Let's look at the pros and cons of the Nintendo Switch, as we know them so far.
Nintendo Switch Pros
- Good-looking, reasonable size screen (720p, 6.2")
- Zelda: Breath of the Wild is a strong launch title
- Flexible play options (home, handheld, tabletop)
- (Probably) Easier to develop for than previous Nintendo systems (because it's likely based on Android)
- Good variety of input options for developers (detachable controllers with motion and gyroscopic sensors, IR vision, multi-touch screen, lots of input buttons, two analog sticks)
- Some future software looks exciting (Mario Kart 8, Splatoon 2, Super Mario Odyssey)
Nintendo Switch Cons
- High price ($299 with no game included)
- Limited system memory (only 32 GB before OS takes out a chunk)
- Games will mostly be cartridges (otherwise you have to buy MicroSD card storage, which is not cheap)
- Limited launch software (5 titles, only one major one, two ports, two very weak games)
- Limited 2017 lineup (Only 23 titles for this year, most are ports of older software, only 3 or 4 look great)
- There will be no Switch versions of the latest games from top third-party publishers (the system is too different, and not powerful enough to handle Xbox One/PS4 games)
- High software prices ($60 for top games, $50 for a throw-away like 1-2 Switch)
- Limited 3rd-party support (All titles from major publishers are simple ports of old titles)
- Joy-Cons are very tiny and buttons are difficult to reach even for average-size hands
- High prices for accessories ($79.99 for a pair of Joy-Con tiny controllers; $70 for Pro controller; $90 for a dock; $49.99 for a single Joy-Con)
- Online service will cost starting in the fall; some features through a smartphone; one free game a month, which is either an NES or SNES game that you can only play for one month)
- Not competitive with other home consoles in power, price, or software
- Not competitive with smartphones or tablets in power, price, or software
- Little pre-marketing (there's been no long campaign to drive awareness or purchase intent)
- Confused marketing (videos so far targeted at Millennials, but kids are entirely left out -- though the colorful games are classic Nintendo that should appeal most strongly to kids)
When you look at the list and think about what those pros and cons mean, you get the idea that Nintendo fans will buy a Switch right away, but after those folks (a few million, perhaps) buy a Switch, it will be tough to convince other to do so when they look at other options.
Essentially, the Switch is a fairly expensive handheld console that can display games on a TV, though its horsepower is nowhere near comparable to Xbox One or PS4 (let alone PS4 Pro or Scorpio). The console is up-gunned when it slots into the dock, but that just means more work for developers who essentially have to create and test two versions of every title (see tech analysis here). The whole thing is shaping up to be a debacle a lot like the Xbox One launch or the Wii U launch.
If Nintendo keeps going the way it is, I think the Switch will look a lot like the Wii U or the 3DS initially. As always, when Nintendo announces a new console there's plenty of enthusiasm among the hardcore (and journalists, who are mostly Nintendo fans). The first month in sales will look great, as it always does. Then the product will meet reality, and sales will plummet a month or three after launch.
It's at this point that Nintendo could decide to make some changes, the way it did with the 3DS. If you'll recall, the 3DS did well for a while, but then it became obvious the device wasn't selling. Nintendo dropped the price an unprecedented amount (from $250 to $180), which rescued the 3DS (along with marketing shifts that de-emphasized the 3D display, which almost everyone turned off).
What could Nintendo do to rescue the Switch? One suggestion has been to release a version without the home-console items -- the dock, the grip, the straps. That could drop the price to $199 for the purely mobile version. Pack in the 1-2 Switch game instead of trying to get $50 for it. I would also get Niantic to create a version of Pokemon GO for the Switch, and include that as well. Focus the marketing around the mobile and tabletop play. Then you'd have a much better value proposition.
Of course, that would likely mean either dropping the 3DS line entirely, or reducing the price on that substantially so it would no longer be in direct competition. A 3DS XL should be $149, or perhaps $129, to really look good against the Switch. That could also help substantially boost 3DS software sales, which would be a nice profit boost.
Will Nintendo actually make such a gutsy move? They have done it before with the 3DS (well, the price cut part, at least). I doubt they will, though. The company is to wedded to the idea of selling hardware. So if Nintendo does make a move to rescue the Switch, it will likely be too little, too late. The Switch will limp along, selling a few million units a year. Then Nintendo has to hope it will finally figure out how to price mobile games and make some money from that. The fact that Niantic made $950 million in six months, with a very fat profit margin (likely in the 50% range even after licensing fees) doesn't seem to have gotten through to Nintendo.
Seriously, Nintendo's got iconic brands and characters that can be worth billions, if they put them on widely accessible hardware. Which Nintendo's proprietary hardware will never again be, not in today's world. Someday, Nintendo will figure out they should primarily be a software company, but they'll have to lose billions before they even have a chance of grasping that, it seems.