4 Key Business Lessons From Nintendo’s Rocky ‘Switch’ Reveal

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Beloved video game company Nintendo recently debuted its latest console, the Switch, to a somewhat mixed reception. Reactions to the concept behind the console had been extremely positive, but the latest revelation of pricing and launch specifics has got the cold shoulder. So what went wrong for the industry veterans, and what can they and others learn from it?

 

Don’t neglect market research

While Sony has gone on to own the global console market since their debut in the 1990s, Nintendo seems to have shrunk. The concept of the Switch is novel, but it clearly stems from an attempt to sell to Nintendo’s home market. Handheld devices are popular among all ages in Japan, with frequent commutes and a lack of space at home. In this context, the Switch makes perfect sense, and the lack of competition makes its price point a moot point.

But in the competitive Western market, this is a massive stumbling block. Its competitors offer vastly superior online offerings, and more than 30 times as much internal storage, crucial in an age of convenient digital downloads. Relatively few people meanwhile use portable game systems, preferring their mobile phones. This, unfortunately, speaks to a level of insularity that informed its confused marketing for the Wii U, which the company failed to adequately distinguish from the Wii.

This poor initial presentation isn’t the be all and end all. The company will likely take some notice, readjust and enact some damage control, at least through its American and European divisions. But they will struggle to get as big a platform as they had for this launch. Coverage had extended as far as mainstream media, including the massive reach of TV news, which hits the crucial family and older demographics.

Surround yourself with diverse voices

There’s a reason why Japan has been nestled at the bottom of G7 productivity charts for the last 30 years. A lack of flexibility in corporate structure and promotion based on experience rather than merit are considered to have held many companies back.

What’s notable is that Nintendo’s biggest rival, Sony, has long since bucked this trend. High-level executives and developers including Howard Stringer, Mark Cerny, and Kazuo Hirai have significant knowledge of the Western market, and the company has consistently sought to apply this.

Sony’s original PlayStation console – initially a partnership with Nintendo, until Nintendo switched allegiances – immediately invested in English and American game developers. The result was games like Tomb Raider, Crash Bandicoot, Wipeout and Grand Theft Auto, which came to define an entire era and combat Nintendo’s market dominance.

That success has continued to this day, with Sony subsidiary Naughty Dog making some of the most critically and commercially successful games of all time. Nintendo meanwhile has consistently struggled to get the word out about their products.

While the Wii pretty much sold itself – the visual language of hitting a ball or throwing a punch was clear and effective – it was preceded by the Gamecube, and followed by the Wii U. The Gamecube was more powerful than Sony’s PS2 offering but ended up being marketed more as a children’s console, with cartoony graphics failing to show its muscle. The Wii U meanwhile struggled even to show it was a new console, with many parents mistakenly thinking it was an add-on for the Wii.

That’s if they saw an advert for it at all. Nintendo famously makes all of their decisions from the company’s Japanese HQ, delegating information to each region. Nintendo of America (NoA) will be aware of what its audience wants, but it rarely seems to get through to Nintendo of Japan (NoJ). One famous incident involved NoA’s head of indie development being sacked for talking directly to a small developer, rather than letting the developer contact him.

Less demanding independent games would be perfect for Nintendo’s underpowered platforms, and many developers love the company, yet they have failed to court them. The fact that reception to the Switch launch has been lukewarm in the west – and that it aired at 4am UK time – shows lessons have not been learned when it comes to global communication.

Bring all your cards to the table

One of the biggest bugbears of any video game console launch is a lack of games. A games console is a significant investment, and people want something to play on it. Nintendo isn’t alone in botching this for the Switch, but its launch lineup of only five games is extraordinary.

Again, lessons seem not to have been learned from Nintendo’s previous console, the Wii U. That also debuted with very few games and continued a pattern of releasing only a few major titles a year. The lack of games meant low initial sales, which lost the confidence and support of external developers. That, in turn, meant fewer games, which…well, you see the problem.

Rumour had it that all of Nintendo’s resources had been focused on delivering games for the Switch, but it seems like this wasn’t the case. Had the company gone all in, and held off a few months until it could guarantee a strong initial showing, it would have built on the groundswell from its 2016 teasers.

Content availability is an issue that has struck down many platforms. The main reason why Netflix is a market leader in so many countries isn’t its interface, but the amount of content it hosts. Where it is impacted by rights agreements for existing broadcasters – such as in the UK, where Sky has exclusive rights to many movies – other platforms are far more competitive.

Nintendo’s chief rivals in the West, the PS4 and Xbox One, have been out for several years and built up substantial libraries of games. They also cost less than the Switch. Nintendo faces an uphill battle to convince people why they should pay $299/£280 for a console with five games, and inferior specifications to its major rivals. As Mario designer and Nintendo legend Shigeru Miyamoto once said, “A delayed game is eventually good, but a rushed game is forever bad.”

The best ideas are universal

For all the qualms people have had with Nintendo’s new console, few can deny that the central concept – a hybrid home and portable games console – is enticing. Playing the same game on the bus that you were just enthralled with at home is something that’s never been done before.

It may have started as a way to address the unique Japanese market: where everyone plays games on the way to and from work, but fewer people play at home. But the hardware they have developed around that kernel of an idea has been universally praised.

Mobile gaming is huge, but people have often voiced frustration at the lack of variety that a touchscreen offers. Taking that desire for bigger small screen experiences and making it a social experience – the unit acts as a portable TV for multiplayer gaming – ticks several boxes most people thought may never happen.

About the Author:

Katya Puyraud is a former journalist and the co-owner of Euro Start Entreprises, specialising in company formation across the US and Europe. Since 2007 Euro Start Entreprises has helped budding entrepreneurs and expanding SMEs to open their companies in over 30 countries worldwide.

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