Next generation portable gaming console

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NINTENDO’S SWITCH*

Did Nintendo’s Switch Have the Flair to Turn On the Gamers?

On March 3, 2017, Nintendo launched its latest gaming console called Nintendo Switch. It was their ninth-generation portable gaming platform, initially launched with 58 compatible games. Nintendo Switch came with a pair of new and innovative controllers called Joy-Con Controllers, a hybrid of an attachable game pad and a controller that could be used separately for multiplayer game play. A pair of Joy-Cons was included in the $299.99 price tag of the Switch console. The Joy-Con came in two color options for customers to choose from, one grey and red/blue and the other grey and black. A more innovative feature in the new gaming console was that it could be transformed into a 6.2-inch high-definition on-the-go gaming screen if a user decided to move away from the TV. The new Switch console also marked the release of Nintendo Switch’s very first epic game called “The Legend of Zelda: Breadth of the Wild,” which could be played both on Switch and Wii U consoles for a price of $59.99. Nintendo of America’s COO and president, Reggie Fils-Aime, said, “Nintendo Switch makes it easy for anyone to enjoy their games in the living room and then quickly take them on the go.” The new gaming console design meant that console-gaming was not only limited to one stationary TV anymore and could be experienced anywhere anytime.

The launch of Nintendo’s Switch caught the attention of consumers and mostly received a positive response, but apparently the news did not impress the investors, leaving the company’s stock tumbling. This may have reflected concerns regarding the battery life of the portable console, its price, and third-party support. Nevertheless, a flood of customer orders led to stock shortages in stores like GameStop and Toys R Us, among others. Addressing the stock shortage, Reggie Fils-Aime said, “Our focus is making sure that the consumer who wants to buy a Nintendo Switch can buy a Nintendo Switch.” The initial plan had been to ship 2 million consoles. Nintendo decided to double the production to deal with the shortage and meet the strong demand.

To meet demand for one year out, ending April 2018, according to The Wall Street Journal, the company’s management decided to manufacture 16 million Switch consoles, which was double the yearly quantity of 8 million, Nintendo’s traditional production target. Company management was highly optimistic about the Switch, and Nintendo believed that it could sell about 10 million units of Switch consoles within a year after the launch.

One of the key topics of discussion in the popular press was whether or not the Switch console defined the “next generation” of gaming. This echoed similar press concerns after the launch of Nintendo’s previous console, the Wii U. Prior to the launch of the Switch, its predecessor the Nintendo Wii U console had been on the market for only a short while, with the addition of innovative controls and new game titles. Then there had been uncertainty among industry experts, such as Gabrielle Shrager of Ubisoft and Mikael Haveri of Frozenbyte, as to whether or not the improved power and new controller interface justified that system’s being considered a “new” generation.

The Wii U initially was launched with 50 available games and a new controller interface, termed the GamePad. While the GamePad offered a new take on the Wii’s controls, the new console was still compatible with the same motion-sensing controllers of the original Wii. However, the Wii U console was not sold with these controllers included. Instead, it came with just one of the new GamePads. Incorporating traits from tablet devices, the GamePad integrated both traditional input methods—such as buttons, dual analog sticks, and a D-pad (directional pad)— and a touchscreen. The touchscreen could be used to supplement a game by providing alternative functionality or an alternative view of a scenario in a game. With the Off TV Play function, the screen could also be used to play a game strictly on the GamePad screen, without the use of a television display at all. With the Wii U console turned on, the GamePad could be used to display the same picture on its screen as would be seen using a TV display. There were also nongaming functions, such as the ability to use the GamePad as a television remote. While Nintendo was the first of the competitors to release its new gaming console, there was no doubt that both Sony’s PlayStation and Microsoft’s Xbox would be close behind in releasing their own upgraded systems.

Nintendo’s inability to leap ahead of its competition could be seen clearly in its financial figures. As of 2017, Nintendo’s income was off from previous years (see Exhibits 1 and 2 ).

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EXHIBIT 1 Income Statement (1 USD = 112.3095 JPY as of March 31, 2016)

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