Nintendo's Switch: Will the Market Take the Bait?

Now we know a little bit more about Nintendo's new console, but really very little – especially when we're only a few months away from the release date. We know it's called the Switch, it's capable of playing as a portable and hooked up to your TV, it uses an Nvidia Tegra chip, and it's going to be released in March 2017. Officially, the only game we know that will be on the Switch from Nintendo is Zelda: Breath of the Wild. Most of what we know comes from this video that Nintendo released a while ago.

There's a lot of excitement over a new console from Nintendo, and fans are already salivating. We know there are a few million hardcore Nintendo fans who will buy pretty much anything the company releases, no matter what issues it may have. The real question here is can Nintendo find a massive audience for this new console – like the 100 million who bought the Wii – or at least one on the scale of the Xbox One (25 million or so so far) or the PlayStation 4 (45 million or so so far)? Or are we looking at another failure of Wii U proportions, with lifetime sales of 13 million to make it Nintendo's worst console ever?

My best guess at this point is that the Nintendo Switch will end up far closer to the Wii U in sales than it will to the Wii's sales. Why am I skeptical? Several reasons, including the software, Nintendo's continuing difficulty in appealing to modern gamers, the overall value of the system – and the fact that it's essentially a mobile device. Let's deal with each one of these reasons, in reverse order.

How Many Pockets Do You Have?

I think Nintendo has made a fundamental error here in trying to make its home console more successful by blending it with their more successful handheld consoles. What they failed to understand is that their handheld lines have already been on a downward slope – the 3DS line is selling in far smaller numbers than the DS line. Why? Smartphones, of course. You can now play terrific games on your smartphone, and nearly everyone who would be part of the target audience for the Switch already has a smartphone. You're always going to take your smartphone with you wherever you go. Would you take a Switch? Sometimes. The bigger question is, why would you even buy a Switch in the first place when you have a better game playing device in your pocket already?

Top-end smartphones will be better than the Switch. They have better screens, more RAM (doubtless), and a better CPU/GPU than a Tegra. If not now, then they certainly will in the next yearly update cycle. You can already put your smartphone games up on your TV (via Chromecast or Airplay). And now you're going to get Nintendo characters on your smartphone... so is a Switch really worth hundreds of dollars to play a few different games? No, I don't think it will be for most people.

What's the Value of a Switch?

It's hard to say until Nintendo announces the price, but you have to figure if the price was going to be low they would have announced this early. Delaying the price announcement means a chance to build up more anticipation, and perhaps less resistance if the price is high. Expect a minimum of $249, and $299 would not be a big surprise. Since it's Nintendo, even higher is possible – they really hate to lose money on every sale. Say the Switch is $299 – which is the same as the basic price for the Xbox One and the PS4. The Switch will certainly be less powerful than either of those consoles, but it will be portable. Is that really enough to sell the Switch?

The overall value of the console has to include what software is available. There will certainly be some Nintendo exclusives, but we don't know how many, how often we'll see them, or how good they are. As for software that you see on other consoles, that's unlikely except for one or two experiments. The Switch is going to be a non-trivial port for games from other consoles. It's likely the Switch will never have most of the popular console games that appear on Xbox One or PS4, so if you're interested in those the Switch becomes a second console to buy. That's a tougher sell, and gives it less value.

Nintendo Doesn't Do Internet Well

One of Nintendo's biggest problems in appealing to a modern gaming audience is that they still don't understand the Internet, multiplayer online gaming, and related issues. There's no reason to believe they'll have this any more figured out with the Switch. Maybe we'll see Friend Codes. Even if we don't see those again, there's not likely to be any great online multiplayer games for the Switch – and those are some of the very most popular games.

The Lack of Compelling Switch Software

Wait, you cry, Nintendo has already announced Zelda: Breath of the Wild for the Switch, and it looks great! True, except now rumor has it that the game may not be ready at launch, but perhaps months after that. While we saw things that looked like Skyrim and NBA 2K17 in the Switch video, Bethesda and TakeTwo have refused to confirm they are releasing those titles (or any titles!) for the Switch. This does not induce confidence in the software lineup.

Ideally Nintendo would be releasing major titles (using the best Nintendo characters) for the Switch every couple of months. If they were going to, they'd have already announced that. Nintendo has struggled for years with getting major new software out for HD screens, with constant delays. It's great that they want to release excellent software, but on a corporate level they don't seem to be able to figure out how to do that on a regular schedule. Other major game publishers have mostly figured this out, but Nintendo seems to be incapable of doing that – and honestly, most of the big titles from other publishers are significantly more complex than most of Nintendo's games.

The Switch is going to be ARM-based (using a Tegra CPU), so it's essentially going to be running an Android variation I'd expect. Which means porting from mobile titles should be easy – if Nintendo allows it. Though then you'd just have a title you can already get on a mobile device you already own (your smartphone), so this wouldn't seem to provide much of an incentive to buy the hardware.

Summary

It's true we haven't seen the hardware specs, the software lineup, or the price for the Switch yet. I submit, though, that while those will all be interesting, none of them are sufficient to guarantee the Switch sells in big numbers. Honestly, you'd think if any of those three things were really impressive, Nintendo would have been touting them for months, instead of waiting until the very last minute to make them public.

Perhaps Nintendo has finally figured out that mobile is the future for them, but they were so far along this hardware path they had to continue. Or maybe they really figure the Switch has a chance to generate Wii-like sales. That ship has sailed, though. With literally billions of good gameplaying devices in the hands of people around the world, there's no way to create a hardware market that's even a fraction of that size. With Pokemon GO, we've seen where even a pretty limited title (the game initially didn't have much to it), we could see 500 million downloads and over $600 million in revenue in a couple of months. That shows the power of great IP on the right platform with the right monetization – and it's not even as great a game as it could be (though it's becoming better).

Someday, perhaps, Nintendo will be able to realize its potential on mobile platforms. The Switch, though, just isn't going to be it. Even if the Switch is a huge hit, selling 50 million units in a couple of years, that hardware and all of its software wouldn't generate as much profit as Pokemon GO will in one year. That's the real switch Nintendo should be making – the switch to creating mobile games.

Super Mario Run Pricing Set: Will It Fly?

Nintendo has finally announced when its highly anticipated iOS game Super Mario Run will ship: December 15. And while the game will let you play for free, that apparently only applies to a limited part of the game (though you will be able to check out all three game modes, apparently). You can unlock the entire game for the princely sum of $9.99.

Wow.

Now, if there's any company whose brands could command a high premium price for a mobile game, it would be Nintendo. But $10 for an endless runner game? That seems like a big ask, when there are plenty of free runners out there. Sure, it's a big discount from a 3DS game at $30, but that's not the point of comparison that most mobile gamers will be making. They'll be looking at free games, or maybe something like Minecraft Pocket Edition at $5.99 -- which seems like it packs in far more value than an endless runner, no matter the IP doing the running.

 Of course, we don't actually know how much content there is that you'll get for your $10, nor how many hours of play you'd expect to get. Perhaps the game is a really good value at $10, delivering dozens of hours of game play. That seems unlikely, though, given the genre. It's not like it's a deep strategy game, or an RPG, or even a sophisticated platformer. What we saw demoed looked pretty simple, and not enough to justify the price.

Perhaps Nintendo can indeed command that price, and sell millions of units at $10. That would be great for the industry -- with Nintendo leading the way, we could make premium mobile games a real thing and not just a fluke. Let's hope that is what occurs.

I'm doubtful, though, because I think mobile gamers are less concerned about the brand and more about value. I think Nintendo will easily get millions of downloads, but getting people to drop $10 will be much, much harder. I don't think the problem is $10 per se, though there are few apps of any kind that demand that. It's a value question -- do you really get your money's worth? More than 20 million people have paid for Minecraft Pocket Edition at $5.99, so it can be done. But compare what you get for $6 to what Nintendo is offering for $10, and I don't think Nintendo compares very well.

Now, one of the many great advantages of digital distribution is that price changes are easy. Nintendo could (and should!) experiment with its price point to find the optimum level -- the point at which Nintendo maximizes its revenue for Super Mario Run. (In other words, selling 100,000 units at $10 each is not as good as selling 20 million units at $1 each.) That optimum level may be $10, or it may be $1, or $5. Only testing would reveal that. That said, I'm doubtful Nintendo will actually test various prices, because that's something they are not used to at all. I'd like to be pleasantly surprised, though.

While the upside for the $9.99 price is that it may help others in the mobile game business charge more for premium games, there's also a possible downside: Nintendo could create a great deal of ill will towards themselves and their brands if the value isn't there. The company's first mobile "game" Miitomo was a pretty clear failure, though it really wasn't a game per se (another mistake -- why should a game company release something that isn't a game, especially as their first foray into mobile games?). Nintendo might be hurting their future titles like Animal Crossing and Fire Emblem (both announced for mobile, coming sometime next year) if Super Mario Run is a big disappointment.

We'll see. I think Nintendo is trying to create mobile games that are very different from its handheld console games, to avoid cutting into those sales. That's a remarkably shortsighted idea, though. Here's a simple piece of data that should convince you why that is: Pokemon GO has been downloaded or 500 million times. That's an order of magnitude more than any Pokemon game, ever, and more than all of them combined by several times. So why in hell wouldn't Nintendo give up low-margin hardware and just make killer mobile games (with a very high margin)  that can attract an audience at least ten times larger than any they've ever had?

OK, hedge your bets a bit and do one or two mobile games first to demonstrate you can actually do that well before you give up on hardware. I can see that. But Nintendo's Switch is never going to sell more than a tiny fraction of the number of smartphones out there, and therefore any Switch game will be microscopic in sales compared to a good mobile game. There are no multiple mobile games that generate over a billion dollars a year in revenue with a profit margin greater than 50%. No Nintendo game has ever generated that sort of profit, and few indeed have ever created that kind of revenue.

It's going to be a very interesting product launch to watch, and come January we should have some idea of how successful it is.