Nintendo (7974) and DeNA (2432) Assessed in the Light of Switch Launch
The launch of Nintendo’s new console system, Switch, can be considered a qualified success. Reviews have generally been positive – especially in comparison with those received by the WiiU at launch – and sales data (such as 330,000 units sold in Japan in first three days), along with shortages on Amazon.com (AMZN US), suggest that demand is decent (reviews on Amazon are also quite favourable, with an average of 4.5 out of 5.0, identical to Sony’s (6758) PSVR.). The “330,000 in three days” figure has been compared, sometimes unfavourably, with the “300,000 in two days” figure for the WiiU, but in our view the comparison is pretty meaningless, due to production limitations.
The Japan sales figure and online shortages suggest that Nintendo should meet its FY16 sales target of 2mil units – unless production continues to prove an issue, which it really shouldn’t (management is already intimating that it plans production increases). However, the situation thereafter becomes more problematic. This is because much of the current demand for Switch is being driven by fans of Zelda. The new Zelda game has had rave reviews and boasts a loyal fan club, with the result that two out of three Switch consoles are being bought with Zelda: Breath of the Wild.
Key Points:
- Once the Zelda-related demand has been met, what then for the new console?
- Making a success of Switch is only half the battle.
- Nintendo needs to work out how it replaces the 3DS and the WiiU
- Concerns on Nintendo’s smartphone strategy
- Super Mario Run and Fire Emblem Heroes are already losing traction
- Implications for DeNA
Nintendo is mainly engaged in the development, manufacture, and sale of home-use game hardware/software and peripheral equipment as well as software under the name of "Nintendo DS," "Nintendo 3DS," "Game Boy," "Nintendo 64,"" Game Boy Advance," "Wii," "Nintendo GameCube," "Game Boy Color" and "e-Reader (trading card games)." Co.'s principal software trademarks include "Pokemon," "Super Mario Bros.," "The Legend of Zelda," "STARFOX64" and others. Co. also provides online games and repair services. In addition, Co. is involved in the manufacture and sale of Japanese playing cards called "Karuta," playing cards and board games, as well as the management of intellectual property rights.
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012.
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