Nintendo is just shy of reaching 20 million Switch consoles sold, but momentum is slowing
- Nintendo's Switch game console is still doing very well, with nearly 20 million units sold worldwide.
- Second-year sales are down for the console - momentum has seemingly slowed with Switch sales.
- The Japanese game company's stock is also taking a hit, but it would be a mistake to count out Nintendo.
It's a complicated time for Nintendo.
The Japanese game giant's newest console, the Switch, is a hit - but it's losing momentum due to a lackluster second year line-up of major Nintendo-made games.
The Switch's first year was packed with top-level blockbuster games, starting with "The Legend of Zelda: Breath of the Wild" at launch in March 2017, and "Super Mario Odyssey" bookending 2017 in time for the holidays. And that's without mentioning games like "Splatoon 2," "Mario Kart 8 Deluxe," and "ARMS."
The second year, by comparison, is a massive drop-off.
Games like "Kirby Star Allies" (above), "Captain Toad Treasure Tracker," and "Mario Tennis Aces" - highlights for 2018 thus far - have failed to excite Switch owners and critics alike. The biggest game to launch on Nintendo's Switch in 2018 is the biggest game in the world, "Fortnite," which can be played on nearly every other game platform.
As a result, sales of the Switch console in its second year are down: Nintendo sold 1.88 million consoles between April 1 and June 30, 2018. That's approximately 100K units less than the previous year's quarter.
At the same time, the latest financial data puts the Switch on track to reach 20 million total consoles sold worldwide any minute now - an incredibly impressive number for a console that's only been available for about 15 months.
And games like "Mario Kart 8 Deluxe" are selling incredibly well. For every two Switch consoles sold, one copy of "Mario Kart 8 Deluxe" is sold.
Long term, sales of "Mario Kart 8 Deluxe" will no doubt continue.
It's a series with notoriously long legs, that anyone who buys a Nintendo Switch at any point may purchase. But Nintendo needs big new games to sustain and increase interest, and it needs them on an ongoing basis.
In 2018, Nintendo has failed at that objective thus far, and the second half of the year isn't looking much better.
Here's Nintendo's line-up for the rest of the year based on what we know right now:
1. "Super Smash Bros. Ultimate" - the next entry in the long-running Nintendo fighting game series which features an all-star cast of gaming characters.
2. "Pokémon: Let's Go, Eevee!" and "Pokémon: Let's Go, Pikachu!" - an updated re-master of "Pokémon Yellow" that comes in two slightly different versions.
3. "Super Mario Party" - the next entry in the multiplayer-focused minigame series starring Nintendo characters.
Things could change between now and next March, when Nintendo's fiscal year ends. Nintendo could announce major new games coming to the Switch, and momentum could return.
That's unlikely for at least one good reason: Major game companies tend to announce holiday launches well ahead of time, allowing for a marketing build-up. Such is the case with Nintendo's holiday blockbuster duo of "Super Smash Bros. Ultimate" and the twin Pokémon "Let's Go!" games.
It was always going to be hard for Nintendo to top 2017 - a year with major new "Mario" and "Legend of Zelda" games - but 2018's comparative game line-up is a return to the Wii U years of B-tier games sporadically launching. At very least, it's a far cry from the near-monthly game release cadence of 2017.
Worse, Nintendo set a nearly impossible goal for itself: Executives projected sales of 20 million Switch units in the second fiscal year. As Wedbush analyst Michael Pachter told me in an email this week, "That sounds implausible to me."
He's got good reason to believe as much: Nintendo sold just 1.88 million consoles in its first financial quarter of the year, and would have to sell another 18.12 million consoles in the next nine months to meet its own goal.
According to Pachter, Nintendo is betting on the twin release of "Pokémon: Let's Go, Eevee!" and "Pokémon: Let's Go, Pikachu!" this November to massively bolster Switch console sales.
As Wedbush argued in a note following Nintendo's financials earlier this week, the "Let's Go!" Pokémon spin-off games are unlikely to move consoles the way Nintendo may expect. They're not main series Pokémon games - one is planned for the Switch in "late 2019" - and they're unlikely to attract huge audiences the way that "Pokémon GO" did.
"'Pokémon GO' is free-to-play and requires nothing more than a mobile phone or a tablet to play," the note said. "In the case of this fall's Pokémon titles, the prospective player will be required to buy both the game ($60 for one, or $120 for both) and the Switch hardware (another $299 at current prices)."
Given the barrier to entry being far higher - both from a price and gameplay perspective - it's unlikely that the "Let's Go!" Pokémon games will attract anywhere near as many players as the smartphone Pokémon game did. Thus, betting on them to help move tens of millions of Switch consoles over the next nine months is risky at best.
"I think that is exceptionally naïve," Pachter said. "But we'll see."
It's for these reasons that Nintendo finds itself in a complex position with the Switch. Sales are still brisk - the Switch has now sold 7 million more units than its predecessor, the Wii U, in a fifth of the time - but there's not much new incentive to buy the console.