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Analysts debate Switch's place in the market, potential for success

by rawmeatcowboy
14 January 2017
GN Version 5.0

"This is not an impulse purchase or as cheap as other recent Nintendo consoles and at this price point Nintendo will be competing with existing consoles and tablets. As a result, communicating the unique aspects of the Switch - particularly the capabilities of the Joy-Con controllers - and its exclusive content through marketing spend will be key to gaining market traction. Unlike the Wii, this is not a product that will necessarily sell itself through word of mouth as its proposition is still relatively complex. Is this a device for the mobile gamer that plays on the move? To a segment of the mobile gamer population yes, but the Switch is more naturally a direct challenge to the use of tablets in the home or perhaps on family holidays.

Nintendo's new hybrid console Switch reflects a company that is in cultural flux as it seeks to find a balance of approach between its traditional console games business and to cater for a new population of smart device gamers. The Switch's form factor literally embodies the tensions at play here as it seeks to satisfy traditional Nintendo console gamers and also engage a new set of consumers that routinely want to use smart devices - and more specifically tablets - for gaming. A hybrid device strategy such as this is unproven in the market - previous gaming tablets that can dock to TVs have found very little sales traction but significantly have not had the backing of a company such as Nintendo." - Piers Harding-Rolls, IHS Markit

"The press conference added support to my prediction that the Switch will have a strong launch, but has challenges to long-term success. An appealing first-party lineup will likely drive strong initial sales. The Switch will appeal to core Nintendo fans in both the West and East with the smartly paced lineup of major IP, most notably including Zelda, Mario, Splatoon, and Dragon Quest. However, the announcement of a relatively high price point and lukewarm third-party support will present challenges to mainstream adoption

The price of the base SKU was $50 higher than the rumors of $249.99, and much of the equipment and services to get the full experience are sold separately. And apart from FIFA and Skyrim, there was little presence from the major third-party publishes, such as Activision, Ubisoft, Take-Two, Square Enix, and Capcom. Most importantly, to recapture the mainstream market Nintendo needs to show consumers why they need a hybrid console, much like they famously did with motion gaming and the Wii at E3 2005. While the party game 1-2 Switch is innovative and interesting, the market fit with the casual audience is immediately less clear than it was for the Wii and Wii Sports." - EEDAR VP of Insights Patrick Walker

"the distinctive control paradigm, coupled with Switch's portability, will open up some new gameplay opportunities and open up 'console' gameplay to more environments that will appeal to many gamers. I'm a bit worried about the depth of the launch window catalog, although Nintendo stresses the importance of cadence, meaning that big releases should come every couple months throughout 2017. Right now I'd say they're better positioned for sales than Wii U was at the same point in its launch cycle... and I'll want more color on the third-party launch window lineup before making firm predictions about how much better Switch will do in 2017 than Wii U did in its first year. I'm glad they're embracing a subscription model and will be interested to learn if they make it materially different from PS+ and XBL - right now I don't see much difference though." - IDC Research director Lewis Ward

"Nintendo is de-emphasizing physical cartridge sales. The cartridge system for the Switch is based on the 3DS more so than the Wii U, suggesting that digital distribution will play a bigger role for the upcoming platform. Consumers generally find it is easier to expand the memory and download titles directly to the device than having to carry all of their games separately. The challenge here for Nintendo centers on providing a seamless experience in its eShop

Even as Nintendo continues to innovate on its existing titles, for many consumers the classic titles remain an important selling point. Providing access to this library of games will help drive adoption to the paid online service for the Switch. By comparison, the combined earnings for the subscription service for Sony and Xbox--PlayStation Network and Xbox Live, respectively--generated around $3 billion in revenues last year, and has proven a key component in transitioning consumers to the higher-margin side of the business in digital distribution. Total earnings for digital downloads on console last year, including full game downloads and micro-transactions, was $7 billion, worldwide.

The emphasis on gaming consoles as a toy is a smart, and proven, strategic move," van Dreunen continued. "While we don't anticipate games like 1-2-Switch to become breakout sellers in comparison to the announced Mario and Zelda titles, they do a great job differentiating the Nintendo device from other consoles. It continues the company's legacy as a toy-maker and shows Nintendo's strength in providing innovative gameplay that integrates both hardware and software." - SuperData's Joost van Dreunen

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