The Nintendo Switch, a new innovative home and mobile gaming experience is set to release in March of 2017. The release of this device has the potential to reinvigorate the company of Nintendo, which has been falling short in recent years to other technology powerhouses such as Microsoft and Sony. This is of course pending the success of the console. No matter the result however, the release of the Switch is going to determine the direction and future of the struggling Nintendo.

Overview of the Console

The Switch received its namesake for the feature of the system that makes it such an innovative product: it can transform from a console to a tablet and even to a hand-held device. These three transformations have never been seen before in a gaming console. The closest thing to this technology is perhaps the series of Apple products (iPhone, iPad, and iMac) that sync apps and data via the cloud. However, the Switch takes things much further by being one whole device that just breaks off into smaller pieces. In its bulkiest form, it is a console that can be connected to a TV and controlled with a remote. The console can then be dismantled into a tablet that can be controlled with a smaller version of the previous remote control and has its own stand. These little controls can then be placed on the tablet itself, making for a handheld experience.

Gamers have always had the problem with transportation of their devices. The Nintendo Switch solves this in an innovative way that Nintendo hopes will appeal to all different types of gamers. Nintendo has also introduced a diverse group of games for the release of the Switch in an attempt to appeal to a broader range of consumers. The game offerings for the Switch will include the classic Mario franchise coupled with more mature games like Skyrim, and more youth friendly games like The Legend of Zelda and NBA 2K17.

Video Game Consoles and Stock Prices

Nintendo’s gaming consoles play a big role in determining the value of its stock. Nintendo’s peak arrived in the months following the release of the original Wii in November of 2006. By the following November, after a year of sales, Nintendo was at its highest value, with shares selling for $78.50. At this time, Nintendo was more valuable than both of its major competitors, Microsoft and Sony. This was an incredible feat at the time as those companies are involved in more aspects of technology than Nintendo and have been around for much longer. Nintendo’s limited scope contributed to its volatility as well, however. After seeing such amazing growth in 2006 and 2007, the stock plummeted in 2008 as Wii sales naturally slowed down and no other major new products were released until the next decade.

Similarly, Sony also had one major flourish following the release of the Playstation 2 in 2000. This surge was almost twice the size of that of Nintendo in 2006, with shares selling for $149.72 in March of 2000. Microsoft has been the most consistent of the three companies. There was of course a major surge following the growth of Windows in the 90’s leading up through the early 2000’s when the Xbox was first created. The stock dropped a little and was steady for many years until recently. In the past few years, it has been growing once again and has just attained a price of $59.87 per share in October.

Nintendo’s “Next-Generation” Console Falls Short

2012 and 2013 was marked by a craze for “next-gen” gaming. This pitted the three companies together in a battle to create the new revolutionary console the people were yearning for. Six years prior, when a similar dilemma faced the companies, Nintendo won with the Wii, a device that utilized motion sensors to create a never before seen interactive gaming experience. However, in this next wave, Nintendo’s “Wii-U” console failed to resonate with consumers. The “Wii-U” was essentially an extension of the Wii. It added some new features that just simply did not stack up with the quality of the Xbox One and the PlayStation 4. Additionally, the graphics exhibited by Microsoft and Sony were dramatically better than those shown by Nintendo. Nintendo hit its lowest value since the turn of the century in 2013, the lowest being $11.43 per share in February. The following November, Microsoft and Sony released their respective consoles and their stocks both increasing in value as a result.

Nintendo after the Wii-U

Since 2014 Nintendo’s share price has seen some slight growth but nothing comparable to the increase that was seen upon the release of the original Wii. These increases over the past few years are promising for Nintendo, however, as it shows that people are still willing to buy their new releases. In February of 2015, the release of the “New Nintendo 3DS” prompted an increase from $12.79 to $21.80 per share. The stock then fell to under $20.00 per share until Nintendo’s biggest release to date, Pokemon Go in early July of 2016. Upon the release, the stock jumped from $17.72 to $33.38. Unfortunately, the excitement surrounding Pokemon Go died down very quickly, but the stock has remained consistently above $25.00. It also introduced an innovative field of location-based gaming utilizing GPS that Nintendo can certainly look to exploit with its new portable console.

The Future of the Nintendo Brand

Although it is much more limited in scope than Microsoft and Sony, Nintendo has competitive advantages that allows the company to differentiate itself from its competitors. Nintendo’s major advantage is that it dominates its local market, Japan. Japan is a region Microsoft and Sony have had much difficulty infiltrating as Nintendo is such a household name there. This links to another advantageous facet of Nintendo: their exclusive titles. Games like Pokémon, Mario, and Zelda are specific to Nintendo consoles and are not (and most likely, never will be) manufactured for other systems. This promotes a sense of brand loyalty as people are forced to stay with Nintendo in order to play some of their favorite titles. Therefore, there is already an impetus for gamers of all age to play on Nintendo consoles, as long as these consoles are not so far inferior to their competitors as was prevalent in the most recent wave of “next-gen” gaming released by Nintendo.

The release of the Switch is scheduled for this upcoming March. It is traditional for consoles to be released in November, prior to the holiday season. This peculiar release date completely isolates the Switch however, as no other companies are releasing any consoles, or even major games during this period. If the Switch catches on, Nintendo’s stock should see growth it has not experienced in the past 10 years. Interestingly enough however, following the reveal trailer for the console, Nintendo’s stock dropped 6.5% percent. This can be attributed to many unanswered questions about the console; critics are skeptical if the console is novel enough to do well upon the release date. The pressure is on Nintendo to outperform market expectations with the release of this unique device.  

Please reach out to Harrison Ceruto at hceruto@princeton.edu for any questions, comments, or concerns.

Written by thefinancier

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