If Nintendo Switch Flops it Could be the End of Nintendo in the Hardware Business

No, this isn’t one of those doom and gloom pieces that falsely states Nintendo is in some sort of financial crisis and could end up becoming the next SEGA due to failed hardware launches. Indeed, if any company was going to keep releasing failed console after failed console and not really care, it would be Nintendo.

They have the bankroll to do it, the clout, and their games traditionally sell well enough that even when a console flops, they end up making an overall profit by the end of the life cycle. However, Nintendo is a business, and like any business they know when it’s time to stop doing something stupid.

The Wii U, for as much as I love it, was a sales disaster. It is Nintendo’s worst selling main line Nintendo home console of all time. Despite Nintendo putting forth what I would argue is one of their finest 1st and 2nd party libraries for it, reality is the system itself was unappealing and confusing to a general consumer base and enthusiast gamers alike. Factually, it didn’t click with enough people.

Nintendo is cutting the life cycle of the Wii U short by about 8 months with the release of the Nintendo Switch in March 2017. Nintendo has always had 5 or more years in terms of gaps between their major home console releases. Wii U marks the first time in their home console history (sorry, virtual boy) that Nintendo will not have the Wii U on the market for a full 5 years.
Remember when I said Nintendo knows when it’s time to stop doing something stupid? Coninuing to try and push Wii U sales at this point is a fruitless and ultimately unprofitable venture. They need to get everyone ready to make the switch (pun intended), not hold onto the present.

However, reality is that Nintendo lives in a world that has traditionally not been sustainable. We have now gone three straight generations with three major platform holders all existing at the same time. This ignores the fact that today, PC is trying to invade the living room, Smart TV’s are now able to play some games on their own, the high end gaming consumer is already looking ahead to 4k, while handheld gamers are generally happy with what’s available on their phone.

PC’s are now invading the living room.

Nintendo has even realized this potential, given the massive success of Pokemon GO, the modest success of Miitomo, and what is sure to be a pretty good success in Super Mario Run. Nintendo has already begun a fundamental shift that the late Satoru Iwata stated Nintendo would never do. The claim was always that Nintendo games are best experienced on Nintendo hardware, but now Nintendo games are starting to become, albeit slowly, available on a wide range of hardware given the state of the mobile phone industry.

This may simply be part of Nintendo’s recognition of their desired audience. Everyone that cares about video games even slightly probably has a smart phone. They outwardly claim their goal is to use these games to drive people back to their hardware and console titles. Pokemon GO certainly did, as 3DS sales worldwide saw an increase, old Pokemon games started flying off shelves, and now Pokemon Sun & Moon are off to the hottest start in the franchise’s history in terms of sales. It’s easy to draw some correlation here. Similarly, it’s possible that Super Mario Run could help Mario Switch, whenever it releases, become a bigger success than it may have otherwise.

Could Super Mario Run already be paving a path?

On the surface, it certainly appears Nintendo’s outward goal is being obtained. However, there is a caveat to this goal that cannot be ignored. What happens if the Nintendo Switch sells even worse than the Wii U? Heck, what if it only sells a little bit better? Even as game sales may see some increase, hardware sales may not. It is easy to assume the Switch will outsell the Wii U due to being a hybrid, but will it? Nintendo’s mobile gaming market has also taken a massive hit with the 3DS being the worst generation of Nintendo mobile console hardware in the history of the company. It’s not all rosy just because you see a big 60 million userbase number.

I’ll tell you what happens – what we’re seeing today in Nintendo expanding their IP use may not stop at theme parks, merchandising, and mobile parks. Rather, Nintendo games could one day be on a PC on purpose. You might be able to fire up that Xbox Scorpio or PlayStation 4 Pro some day and play a legal version of the latest Zelda game.

And this isn’t because Nintendo is in dire straights. It’s because more than anything else, they care that people play their games. Nintendo is under new management, and with it could potentially be a more open minded approach to their IP.

Now, this is not the direction Nintendo wants to explore, naturally. They hope the Switch is at least midly successful, moving over 30 million units and beginning a resurgence on a new family of devices that can carry them for decades to come. They are putting everything they have into this system because they really want it to signify the the return of hardware relevance for them. They may PR their way into “innovation” or some other poppy cocky about their importance in the hardware industry, but the real reason they want to succeed is because successful hardware literally dwarfs succcessful software in terms of profitablity.

They didn’t make so much during the DS and Wii era because of their software sales (they massively helped), but primarly because of hardware. In fact, something like 65% of their overall yearly profits in years past has been directly from the hardware. Either from new hardware sales, or royalties on people buying 3rd party games on their systems. The rest came from Nintendo’s games.

So rest assured, Nintendo isn’t hoping for the Switch to fail, it’s success unlocks more revenue than any of us can probably count. However, if it does fail I am not so sure Nintendo isn’t prepared to try and live out life as a third party publisher/developer, where you see the only type of hardware they work on being accessories for other systems.

You may read this and feel that if the Switch fails, they should just try again – and as noted, Nintendo is stubborn enough to do just that. However, under new management, I think Nintendo is more open than it’s ever been to admitting that their ideas, their vision for video game hardware, could fail. They are more willing to obtain a greater reach.

That doesn’t mean they won’t ever return to video game hardware again. Should Microsoft or Sony falter, a door would open again. However, if and when Nintendo goes third party, they may find too much success to contemplate going back.

Of course, this is all pure speculation on unknown circumstances. It may never even be a concern, as the Switch may be the next big thing. I sure hope it is, because I like Nintendo hardware more than others. It has lower failure rates, and admittedly some of my hope is holding on to my past. I like saying “I’m playing my Nintendo”. It just has a nice ring to it.
If the Switch does fail to catch on, what do you think will happen?