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CourageTCD said:

How does this make any sense looking through a business perspective? Shouldn't they focus on Mario Kart's new entry, specially when it got a fair share of criticism

There’s a quote from Furukawa on this, but essentially, Nintendo does these Switch 2 upgrades on Switch 1 software in order to encourage current Switch 1 owners to “make the jump”. By offering free upgrades on popular software, consumers have all the more reason to justify spending $500USD (or perhaps even less if willing to trade in their Switch 1 for credit on their Switch 2).