State Of The Switch

The Nintendo Switch has been on the market for almost six months since it launched back on March 3, 2017 to a worldwide audience. As with any new console release, there’s an air of uncertainty swirling around its longevity, with plenty of analysts trying to guess its level of success. The video game business has traditionally been very fickle, with console manufacturers being kings of the hill one generation, only to fall out of style the next.

Nintendo has seen this first hand over the years, rising to meteoric success with the NES and capturing some 90% of the 8-bit video game market only to lose half of it to competitors like Sega just five years later. In fact, Nintendo seemed to be in dire straits with its Nintendo 64 and GameCube systems selling only a fraction of Sony’s wildly successful PlayStation and PlayStation 2 platforms. It wasn’t until 2006 when Nintendo had another massive hit on its hands with the Wii, which would go on to sell over 100 million units during its lifetime.

 

Nintendo was losing marketshare to the competition with each new generation. Credit: Nintendo

 

After such a milestone sales achievement with the Wii, many pundits figured the follow-up system would be a slam-dunk. Not so. The Wii U was met with a tepid response from the gaming industry. A confusing name, horrible marketing, and perhaps a disconnect with what players were yearning for all factored into the Wii U becoming Nintendo’s worst selling console of all time, excluding the Virtual Boy. Third parties quickly jumped ship and Nintendo was left alone to try and keep its home console business afloat. Many great games came to the system, but no matter the quality of software, consumers just weren’t biting and Nintendo, unable to drop the cost of the system due to shortsighted manufacturing decisions, was left with a noose around its neck. It is no wonder the company fast tracked a new console to the market, but would consumers respond positively to another Nintendo machine, or was the company past its prime?

 

Wii was a huge success. Wii U was a massive failure. What about Switch? Credit: Nintendo

 

When Nintendo first mentioned it was working on a new system, codenamed NX, everyone in the gaming industry paid attention. As many competitors and supporters alike have said over the years, you never count Nintendo out. Still, many doubted that this new system would find a footing and be able to perform well in a marketplace dominated by PlayStation 4, Xbox One, and PC.

Perhaps the first glimmer of hope came from the now-late President of Nintendo, Mr. Iwata, when he mentioned to investors that the company would be restructuring its development teams so that the handheld and console divisions would work together. You see, for all of the trials and tribulations that Nintendo had in the console market, ever since the Game Boy launched in 1989, the company had a steady stream of income from the handheld arena. Granted, in recent years mobile had taken a huge chunk out of Nintendo’s revenue stream, but even the 3DS has managed to sell almost 70 million units this generation. So, one wondered what would happen if Nintendo’s next system was a hybrid, combining Nintendo’s stellar portable business with its console gaming prowess to create something truly exciting – a machine that could play the same games on the go as well as on the TV. It would be a risky move, since everything would be riding on a singular device.

 

 

These hybrid rumors persisted throughout 2015 and into 2016 until finally, in October of last year Nintendo finally showed off a three-minute video introducing its new console: the Nintendo Switch. The rumors were true; the Switch would let gamers take console gaming on the go. The message was clear, concise, and powerful. The marketing was on-point and it was easy to convey what the Switch was capable of. Now all Nintendo had to do was have great software ready to go. Of course, when you’re launching a brand new system it’s always great to have a system seller. For the NES that was Super Mario Bros., the N64 had Super Mario 64, and the Switch would have The Legend of Zelda: Breath of the Wild. In fact, it appeared that Nintendo might have taken a few pages from its Wii playbook – create a video that explains the technology and resonates with players ahead of release, then a few months later show off the console and the games lineup, and finally announce the bombshell: that a Zelda game will launch alongside it. It worked for the Wii, but would it work for the Switch?

Once again Nintendo was playing by its own rules, ignoring what was typical for the gaming industry. Instead of launching its new console during the busy holiday season, Nintendo decided to go for a worldwide March 3, 2017 launch date. This allowed for several key things to fall into place. First up, The Legend of Zelda: Breath of the Wild was in need of some extra time in the oven to smooth out the gameplay experience, so “delaying” the system from November 2016 to March 2017 gave that team the time it needed to make the game even better. Second, it cleared the way for Nintendo to launch with less competition. They didn’t have to fight for ad spending or retail space. Basically they had the entire month to themselves, and although they wouldn’t benefit from the holiday gift giving season, tax refunds were in full effect, giving many gamers a little extra income to spend on something fun.

 

 

Also, these extra months gave Nintendo the ability to produce more Switch units. After the highly successful October reveal and subsequent gameplay reveals on shows like Jimmy Fallon, the hype for Switch was becoming a real thing. In January Nintendo unveiled the rest of its game lineup, with titles like ARMS, Super Mario Odyssey, 1-2 Switch, and some third party announcements making waves. Although Nintendo had planned to sell 2 million Switch systems in March, they were able to increase supply to try and meet more of that launch day demand. In the days leading up to the system’s launch, the Breath of the Wild reviews began hitting the internet, and they were almost universally exceptionally positive. Indeed, we even gave the game a perfect 10, citing it as one of the best games in the past 10 years, and perhaps even our favorite Zelda game of all time. This propelled the hype for Switch into the stratosphere, so it’s no surprise the system sold out across the country, and for the most part, throughout the world.

Still, few could have predicted that Nintendo would have as big of a hit on its hands with the Switch as it currently does. Despite increases in production, the system is still regularly out of stock in the U.S. and Japan, where people often line up just for a chance to get to purchase one. With a regular stream of first party games every month or so, the Switch has quickly amassed a library of exclusive software that gamers desperately want access to. So, let’s take a look at the state of the Switch. How is it doing six months into its life?

 

Hardware Sales

Originally Nintendo had forecast 2 million Switch systems would be sold in its first month on store shelves. As the release date neared, it was obvious the hype for the new console had reached new heights. Nintendo ended up shipping extra systems over by air to meet the exceptional demand. This resulted in an additional 740,000 systems shipped by the end of March 2017. Of course, this meant that its reserve supply had dwindled, and that led to some massive shortages in the following months. As of June 30, 2017, Nintendo had shipped approximately an additional 2 millions Switch systems, bringing the total to 4.7 million worldwide. Given that most retailers across the world were still sitting with empty shelves, most of those shipped consoles were sold through to customers.

Typically video game console sales fall off during the summer months and pick back up for the holiday. Even though Nintendo has increased production of the Switch consoles, it’s still difficult to find in many parts of the world. This has been compounded by several factors.

 

 

First up, the system is still relatively new and gamers are anxious to get their hands on fresh technology to play the latest games. Other than tradeshows or playing a friend’s Switch, there aren’t really any convenient ways for potential customers to try it out, since retailers still don’t have any interactive kiosks. This adds to the curiosity and allure of the new device. It helps that one of the highest rated games of all time (Breath of the Wild) looks and plays best on the Switch, and it shows off the system’s potential for taking console games on the go. The popularity of Splatoon 2 in Japan has increased demand for the console in that country significantly, keeping the system in short supply overseas as well.

Second, given its hybrid nature, the Switch is the ultimate handheld gaming system on the market. Many people take vacations and travel during the summertime, so it’s only natural that the demand for the Switch would increase for these reasons as well. Although anecdotal, I was surprised on my recent flight to Seattle to see the person next to me pull out his Switch and play Zelda, and then on the way back another random person sitting next to me was playing Splatoon 2. Keep in mind I rarely saw 3DS systems being played on recent plane trips, so this was great to see. It’s the first time I realized that Nintendo might have struck gold with the Switch and I think Nintendo has really hit the nail on the head with their “console games on the go” mantra.

 

 

Lastly, a steady stream of big first party titles has kept the Switch in the limelight. Imagine if you’re a gamer who wanted a Switch at launch, but was unable to find one. At first there was Zelda that really interested you, but now as the months have flown by you’ve seen games like Mario Kart 8 Deluxe, ARMS, Splatoon 2, and now Mario + Rabbids Kingdom Battle all release – and that’s just the major releases! There have been many more fantastic indie games (Blaster Master Zero, Ironcast, and Graceful Explosion Machine for starters), and niche titles (Puyo Puyo Tetris, Disgaea 5: Complete, for example) that have built up the library and made the Switch an even more desirable product. Basically Nintendo has been on a roll since launch and hasn’t taken its foot off the gas pedal since. As a Nintendo fan and a reviewer, it’s been tough keeping up with the steady releases!

So, we know from March 3, 2017 through June 30, 2017 that 4.7 million Nintendo Switch systems have been sold worldwide. For Japan’s Switch hardware sales we won’t know official numbers for July and August until October when Nintendo shares its second quarter financials. However, we do know roughly how many of sold in Japan during this timeframe thanks to Media Create, which tracks sales across the country. This number is historically slightly under the actual number sold because it doesn’t track certain online sites sales. We know that for July and August the Switch sold at least an additional 488,137 systems in Japan. Looking at the graph below, we can see that the Switch is off to a great start in Japan, despite being supply constrained. 3DS had a major spike in week 25 thanks to the huge price drop and then continues to sell great for the remainder of the year. Will the same hold true for the Switch?

 

Japanese Hardware Sales – Comparing Launches | Credit: hiska-kun via NeoGAF

 

For the U.S. we also have NPD data that tracks sales numbers. According to the Wall Street Journal, Nintendo moved approximately 215,000 Switches in June and another 294,000 in July. Obviously we don’t know August’s numbers yet, but let’s be conservative and say they sold 200,000 in America. Europe’s numbers are unknown, but if we look at the historical breakdown of Switch system sales, we know that about 25% are sold in other territories so far, so we’ll go with that (which gives us 245,534 total for the months of July and August). That gives us an estimated conservative total of approximately 1.25 million Switch systems being sold worldwide for July and August, which should put the total installed user base at least at 6 million worldwide. So, roughly 1 million Nintendo Switch systems a month have sold through to customers since launch. This puts it slightly ahead of the Nintendo 3DS’s first six months of sales. However, as we just noted, the 3DS really took off in sales numbers after a major price drop during its sixth month on the market (from $249.99 to $169.99). So it’s difficult to predict if Switch will keep the lead or if 3DS will have sold more during its first year.

Nintendo has forecast that it will have sold 12.74 million Nintendo Switch systems by March 31, 2018. They are currently about half way there with seven months to go and a busy holiday season ahead of them. We think they’ll easily hit that target, and if they can manage to ramp up production they should be able to easily shatter that forecast. If they reach an install base of 13.56 million units they will have matched the worldwide lifetime sales of the Wii U in just one year – illustrating just how poorly that system performed in the marketplace.

 

Software Sales

If you solely shop at brick and mortar retailers, you’d be forgiven for thinking there’s not a ton of software available for the Nintendo Switch. It’s true that Nintendo’s retail presence is a bit lacking. This is partially due to the wait-and-see approach that third parties took with the system. Some of them had been burned badly with the failure of the Wii U and wanted to see if the consumer reaction to the Switch would be positive or not. Now that it’s proven to be a success, expect more games to start appearing on retailers’ shelves over the next year.

After six months on the market, there are 21 games available at North American retailers. That’s not a ton of selection, but many of the titles are high quality. Of course the digital landscape holds a lot more diversity. As of this writing, the Nintendo Switch eShop has 111 titles to choose from. These range from full retail releases to small indie games and even NEO GEO arcade classics. Nintendo has not implemented a Virtual Console downloadable service at this point; otherwise the digital library would no doubt be much larger. Still, there are quite a few gems to be found on the eShop and there are a lot of seemingly great games on the way. Keep in mind that there are another 40 physical games that have been announced to be released by March 31, 2018 (with no doubt more announcements to come). In addition, Nintendo has just shown off a bunch of indie games coming to the Switch, with over 100 games in development. In short, if you like Nintendo’s first party games and enjoy smaller indie titles, the Switch will probably serve you nicely!

 

 

Even though the Switch is only six months old, it has had some very successful software sales. The attach rate for The Legend of Zelda: Breath of the Wild was over 100% for the month of March, which is pretty much unheard of. Basically more copies of the game were sold than systems, most likely due to some gamers double dipping and buying the collectors editions or buying the game before they were able to find a Switch.

In Japan the big hit has been Splatoon 2, where it has sold 1.05 million copies since it released on July 21. This is even more impressive when you consider there are only 1.52 million Switch consoles sold in Japan. That means that Splatoon 2 has an amazing 70% attach rate, with more than 2 out of every 3 Switch owners buying the game.

 

 

Even new IP like ARMS has crossed the million sold mark worldwide, and older remakes like Mario Kart 8 Deluxe has sold close to 4 million copies. Nintendo’s first party efforts definitely appear to be holding strong! They’ll need to continue their brisk sales rates if Nintendo hopes to reach its goal of selling 35 million pieces of software by March 31, 2018.

 

Conclusion

Nintendo is off to a fantastic start with the Nintendo Switch. The fast sales pace doesn’t appear to be letting up and we’re now heading into the busy holiday shopping season. Big titles like Super Mario Odyssey, Skyrim, and Fire Emblem Warriors are just around the corner. Hardcore games like Pokkén Tournament DX and Xenoblade Chronicles 2 will help round out the game library for the remainder of the year. Third party support is finally starting to trickle in at a faster rate, with software like Rocket League, FIFA 18, WWE 2K18, and NBA 2K18 all gracing the system in the next couple of months. Plus, with indie games like Stardew Valley, SteamWorld Dig 2, and Nine Parchments on the way, there’s practically at least one good game coming to the Switch every week for the rest of the year.

We expect Switch systems to be readily available at many retailers across the U.S. over the next few weeks, but as we creep into mid to late October, the supply is going to be very constrained. Nintendo will no doubt save some of their biggest shipments of Switch systems for late October and November, but increased demand due to Christmas gift giving will make them just as difficult to obtain as they have been over the past few months. This is especially true in Japan, where even now major retailers have customers line up for a chance to buy a Switch. Can you imagine waiting in line for hours only to be told that your number wasn’t drawn and you can’t buy a Switch, so please try again? Nintendo definitely needs to increase its shipments in its own country, but it can’t afford to drop the ball in the U.S. where the gaming market is always ferocious during the holidays.

 

 

Despite some teething issues at launch, which included some Joy-Con controllers disconnecting and some docks scratching Switch screens, Nintendo has surmounted all of the hurdles thrown at them. Supply issues still persist, but that’s not entirely a bad thing as it does keep the system at the forefront of many people’s minds and they know if they see one on a store shelf that they should probably grab it now or risk it being out of stock later.

There are plenty of things that need to be improved with the Switch in the future. Streaming apps like Netflix and Hulu are still missing, and there’s still no Virtual Console service to speak of. Their paid online was delayed until next year, leaving the system with a crippled chat solution that almost no one is happy with. The eShop could use a facelift and have more options to sort and to easily find games as well. Plus, where’s the trippy background music we’ve loved since the days of the Wii?

 

 

Even with all of these concerns, the Switch is a lovely piece of hardware with a fantastic screen for portable play and the OS, while pretty basic, is super snappy and most games have very little loading. The ability to take your home console games anywhere and play at anytime should feel like old hat by now, but six months in we’re still as impressed with this little machine as we were the day it released. Solid first party software that will continue into next year with games like Kirby and Yoshi (as well as possibly Pokémon and Metroid Prime 4 – they’re in development) will continue to make the Switch a must-have gaming device. Increased third party support should propel it to new heights and the indie scene has really fallen in love with the system, making it the ideal machine for those games as well. Nintendo has built a machine to be proud of and software to fall in love with. Here’s to the next six months!

 

Craig has been covering the video game industry since 1995. His work has been published across a wide spectrum of media sites. He’s currently the Editor-In-Chief of Nintendo Times and contributes to Gaming Age.

Craig Majaski

Craig has been covering the video game industry since 1995. His work has been published across a wide spectrum of media sites. He's currently the Editor-In-Chief of Nintendo Times and contributes to Gaming Age.

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