Nintendo’s Next Machine Must Switch Past Patterns

Finally, Nintendo Co. has acknowledged the obvious: It’s time to switch things up.

The Kyoto firm has been typically coy about what would come after the Switch, which will likely go down as its best-selling console of all time.1 Until this week, it hadn’t so much as admitted that a successor was coming.

Even on Tuesday, in a social media post released alongside earnings, the company recognized the upcoming new machine in only the vaguest possible terms. “We will make an announcement about the successor to Nintendo Switch within this fiscal year,” President Shuntaro Furukawa said, which gives the company until the end of March 2025 to provide details.

The Mario-maker’s next step needs to be quite atypical and find a way to follow one success with another. That’s something it has struggled with in the past.

Investors reacted cautiously, and they’re right to be concerned. When it comes to new machinery, Nintendo’s consistency has often been in being inconsistent. The DS, its hit handheld in the 2000s, was succeeded by the 3DS, which badly floundered at launch in 2011 though it recovered later in its lifecycle. The mid-2000s pop-culture phenomenon that was the Wii was followed by the disastrous Wii U.

Indeed, many have attributed the astounding triumph of the Switch to the depths of its predecessor’s failure. The Wii U, which made its debut in 2012, should be used in business-school case studies as an example of how not to market a product. When first announced, its branding was so confusing that many thought it was a new accessory for the Wii, rather than a whole new console. Fewer than 14 million units, less than 10% of the Switch, were sold before Nintendo pulled the plug in early 2017.

Nintendo’s chief concern will be how to position the new machine — starting with the name. Will it opt to continue the current branding, perhaps as a Switch 2, Switch Pro or Super Switch? Or, like the Wii U retool, will it opt for something else entirely, and risk ditching the valuable Switch brand for something that doesn’t resonate with gamers?

Then there are the specs. Four years ago (which is how long murmurs have been mounting over a new machine), it seemed reasonable to assume that Nintendo could take a leaf from Apple Inc.’s playbook and release a slightly more powerful machine on a more regular basis — one that, like yearly iPhone updates, eventually leaves older models obsolete and consumers needing to upgrade.

With so much time having passed since the Switch’s launch, that now seems harder to pull off. If the next console’s games were to also work on older hardware, that would require titles launching next year (perhaps including the long-in-development Metroid Prime 4) that could also run on a machine that was already seen as underpowered when the Switch was announced in 2016. While Nintendo never prioritizes processing power, that would undoubtedly make the new device a harder sell.

There are also risks with the alternative option, which would return Nintendo’s prospective customer base to near-zero. Nintendo’s own games make up more than 80% of all software sold on Switch. That’s an extraordinary ratio and one that, when its hardware sells as well as this model has, means the firm can continue profiting for years off titles like Mario Kart 8, which sold more than 8 million copies in the last fiscal year alone despite being nearly 10 years old. Nintendo has also become better at promoting its second-tier titles, with the likes of Princess Peach: Showtime! and Mario vs. Donkey Kong already becoming million sellers.

But that integrated success also puts great pressure on the firm’s studios to continue pushing out the hits; Nintendo can’t count on third-party titles to tide it over and sell hardware. And if the successor stumbles, there’s no quick way to recoup already-increasing development costs. And remember that with the Switch, Nintendo combined its previously separate home console and handheld lines. Everything depends on this one product.

Ultimately, whatever the shape of Nintendo’s next machine, the company typically doesn’t take the easy route. Apple might say that it “thinks different.” Nintendo really does, to a fault. That instinct has had asymmetric returns. Resisting what was, at the time, the common wisdom that the console industry was finished and that Nintendo should ditch its own machines for mobile games led to some $16 billion in profit over the Switch’s lifetime.

But the desire to do things differently has also led the firm down dead ends, from handcuffing the GameCube with its lower-capacity discs instead of what was becoming the commonplace technology of DVDs, to the 3DS’s innovative-but-ultimately-gimmicky glasses-free 3D. (It feels almost unfair to bring up flops like the mid-1990s Virtual Boy.) It must catch lightning in a bottle once more.

Furukawa said last year that the firm was in “uncharted territory.” He has finally indicated a direction of travel. Now, he must find the right path.

More From Bloomberg Opinion:

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• Nintendo Must Plot Exit From Uncharted Territory: Gearoid Reidy

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