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Nintendo Switch Set For March ’17

Using a three-minute video posted on YouTube, Nintendo Co. Lid. unveiled its next console, the Switch. The intention is something of a design reversal of the Wii U in that the Nintendo Switch is based upon a large portable tablet that plugs into a hub for living room play, rather than a separate tablet that complements a home console.

NS Combo-STo provide better gameplay control, two Joy-Con controllers attach to the ends of the Switch tablet. For simple games, each Joy-Con can be used by a single person for competitive play on the tablet. For home use, the two Joy-Con units attach to a wireless component to create one fully featured controller. A traditional Pro wireless controller will also be available for use in the living room.

Powering the Switch is a custom Tegra processor from Nvidia Corp. that features an up-to-date GPU from the same family utilized in the GeForce line of performance graphics cards. In addition, Nvidia is providing a custom operating system that integrates with the GPU to increase both performance and efficiency with full optimization of hardware and software for gaming and mobile use. According to Nvidia, this includes a revamped physics engine, new libraries, plus advanced game tools. Nvidia also created new gaming APIs such as NVN, specifically created to support lightweight, fast gaming. With such a completely different processor and middleware environment compared to prior Nintendo consoles, backward compatibility is not expected. The Tegra processor is also used in Nvidia’s own Shield Android console.

The Switch marks a return to cartridge media.

The Switch marks a return to cartridge media.

Switch titles shown in the video included the previously announced Legend of Zelda, a new Super Mario installment, Mario Kart, Splatoon, Elder Scrolls 5: Skyrim, and an NBA sports game. Nearly 50 third-party publishers supporting the Switch have been announced including: Activision Blizzard, Bandai Namco Ent., Bethesda, Capcom, Codemasters, Electronic Arts, Epic Games, Konami, Sega, Square Enix, Take-Two Interactive, Ubisoft and Warner Bros Interactive Ent. One major change is Switch games will use cartridges similar to those employed with the 3DS handheld.

Nintendo has not yet disclosed system specifications, dimensions or pricing for the Switch, its components or accessories.

Impact: DFC Intelligence has just released its forecasts for the Nintendo Switch and based on what we have seen the forecasts were moderately bullish. Two things strike us about the Switch: 1) the name tells consumers immediately what the system is all about, and 2) this is a console being driven enormously by trends in Japan.

NS Hub-SConsole sales have been declining in Japan for a while now as consumers have embraced mobile platforms for their gaming. This is not a new phenomenon worldwide, yet Japan had been a bastion for home video game systems for decades until recently so the fall-off in console popularity is a serious issue in that market. By comparison, video game system sales in North America have remained stable. For Nintendo to lead with a mobile-centric console makes tremendous sense from a Japan market perspective. In addition, the gamemaker needs a serious refresh of its handheld business to spur growth, and the Switch has the potential of being just such a product. As for the rest of the world, the mobile-first concept could provide a significant enough counterpoint for Nintendo to carve out a successful niche for itself where the firm does not have to compete directly with Sony or Microsoft. The emphasis on multiple ways to utilize the Switch to play games in a portable scenario opens up new options for consumers. Once again, the Switch strategy is more of a melding of the 3DS and home console business. Mobile platforms aside, Nintendo is still dominant in portable gaming and that should not be underestimated.

Nvidia Tegra-SThere is plenty we do not know about in regards to the technology behind the Switch. What are the capabilities of the custom Tegra processor, for example? There is also the purpose of the hub. Is it just a docking port, or does the hub include extra processing and memory expandability for higher-performance on HDTVs and UHDTVs? The best guess today is that the Switch will have performance somewhere between a Wii U and the PlayStation 4 or Xbox One.

In partnering so completely with Nvidia, Nintendo has freed itself from having to create the breadth of software design tools console makers traditionally have to develop internally. It appears the gamemaker is receiving a robust and mature set of tools to work with, which goes a long way in explaining how quickly the Switch is being brought to market. Conversely, Nvidia has also scored a big win here in adoption of the Tegra line. The processor has been seen as too beefy for wide mobile adoption, and the prospect of powering millions of Nintendo systems is a significant boost for Nvidia.

What we appreciate a great deal is that Nintendo has a clear message about what the Switch is and what the system’s value to consumers is. The same could not be said about the Wii U, which has dragged down Nintendo’s market share for years. Price will play a big factor, and while introducing the Switch in March does keep the system away from major marketing cycles by Sony and Microsoft, there is not a lot of time to build anticipation behind the system with consumers. The best option would be to get the Switch into people’s hands to build excitement then follow up with a promotional blitz. Barring that, Nintendo is looking at a slow build introduction.

The Switch features new ways for four people to play against each other on the go.

The Switch features new ways for four people to play against each other on the go.

In DFC’s view, Nintendo has a market opportunity to leverage the desire of many people for a simple to use system that gets back to the plug-and-play console virtues that the PS4, Xbox One and Wii U got away from. There is a definite fondness for the days when you did not have to wait hours for system and game updates before playing a new console or game. And while Nintendo has a clear product strategy, we still question the firm’s ability to execute on marketing based on past performance. The Wii U was a failure of marketing as much as anything else. The Switch can’t succeed if it comes across to consumers as just another expensive tablet with attachable controllers. So the test is can Nintendo deliver a clear product message?

There also is concern that the focus will not be truly international. Nintendo is a very Japanese company and the focus is clearly on bringing back the Japan console market. It seems that the secondary market is not so much North America but Europe which makes sense given how well the Nintendo portable systems have done in that region. The question is does this leave North America as an afterthought?

In the final analysis there is clearly a major opportunity to deliver a plug-and-play game system that is quick and easy to use. Console gaming with the PlayStation 4 and Xbox One has become a complicated affair and many consumers would like the simplicity of products like the Apple iPad with, of course, more robust game offerings. However DFC has tempered its latest forecasts because of major concerns that Nintendo is not currently in the position to truly target this opportunity. Of course, many of the details remain unknown and forecasts will be regularly revisited over coming months.

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