Nintendo’s lackluster third quarter financial results and subsequent decision to lower its sales forecast for this fiscal year was the result of a failure to “fully convey the appeal” of Nintendo Switch hardware and software, the company said in a Q&A session following the release of its financial results this week.
In response to a question asking what had changed in the company’s expectations compared to the start of the year, Nintendo President Shuntaro Furukawa highlighted this communication problem as the main culprit.
“[D]espite having been able to sell fairly large volume of hardware during the holiday season, it is true that we now do not anticipate reaching the forecasted 12-month sales volume set at the beginning of this fiscal year,” said the Nintendo head. “As we look back so far (for this fiscal year), we now evaluate that our efforts to fully convey the appeal of Nintendo Switch hardware and software to the number of new consumers we originally hoped to reach were insufficient.”
“And from the viewpoint of our full-year unit sales forecast for this fiscal year, while we expected that releasing titles during the holiday season would help to increase sales, the year-on-year sales increase during the first half of the fiscal year (April to September) turned out not big enough, which also affected the revision of the unit forecast as we looked back now. We will talk about the next fiscal year in more detail at a later time, but basically, we want to further increase both our hardware and software unit sales more than this fiscal year. We want to further enrich our software lineup and convey its appeal to consumers so that they decide this (calendar) year they would buy Nintendo Switch.”
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Nintendo has previously stated that Nintendo Switch is continuing to sell at a pace close to that of the Wii. But Nintendo’s Wii was a hit with sales of roughly 26 million in its third year after launch, after which sales began to decrease. Will Nintendo Switch follow this same pattern?
“The launch timing for Wii and Nintendo Switch were indeed different,” answers Furukawa, “plus the business environment has also changed, so I donʼt think we can make a simple comparison between the two platforms. And Wii had Wii Sports, which appealed to all consumers from the moment the hardware was launched, and which contributed to its explosive popularity. Conversely, consumers played multiple titles on Nintendo Switch from its first year, and the fact that they are continuing to play them after that is what contributes to enlarge its installed base. Going forward, I think the way this platform grows will also be different. So, rather than comparing it to Wii, I would like to keep pursuing Nintendo Switch’s unique challenge to the market, and by doing so, continue to sell it for a long time.”
“Compared to the NES (Nintendo Entertainment System) era, there are a lot more developers, larger development teams,” said Nintendo Senior Managing Executive Officer Shinya Takahashi.
“We conduct development in a variety of locations as the number of development centers also increased. Even so, development is being managed more systematically than before. So although it’s true that the volume of software is increasing, there are more people involved in developing it, there are more development processes in place to bring it all together, and development scale has expanded, I believe, regarding plans how to develop software, we are working better than before partly because development departments have been integrated”
“I have heard some people say we have a tendency towards slow development, but thatʼs certainly not true in every case. We have titles currently in development that we havenʼt announced yet, some of which weʼre preparing to release this year, and I donʼt anticipate the kind of delays they would be concerned about.”
Furukawa noted the Nintendo 3DS market has also contracted faster than the company had anticipated.
“[C]urrently many of consumers who newly purchase Nintendo 3DS are consumers purchasing Nintendo 3DS as their first game system. Nintendo 3DS is appealing as a portable game system, that is easy to carry around since it is small and light, and at a very desirable price point. Demand still remains from parents looking to purchase a first game system for their children. That is why our basic policy is to proceed with both Nintendo Switch and Nintendo 3DS in our dedicated video game platform business. Regarding future sales of Nintendo Switch, what we first need is to drive sales of one system per household, and we will work towards increasing demand to expand the installed base much further than now”
“On the other hand, in a survey of households asking how many family members use Nintendo Switch, we found that, while a certain number of households have multiple family members who play on a single console, some households have already purchased multiple consoles. Going forward, we aim to generate such demand among consumers as they feel like “I want to have my own Nintendo Switch console” through measures such as software offerings, not necessarily so that each person will have one, but so that each household will have multiple Nintendo Switch consoles.”
Nintendo released its third-quarter earnings report for the year which included news that the company is lowering its expectations for Switch sales by a small amount and nearly cutting in half how many portable 3DS it thinks it can sell in the fiscal year, which ends in March.