nintendo has learned anything (i hope they have)... it is that innovation is their lifeblood... i would NOT expect their next console to just be "switch 2.0" ... and they have repeatedly and very vocally stated that their R&D into new and meaningfully engaging and fun ways of gaming and interacting is their core focus on bringing compelling experiences to gamers. They know they cannot go toe to toe with MS/sony in a specs war... they tried it and got destroyed.
Given that they must be profitable and cant lean on other dvisions of their company like MS/Sony to weather significant losses, id say we can expect them to juice every ounce out of the switches profitabiltiy so long as its selling 10+ million units a year. That being said, id expect them to forecast that 2025 is the last year the switch will do so. Which in turn means id expect a product announcement sometime mid-to late next year with a realease in early/mid 2025.
The switch is almost guraunteed to end up being the best selling console in history, but as mentioned earlier it is doing double duty... the GB line is dead - almost certainly forever, and theres a VERY strong chance that the next iterations of PS/Sony will go hybrid as well. nintendo gets a shot at being first mover before the next round of competition and every additional month they can wait gives them more time for R&D and better pricing on better components. COVID hurt MS/Sony really badly, and i dont think they have as much flexibility in getting their next gen out earlier.
