Nintendo has made a huge bet on the Switch console, and on Thursday we'll see how well it's selling
- Nintendo reports fiscal year 2016 earnings on Thursday, and it will probably report unit sales for the new Switch console
- Analysts believe the console is selling well, with NPD estimating more than 900,000 units in the U.S. in March
Nintendo is will release its fiscal 2016 earnings on Thursday — which will almost certainly include the first global hard sales numbers for its newly released Switch game console – and analysts have high expectations.
There's good reason for that. The NPD Group, which tracks video game and video game system sales, says Nintendo sold more than 906,000 units in March in the United States. ("The Legend of Zelda: Breath of the Wild," the Switch's premiere launch title, sold over 1.3 million units, making it the fastest selling Nintendo game of all time.)
Worldwide sales figures are expected in Nintendo's earnings — and that could significantly boost the total. Switch, for instance, has outpaced the PlayStation 4's launch month pace in Japan. And the company is said to have set records in Europe as well.
A strong launch is a good first step, but it's hardly an indicator of long-term success. The Wii U, for example, sold 890,000 units in its first six weeks, but went on to become the company's worst selling console.
Some analysts, though, say Nintendo is positioning the Switch well for strong long-term sales.
"True to past form, they're trying to stay out of the fray with the competition by not making a high-end console," says Billy Pidgeon, an independent video game analyst.
"Switch bridges the home and the portable console. ... I think they're taking a long view here. They're playing a long game."
The question many investors have is whether Switch will outsell the Wii long term, something Nintendo President Tatsumi Kimishima reportedly said was possible.
Michael Pachter, managing director of equity research of Wedbush Securities, is skeptical.
"I think [Tatsumi Kimishima] has no idea what he's talking about," says Pachter, who expects sales to more closely mirror the Nintendo 3DS. "The Wii sold 100 million units — and sold 14 million the first year. I would really be surprised if this thing sells 14 million this year. But then the Wii sold 19 million the next year. And that's not going to happen [with Switch] unless grandma starts playing [with it]. ... I don't think there's anything about this device that is so novel that grandmas are going to start playing 'Zelda' on it."
One of the keys to long-term success could lie in the Switch's software. "The Legend of Zelda: Breath of the Wind" is an undisputed hit, garnering some of the best critical ratings of any Nintendo game ever. But it's also a franchise that's generally favored more by core gamers, rather than the mass market.
In a presentation to consumers recently, though, Nintendo laid out a release schedule of other big upcoming games in the near future, including "Mario Kart 8 Deluxe" on April 28, "Arms," a Wii-like motion controlled fighting game, on June 16, and "Splatoon 2," the sequel to Nintendo's family friendly shooter, on July 21. Also on the way before this fall are Switch versions of "Minecraft," the core action game "Payday 2" and "Monopoly". A new Mario game is in the works as well.
And looming in June is E3, the video game trade show, when we'll see if third party developers, like Activision, Electronic Arts and Take-Two Interactive Software will lend additional software support to the system.
That broad range of software gives Nintendo a wider casting net to lure in mainstream audiences.
"I'm sure some people right now are not going to jump on getting a Switch because it's $299 and there's only one killer game," says Pidgeon. "But when there are three, four, five, six or seven killer games, you'll see those people jumping. And it will result in a higher attach rate, which is what's really important."
That attach rate — the number of games sold per system — is the number investors will really want to keep an eye on. The Wii had an attach rate of 9.01, meaning the average owner had roughly nine games. The Wii U had an rate of roughly 7 games per system. Those are both over the lifetime of the consoles. While it's certainly too early to know the Switch's attach rate, GameStop says it has seen a higher attach rate for the system than Wii U (which included a free game in its packaging).
The Switch has an undeniably strong catalog of games lined up for its first year. The big unanswered question, though, is what happens in years two and three?
"Just seeing the words Zelda and Mario in the same breath, in the same year - I can't remember that ever happening," says Pachter. "That's really good, but what are the odds that Nintendo keeps that going with two of the big IPs in the same year. There's no way. They just haven't done that in the past. ... If they don't have three games that everybody wants, it's going to be hard for people to justify buying one."