Nintendo started 2017 as a punching bag - and ended up with the hottest gadget of the year
- When 2017 began, Nintendo was in a precariously weak position: Its Wii U console had flopped, and its first "Super Mario" game for smartphones was a sales disappointment.
- But the Nintendo Switch is a huge sales sensation, selling at least 10 million units in 9 months. Gamers love it, and the stock has rebounded tremendously.
- Nintendo's smartphone business is still uneven, but it's picking up momentum. Delivering more smartphone hits is a major challenge for Nintendo in 2018.
By the time this year began, Nintendo was looking more like a punching bag than a powerhouse.Nintendo had just ended the production run of the Wii U console, which had only sold 13.56 million units since its 2012 launch - an embarassing misfire from the 128-year-old company. And "Super Mario Run," Nintendo's grand debut as a serious smartphone game developer, was a critical success, but a sales disappointment. It's telling that Nintendo's hottest product of 2016 was a $60 console loaded with 30-year-old NES games.
Now, though, Nintendo is playing with power. The Nintendo Switch, the company's latest console, is a tremendous hit, with at least 10 million units sold in its first 9 months. In fact, in Japan, the Switch just overtook the first-year sales record set in 2000 by the Sony PlayStation 2, the best-selling game console of all time.
In fact, it might even be fair to say that the Nintendo Switch was the hottest gadget of 2017. With the Apple iPhone X reportedly seeing lower-than-expected demand, the Switch seems like it was the only unambiguously successful new product of the year - supported by the fact that it was just so hard to find for months after the launch.
Just to hammer home the magnitude of Nintendo's turnaround, here's the company's stock price chart, from December 30, 2016 to December 29, 2017:
How did Nintendo do it?
The biggest factor behind the success of the Nintendo Switch is something that's far easier to say than it is to do: Nintendo simply made a product that made lots of people happy. It sounds simple, but Nintendo completely missed the mark with the Wii U. Happily, it seems that Nintendo has learned its lesson.The underlying gimmick behind the Nintendo Switch is that it's both a TV console and a portable console. You can play "Super Mario Odyssey" on the bus, and then drop it in the included dock to keep playing on the TV. Nintendo totally nailed this feature: Going from portable to TV and back is a smooth and painless process.
Speaking personally, this feature has actually driven my total gaming hours through the roof. I only get maybe an hour or two of TV gaming time a week, on average. But being able to take my TV games with me to the bedroom, on the train, or on vacation? It's enough to make me wish that every game, ever, was a Switch game.
Over at Kotaku, Mark Serrels dives deeper into this phenomenon, in a wonderful personal essay on how the flexibility of the Nintendo Switch helped him reconnect with his love of video games, even with the responsibilities of being a homeowner and a father.
And Nintendo is playing its part, too, releasing great Switch game after great Switch game. The system launched with "The Legend of Zelda: Breath of the Wild," with "Mario Kart 8 Deluxe" and "Splatoon 2" soon after. Then it was "Arms," and the superlative "Super Mario Odyssey." Less than a year in, Switch owners are spoiled rotten.
Outside developers are starting to bring games to the Switch, too. The classic "The Elder Scrolls V: Skyrim" and retro revival "Doom" both hit the Switch this year, with "Wolfenstein II: The New Colossus" expected to drop in 2018, too.
Nintendo isn't in the clear just yet
A big lesson for Nintendo from the Wii U debacle was that the world has changed. In 2016, the company started investing in the smartphone as a long-term play to ensure that Nintendo and its franchises stay relevant for years to come. It hasn't been a smooth ride so far, though, and is a major hurdle that Nintendo will need to clear in 2018.
In October 2017, Nintendo told investors that despite updates to the game, "Super Mario Run" had "not yet reached an acceptable profit point" - it was a massive hit in terms of free downloads, but too few players were paying $9.99 to unlock the full game.
Nintendo's next mobile game, "Fire Emblem Heroes" fared better, with Nintendo telling investors in that same presentation that the game was on track to meet Nintendo's "profit objectives." Unlike "Super Mario Run," this game employs the troubling tactic of being free-to-play, but encouraging players to buy randomized characters to win.
The most recent mobile Nintendo game, "Animal Crossing: Pocket Camp," was a return to unevenness, with analysts estimating that it made a mere $10 million in its first nine days after launch, versus $24 million for "Mario Run" and $32 million for "Fire Emblem" in the same period.
But it's not all gloom-and-doom for Nintendo on the smartphone front. In fact, Jefferies thinks that Nintendo could make more money from the smartphone than its own consoles within the next decade. It is fair to say, though, that Nintendo has some more work to do if it's serious about being a smartphone superstar.
There are other challenges ahead, too: A reported delay to high-capacity Switch cartridges could harsh the flow of new games in the 2018 holiday season. And the future of the seven-year-old Nintendo 3DS line of consoles is in doubt, as Nintendo continues to release new hardware, but new flagship games are few and far between.
Ultimately, though, Nintendo came into the year as an also-ran. It's leaving it as a legend.