Unlock Editor’s Digest for free
FT editor Roula Khalaf selects her favorite stories in this weekly newsletter.
Nintendo’s flagship, Nintendo Switch, has rewritten the history of gaming consoles. Until the launch of the Switch in 2017, the life cycle of a game console used to be about five years.
Entering the eighth year since its launch, Nintendo finally said it will announce a successor to its hit console, a promise that came after the company announced a significant decline in its profits for the current financial year.
The Japanese gaming company expects operating income to fall by about a quarter to 400 billion yen ($2.6 billion) in the year to March next year, with 1.35 trillion yen in net sales, missing forecasts. market, with a big drop in Switch sales. Software sales are also expected to decline, from 200 million units to 165 million units. For the March quarter, Nintendo posted an operating profit of 64.5 billion yen, also below market expectations – all signs that the Switch’s extraordinary life cycle could finally be coming to an end.
The Switch has had an impressive run. The Switch’s cumulative global shipments totaled nearly 140 million units as of last year, among the top three best-selling consoles in the history of the gaming industry. That large user base has helped Nintendo build other high-margin businesses, such as its Nintendo Switch Online subscription service. The Switch era has also meant a lot more time for game developers to create blockbuster exclusive titles for the console, such as The Legend of Zelda: Tears of the Kingdom. This has led to years of strong gaming software sales. Nintendo stock has more than quadrupled since the launch of the Switch. Operating margins have increased more than fivefold.
Meanwhile, the planned shift from traditional gaming to cloud gaming (once considered the successor to game consoles) has been much slower than expected. Last year, Nintendo shares rose 35 percent, outperforming local gaming peers including Sony, reflecting the longer-than-expected success of the Switch.
In the short term, the announcement of an upcoming successor will impact existing Switch sales as gamers delay purchases until the new console goes on sale. Sony’s newer, higher-performing PlayStation 5 console, which gained market share last year, will add more competition.
But the effects of the Switch’s success will be long-lasting. It has given Nintendo more than seven years to build a large user base for its premium subscription services, as well as a fan base for the characters in its games.
That should give his successor a good chance of finding an edge over his rivals.