M+E Connections

Analysts had a mostly favorable reaction to the Nintendo Switch game system that the company introduced Oct. 20 and said will be released in March 2017. But while analysts praised Switch’s innovative hybrid home console/portable design, they pointed to the lack of an announced price as a potential issue.

NPD analyst Sam Naji Oct. 21 called Switch a “bold and innovative move to appeal to both console gamers and portable gamers.” Although Nintendo specifically referred to Switch as a “home gaming system” in a news release, it’s clearly a hybrid system that works as both a home console and a portable, tablet-based game system that – unlike the previous Wii U — can be taken out of the house and played on the go just like one of Nintendo’s older portable systems, including the DS, 3DS and Game Boy. At home, Switch rests in a Switch Dock that connects the system to the user’s TV. By lifting Switch from the dock, the system instantly transforms into a portable system resembling a typical tablet that can play the same games on the go.

“Price and software availability will determine success of the console when launched,” Naji told MESA by email. Microsoft’s Xbox One S and Sony’s PS4 Slim start at about $299 and if Switch is to “gain traction outside the Nintendo fan base it must take into account where prices of console systems are today and that consumers have a wide choice of gaming systems to choose from,” he said.

Naji pointed out that the promotional reveal video Nintendo made available at its website and via YouTube Oct. 20 “showcased young adults as the key market for the console, a space which the Xbox One and the PS4 are appealing to.” The launches of prior Nintendo systems, including the Wii, Wii U and 3DS, “all had software with families and kids in mind,” he said, adding “Nintendo could be diversifying their target market to the core gamer.”

But targeting core gamers “could pose difficulty if the Switch is limited by hard-drive memory or functionality,” Naji said. From the promotional video, it seems that Switch uses game cartridges like Nintendo’s older systems and unlike the Wii and Wii U, which used optical discs. Switch has a “high-definition display,” according to Nintendo’s news release, which didn’t mention anything about 4K Ultra High-Def capability. Nintendo of America didn’t respond to a request for additional details about Switch’s game cartridges, resolution or the size of the tablet display.

Nvidia indicated that the graphics card it’s supplying to Switch is “comparable to some of their best PC cards,” Naji said. “As to whether that is 4K compatible, we will have to wait and see. If those cartridges are bespoke they could contain more memory than a standard Blu-ray. They should at least support HD (1080p) graphics,” he said, adding that’s “the norm for today.” Nvidia is supplying a custom Tegra processor, it disclosed on its own blog, adding that the “high-efficiency scalable” processor includes an Nvidia GPU “based on the same architecture as the world’s top-performing GeForce gaming graphics cards.”

Naji predicted that any lack of 4K wouldn’t be a big turnoff to core gamers. He said: “4K gaming will be available on the PS4 Pro and that has yet to be released. Unit sales of the PS4 Pro may give us an idea of how interested consumers are [in] 4K but is not the only factor why someone would want to buy the PS4 Pro. If anything gamers are calling out for more games that support 60fps than they are 4K but that could be because not everyone owns a 4K TV or monitor.” He went on to predict that “maybe in a couple of years 4K gaming will gain more traction” and become a feature consumers want, “ but from my observation, gamers today want more games regardless of whether they are 4K or not.”

Nintendo game systems “always sell well out from the starting gate, but success in [the] console market is the long run, not the starting sprint,” Naji said, adding: “For the Switch to succeed, as a gaming console, it will need to be supported with both first-party and, more importantly, third-party software. It also must meet consumer expectation on price.”

First-party game support is not usually the main issue for console makers. Obviously Nintendo will release its largest game franchises on Switch and the company indicated that its plans include the game “The Legend of Zelda: Breath of the Wild.” But the system could be hurt, like the Wii U was, by the lack of enough significant major first-party games in its first few months of release.

On the third-party game side, Nintendo provided a list of third-party game makers that have already committed to make titles for Switch, including major players Activision, Electronic Arts, Take-Two Interactive and Ubisoft. But it remains to be seen how many major third-party games will be released at the console’s launch.

Wedbush Securities analyst Michael Pachter was “impressed” by the Switch reveal, he said in a research note Oct. 20. “The system has strong third-party support, and if porting titles from the PS4 and Xbox One is cost-efficient, we expect it to perform well assuming its price is competitive with the other consoles,” he said.

Switch includes two detachable Joy-Con controllers that rest on each side of the dock and tablet and can work inside the home or on the go. The controllers click back into place on the dock or can also be slipped into a Joy-Con Grip accessory, “mirroring a more traditional controller,” Nintendo said in its news release. Consumers can also select an optional Nintendo Switch Pro Controller to use instead of the Joy-Con controllers. Several people can bring their Switch systems together to compete in local multiplayer face-to-face competition, the company also said.

A list of launch window titles, as well as the exact launch date, pricing, product configuration and related specifics, will be announced ahead of the March launch, Nintendo said.

Ahead of the Switch launch, the Wii U continues to struggle. The Xbox One was the best-selling home game console in the U.S. for the third-straight month in September, despite Sony’s release of the PS4 Slim that month, NPD said Oct. 20, citing its monthly sales data. The 3DS, however, was the top-selling game system overall in July, and “experienced its fourth consecutive month of increased hardware unit sales compared to last year,” Naji said. Since the release of the augmented reality mobile game “Pokemon Go,” in July, the 3DS has seen a “resurgence in hardware spending,” he said.

The Xbox One accounted for 37% of all hardware units sold in the U.S. in September, he said. That was “not enough to counter a revenue decline” in total U.S. game hardware sales, he said, adding: “Due to average retail price declines for consoles and a decrease in hardware units sold” for the PS4 and the Wii U, total hardware dollar spending tumbled 25% in September to $234.3 million on a year-over-year basis.