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Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
Nintendo’s flagship Nintendo Switch has rewritten the history of gaming consoles. Until the Switch was introduced in 2017, the life cycle of a gaming console was typically around five years.
Ahead of its eighth year since launch, Nintendo has finally announced it will announce a successor to its blockbuster console – a pledge that came after the company forecast a significant drop in profits for the current fiscal year.
The Japanese gaming company expects operating revenue to fall by about a quarter to 400 billion in the year to March next year. Software sales are also expected to fall, from 200 million units to 165 million units. In the March quarter, Nintendo made an operating profit of 64.5 billion yen, which was also below market expectations – all signs that the Switch’s extraordinary life cycle may finally be coming to an end.
The Switch has had an impressive run. Cumulative global shipments of the Switch totaled nearly 140 million units last year, making it one of the three highest-selling consoles in gaming industry history. This large user base has helped Nintendo build other high-margin businesses, such as its Nintendo Switch Online subscription service. The age of the Switch has also meant that game developers have a lot more time 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 shares have more than quadrupled since the Switch’s launch. Operating margins have increased more than fivefold.
Meanwhile, the predicted shift away from traditional gaming towards cloud gaming – once seen as the successor to gaming consoles – has been much slower than expected. Over the past year, Nintendo shares have risen 35 percent, outperforming local gaming rivals such as Sony, reflecting the Switch’s longer-than-expected success.
In the short term, the announcement of an impending successor will weigh on existing Switch sales as gamers postpone purchases until the new console goes on sale. Sony’s newer and more powerful PlayStation 5 console, which captured market share last year, will add further competition.
But the effects of the Switch’s success will be long-lasting. Nintendo has had more than seven years to build a large user base for its premium subscription services as well as a fan base for its game characters.
That should give his successor a good chance of gaining a lead over his competitors.