Gaming

Switch is a juggernaut, but Nintendo will continue to experience investor pressure

Image: Nintendo Life

Today has brought Nintendo’s Q2 financials that could have been easily missed out on understandable enthusiasm. Animal Crossing: New Horizons version 2.0 arrived a day earlier. In a sense, this is the result of two sides, although in the Nintendo boardroom they may feel like they are stuck in the middle.

First of all, below are some of our articles that we will link to in this article.

When you look at numbers for areas such as net sales and net income, for 6 months Period, you will be forgiven for thinking that Nintendo is moving forward and that investors will fall for themselves to express their happiness. But the billion dollar profit is relative, as you can see from its decline compared to the results of the 2020/2021 boom.

  • Net sales – 624.2 billion yen (about 5.47 billion US dollars) – 18.9% less than the previous year.
  • Operating income Yen 219.9 billion (about US $ 1.93 billion) – 24.5% less than in the previous year.
  • Net profit – 171.8 billion yen (about US $ 1.5 billion) – 19.4% less than the previous year.

A decline of 18.9% + made the recent investor buzz undeniably negative. Nintendo Share Price (via Bloomberg) closed down 1.66%, which is not that important, but its current value of 49,140 yen is still hovering around its lowest in the last year, a continuation of its consistent decline.

Switch and Switch Lite Reach Huge Sales in 2020
Switch and Switch Lite Reach Huge Sales in 2020 (Image: Nintendo Life)

This can certainly be partly due to Nintendo’s strengths in the unique circumstances of 2020, which become a weak point with the rather different challenges of 2021. While the surge in demand for home entertainment in 2020 played into the hands of the big N, in particular the Switch and Animal Crossing – Switch Lite stocks began to dwindle when stocks of the standard model dropped – the picture will be very different in 2021.

Not only are the unique domestic circumstances of the past year gone, but the global chip shortage and manufacturing problems are also taking their toll.

Not only are the unique domestic circumstances of the past year gone, but the global chip shortage and manufacturing problems are also taking their toll. As a result, Nintendo had to exclude 1.5 million devices from its Switch hardware, while the Nikkei assumed the previous figure. already represents a reduction of 4.5 million from plans planned earlier this year. Nintendo, in fact, cannot manufacture enough systems to maximize its sales and profits.

And, of course, the elephant in the room is Switch “Pro” or whatever you want to call it the “next” Switch. This year, not only Internet fans got carried away and expressed frustration with the OLED model, but also investors. If the Switch already had less power when it hit the market with the Xbox One and PS4, it is now in a very distant position when compared to the Xbox Series and PS5 systems. Triple-A ports will become less common, or some publishers will try to convince Switch players to buy cloud-based versions, which are unlikely to work on a large scale. Until a new “generation” or more powerful system emerges, the conversation will not stop.

Nintendo's digital sales and trends have been relatively static.
Nintendo’s digital sales and trends have been relatively static. (Image: Nintendo)

In addition, Nintendo’s digital revenues are falling along with everything else and have static trends as Microsoft, in particular, is turning the market around with Xbox Game Pass. The backlash against the Nintendo Switch Online Expansion Pack heightens the feeling that Nintendo is struggling to find a successful and unique angle in this area. With the continued growth of the downloadable games market, Nintendo’s offer does not stand out, at least in a good way.

However, on the other hand, the Switch remains popular and extremely profitable due to its outdated off-the-shelf technology. As the first product to fully represent the amalgamation of Nintendo’s home consoles and handhelds divisions, it has proven to perform particularly well. Its sales will surpass that of Wii U and 3DS combined, with the bonus that supporting one core system is far more efficient for Nintendo teams. Switch will catch up with Wii and soon overtake it, and its best-selling game is Mario Kart 8 Deluxe, surpassed its hugely successful Wii counterpart. In an era of gaming on so many platforms – remember mobile devices, more space on PCs than ever, cloud streaming, and more – Nintendo was able to create a success story that lifted its place in popular culture.

LEGO Block
Image: LEGO / Nintendo

With more theme parks and major motion pictures emerging, and of course existing partnerships such as major Lego releases, Nintendo is strengthening its position outside of games. It’s easy to foresee a time, perhaps 18 months from now, when such initiatives will combine with new equipment to further boost the company.

However, overconfidence should not be encouraged. We must remember that Nintendo has gone from the dizzying heights of the DS and Wii to the relative struggles of the 3DS and Wii U; two consecutive “victorious” generations is not easy.

The Switch generation has undoubtedly been a success, and there are more to come. 24.5 million projected sales as downgrade due to production problems, impressive regardless of the spin cycle; demand remains very high. Nintendo is making a billion dollar profit again, which is impressive. However, success is relative – 2020/21 has set standards that cannot be replicated.

On the one hand, Nintendo wins the streak; on the other hand, there is a lot of room for improvement and growth. This means that all eyes are on the holiday season.




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