Delaying Switch 2 avoided this
Summary
TLDRThe video explores Nintendo's strategic delay in releasing the Nintendo Switch 2, attributing it to both internal data and the global financial context. It suggests that Nintendo's financial success, influenced by the yen's depreciation, and the potential for a more profitable launch due to the weak yen, are significant factors. The script also considers Nintendo's manufacturing costs, the company's history of avoiding rushed product launches, and the potential for a price drop strategy to boost sales of existing titles. It concludes with a 50% likelihood of a price drop for current games and a strategic wait for a more favorable exchange rate before manufacturing the Switch 2.
Takeaways
- 🕒 Nintendo may delay the release of the Nintendo Switch 2 to avoid potential financial risks.
- 📊 The company's financial data and global market conditions are significant factors in their decision-making.
- 🎮 Nintendo President, Chanura Fukawa, has mentioned March 2025 as the earliest possible launch date.
- 🗣️ Rumors suggest the Switch 2 could be ready for release, but no official delay has been announced.
- 📉 A strong game lineup is crucial for Nintendo, as seen with the 3DS and Wii U launches.
- 💱 The depreciation of the yen has positively impacted Nintendo's revenue, but it also increases manufacturing costs.
- 🌐 Nintendo's sales are heavily dependent on foreign markets, with 79% of sales made outside Japan.
- 📉 Unit sales for Nintendo hardware were down, but the company still made more money year-on-year.
- 🔄 The yen's depreciation is a double-edged sword, benefiting revenue from foreign sales but increasing production costs.
- 🔄 Timing is crucial for Nintendo; they must balance the benefits of a weak yen with the risks of manufacturing costs and market conditions.
- 🎲 Nintendo may use the current market conditions to spike sales of existing titles and consider price drops to boost demand.
Q & A
What is the main reason Nintendo might be delaying the release of the Nintendo Switch 2?
-Nintendo might be delaying the release of the Nintendo Switch 2 to avoid a potential financial risk associated with the current global financial context and the depreciation of the yen against other currencies.
What impact did the Super Mario Brothers movie have on Nintendo's revenue?
-The Super Mario Brothers movie contributed to a 93.4% increase in the movie division's revenue, but it only accounted for 5% of net sales, indicating that while it was a growth area for Nintendo, it was not the main driver of their revenue.
How did the depreciation of the yen affect Nintendo's financial situation?
-The depreciation of the yen made sales in foreign currencies more valuable to Nintendo, as 79% of their sales are made outside Japan. However, it also made purchases from abroad more expensive, affecting the cost of manufacturing new consoles.
What was the performance of Nintendo's software and hardware sales in the last year mentioned in the script?
-Despite the release of successful games like Zelda and Super Mario Brothers, software unit sales were down 4.7%, and hardware unit sales were down 7.8%, with the older model Switch experiencing the biggest drop in sales.
Why is Nintendo's manufacturing location a factor in their financial strategy?
-Nintendo's manufacturing is primarily in Southeast Asia, and the currencies of these countries, like the Vietnamese Dong, have strengthened against the yen, making production more expensive. This is a concern if Nintendo wants to produce a large number of Switch 2 consoles early on.
What is the potential financial risk for Nintendo if they manufacture the Switch 2 now?
-If Nintendo manufactures the Switch 2 now while foreign labor costs are high due to the strong yen, they could face lower profit margins when selling the consoles, especially if the yen rebounds against world currencies before the consoles reach the market.
What is the significance of Japan's inflation situation for Nintendo's strategy?
-Japan's inflation situation is different from the rest of the world, with a fear of deflation rather than inflation. This could lead to a change in the financial landscape by the end of 2024, which Nintendo might be waiting for to optimize their strategy.
How might Nintendo benefit from delaying the release of the Switch 2?
-By delaying the release, Nintendo can continue to increase their income from foreign sales per unit. They also have the opportunity to drop the prices of their existing games and systems, potentially boosting demand and sales across their library.
What is the role of decision-making in Nintendo's corporate culture?
-Nintendo follows the Japanese principle of Nashi, which involves building consensus and considering all perspectives. This can sometimes lead to analysis paralysis, where the company overthinks decisions to the point of inaction, which could be a factor in their strategy regarding the Switch 2.
What is the likelihood of Nintendo launching a full line of cut-price games?
-Given the potential benefits of boosting sales and reducing inventory, there is a 50% likelihood that Nintendo will launch a full line of cut-price games. They may also offer more flexibility for different regions to have sales on particular titles, especially for digital sales where margins are higher.
Outlines
📊 Nintendo's Strategic Delay and Financial Insights
This paragraph discusses Nintendo's potential strategic delay in releasing the Nintendo Switch 2, analyzing their financial data, manufacturing arrangements, and the global financial context. It suggests that Nintendo may be avoiding a catastrophic error by waiting to release the console, based on the data they've seen. The paragraph also touches on Nintendo President Chanura Fukawa's honesty about the earliest launch date and the reasons for the delay, including the desire to avoid a game drought and ensure a robust software lineup. The impact of the yen's depreciation on Nintendo's revenue and the potential risks of manufacturing the new console during unfavorable exchange rates are also highlighted.
💰 Financial Implications of Timing the Nintendo Switch 2 Launch
The second paragraph delves into the financial implications of the timing of the Nintendo Switch 2 launch. It explores how the depreciation of the yen has benefited Nintendo's foreign sales but increased the cost of foreign labor and materials. The paragraph discusses the risks of manufacturing now versus waiting for a potential yen rebound, which could lead to lower profit margins. It also suggests that Nintendo could capitalize on the current market conditions by dropping prices on existing games and hardware, which could boost sales and profitability. The paragraph concludes by considering the influence of Nintendo's board members with financial expertise and the company's potential strategy for the next year, including the possibility of price drops and the eventual launch of the Switch 2.
📉 Market Conditions and Nintendo's Decision-Making
The final paragraph focuses on the market conditions and Nintendo's decision-making process. It references a podcast by Nintendo employees discussing 'analysis paralysis' within the company, which could impact the timing of significant decisions like the launch of the Switch 2. The paragraph suggests that Nintendo may use this period to spike sales of existing titles and considers the likelihood of a price drop strategy. It also mentions the influence of the yen's exchange rate with the Vietnamese dong and the New Taiwan Dollar on the manufacturing decision, hinting at a potential launch window based on these financial indicators.
Mindmap
Keywords
💡Nintendo Switch 2
💡Financial Data
💡Manufacturing Arrangements
💡Global Financial Context
💡Yen Depreciation
💡Game Drought
💡Software Lineup
💡Analysis Paralysis
💡Price Drop
💡Inventory Management
💡Exchange Rate
Highlights
Nintendo may avoid a catastrophic error by delaying the release of the Nintendo Switch 2.
Nintendo president, Chanura Fukawa, has stated that March 2025 is the earliest possible launch date for the new console.
The delay in releasing the Switch 2 could be influenced by Nintendo's desire to avoid a game drought like with the 3DS or Wii U.
Nintendo's financial situation and global market conditions are significant factors in their decision-making process.
The depreciation of the yen has contributed to Nintendo's increased revenue, despite a decrease in unit sales for both software and hardware.
Nintendo's sales are heavily influenced by foreign markets, with 79% of sales made outside Japan.
The yen's depreciation is a double-edged sword, benefiting Nintendo's foreign earnings but increasing the cost of foreign purchases.
Nintendo's manufacturing costs for the Switch 2 could be affected by the yen's value against other currencies.
The timing of the yen's rebound could impact the profitability of the Switch 2, potentially leading to a financial risk for Nintendo.
Nintendo could benefit from the current weakness of the yen by increasing sales of existing titles and potentially lowering their prices.
The company's historical strategy includes using older consoles to build hype for new releases.
Nintendo's board includes experts in financial systems engineering and global market analysis.
Nintendo's corporate culture may contribute to decision fatigue or analysis paralysis, affecting the timing of major decisions.
The company may be waiting for a significant change in the exchange rate before manufacturing the Switch 2.
The likelihood of Nintendo launching a full line of cut-price games is at 50%, offering flexibility for different regions.
The global financial markets are a crucial factor in Nintendo's considerations for the Switch 2 launch.
Transcripts
for this video we're digging deep into
Nintendo's financial data their
manufacturing arrangements and the
Global Financial context to show how
they may be avoiding a potentially
catastrophic error by waiting a few more
months to release the Nintendo switch 2
I'll take you through what Nintendo saw
in the data that would prompt them to
push back a console that some reports
speculate has been finished for a
significant period already perhaps years
we also show why Nintendo president
chanura fukawa is being absolutely
honest that March 2025 is the earliest
date he could foresee them launching and
they simply don't let this point know
for sure when they will launch two
Lightning Fast disclaimers yes there's
no official delay yes any talk of switch
to being delayed is all based on rumors
orbe it credibly sourced ones Nintendo
could be pulling some incredible faint
and dropping switch to imminently also
there have been reasons already stated
credible reasons for the delay including
their wish to avoid a 3DS or Wii U Style
game drought early on by ensuring the
software lineup is really robust let me
be clear I'm not dismissing or
minimizing this as a reason I absolutely
think that the comparison of switch is
LA launch against the launch of the 3DS
and Wii U proved Beyond doubt that a
strong game lineup is essential and they
have always in recent years erred on the
side of delay or just downright not
revealing information rather than
rushing something to Market too early
what I'm going to talk you through is an
as well as not an inet of but I think
there is a broader context that I
haven't seen discussed considerations
which Nintendo are less likely to share
externally which is at least a
significant of reason as the games line
up and may be even more crucial as you
probably gathered by now it's to do with
Nintendo's Financial situation and
indeed the state of the world markets
right now ask yourself this question
what is the biggest factor causing
Nintendo's increased Revenue over the
last year is it the Super Mario Brothers
movie that division is up 93.4% but in
total this only accounts for 5% of net
sales it's a growth a for Nintendo but
not what keeps the lights on is it the
release of two huge selling games in
Zelda tears the kingdom and Super Mario
Brothers Wonder both of these games gave
a strong spine to the year last year but
no despite these successes unit sales
for software were down 4.7% and unit
sales for Hardware were down 7.8% with
the biggest hit coming in the older
model switch which has the best margins
for the company and yet Nintendo did
make a significant amount of money an
increased amount of money year on year
and this was attributed to the
depreciation of the yen in the foreign
exchange markets to put it into context
the Yen declined rapidly against the
dollar across 2022 rallied a little by
the beginning of 2023 and has continued
to slip ever since against the Euro and
the pound sterling the decline has been
much more consistent and is still going
against the Chinese when the decline has
also been steadier over the period of
time we can safely assume that the new
Nintendo console has been in the
pipeline for a significant period
whether or not you believe the reports
that Nintendo has had it as good as
ready since 2023 or not they undoubtedly
started the development cycle in very
different financial times for the
company the depreciate of the Y is a
double-edged sword on the one hand a
weekend means that sales in foreign
currencies are worth more to Nintendo
and since 79% of Nintendo sales are made
outside Japan that's a very good place
for the company to be on the other hand
purchases from abroad are that much more
expensive Nvidia is an American company
although much of their production is
heavily rooted in Taiwan where the new
Taiwan Dollar is also at historically
very strong levels against the nend
meanwhile for Nintendo switch much of
the manufacturing in Southeast Asia they
already migrated their production of
switch from China to Vietnam in 2019 but
the Vietnamese Dong is also much
stronger against the Yen than it was 5
years ago that's not such a problem if
your console is older and you're making
fewer of them but if Nintendo wants to
have a huge number of switch two consult
early on to prevent scalping and ensure
they make an aggressive start to the
Next Generation right now as an
expensive time to make that investment
that's not to say that they should be
waiting once they actually sell the new
Switch they stand to benefit
significantly for the same reasons that
their current games are going
gangbusters the weak end gives them a
lot more chance to make substantially
greater profits than they once did
however timing is everything and here's
where Nintendo has a chance to really
win big or to lose catastrophically the
depreciation of the N is currently
largely self-inflicted because Japan has
a very different situation from much of
the rest of the world while the rest of
the world is trying to choke off
inflation from money rampant Japan's
inflation has been stagnant for years
and their fear is actually deflation
that Goods will get ever cheaper meaning
consumers decide to wait and wait
choking off markets but Japan's
inflation is heading towards Target
figures and there is wide expectation
the tide will turn when will it turn you
guessed it the end of 2024 so what does
this mean for Nintendo's strategy well
in an Ideal World they probably be
chucking stuff out there like there's no
tomorrow to benefit from the
advantageous market conditions but you
can't just flick and a switch and have
the switch to appear to ramp up
production would take months and
moreover new games technology generally
has lower margins Nintendo has always
been determined that it should make a
profit on its hardware and never get
into the situation of having the
hardware be a lost leader nevertheless
switch two units stand to be
significantly less profitable in their
own right early on even before you
consider the change in labor costs from
Outsourcing the manufacturer during
times of an unfavorable exchange rate
here's the massive danger the Nintendo
face essentially it's a financial pins
movement if they were to manufacture
huge amounts now now while the foreign
labor costs are high they could find
that by the time they get these consoles
to market conditions have changed and
they're now selling them for much lower
margins because the Yen has rebounded
against the world currencies they lose
out on the cost of manufacturer and they
lose out of the profit at sale whether
or not this could render the switch to
the first unprofitable console at least
for its first few months is impossible
to say without knowing the precise
details but at the very least it would
be uncomfortable for a corporation that
has always prided itself in knowing the
value of what it sells you can just
imagine longtime Nintendo veteran the
data and looking on with horror at the
very idea that this l- held principle
could be compromised because of an
imprudent Financial strategy born out of
rushing the new conso to Market and yet
even the fear of this is still not
necessarily a reason to delay after all
they could become caught in a cycle of
endlessly waiting for a correction that
doesn't come while the OG switch
shrivels on the vine but there is
another strong incentive to wait
specifically there are opportunities
that are unique to the current weakness
of the mend if Nintendo stands
completely still their income from
foreign sales will continue to increase
per unit but of course the unit sales
are steadily dropping however with an
8-year game catalog there is a huge
amount of potential for Nintendo to
benefit from something that they haven't
done for the entire switch generation a
price drop dropping the price of these
games possibly even the system would
definitely Spike the demand but from a
financial point of view it would be
taking the games back to the level of
profitability per unit that they were 2
years ago not a terrible place to be in
this is a huge huge chance to do a
massive Victory lap for the switch
Library boosting sales across the board
and moreover boosting awareness of their
different franchises not just Mario and
Zelda but also Pikmin Kirby Splatoon
Fire Emblem zener blade and others their
historic strategy the strategy they used
in the dying days of 3DS was to use the
cheaper older console to build up hype
for the next big thing they used Luigi's
Mansion on 3DS to raise the profile of
Luigi's Mansion before announcing the
switch version and Metroid Samus returns
was announced alongside Metroid Prime 4
the logic is sound you give new
audiences a cheaper entry point option
and ghag good reviews to prove the
quality of the product before launching
your big new thing but Nintendo doesn't
have to do that if they can Stoke sales
on the literally dozens and dozens of
first party titles that have sold a
million plus they stand to benefit
hugely they can reduce that pesky
inventory ahead of a new system
launching making a tidy profit the
hardly any effort and raise the
company's profile amongst consumers into
the bargain keeping people playing their
games and excited about the prospect of
Nintendo even during a fallow period for
games releases it all comes down to
timings and here it getss even more
complicated you would assume given that
they are Japan's 15th largest company
that they would be paying very close
attention to which way the wind is
blowing and possibly have a number of
contacts at the bank of Japan and in the
government note that sitting on their
board is Mel yamazaki who spent 31 years
in financial systems engineering
designing large scale systems and
institutions including Banks as well as
katah hero Umama who is an auditor for a
Vietnamese textile firm there are voices
in the room who will be paying very
close attention to the global Circ
circumstances and Advising Nintendo
accordingly but one final crucial
element comes into play here last year
in a podcast by longtime Nintendo
employees kit and Christa the aonomus
pair talked about how sometimes Nintendo
finds itself delaying making decisions
because of essentially decision fatigue
or as they called it analysis paralysis
please check out the original podcast
which I'll link up here so you can get
the full context but let me quote the
key bit from Christy Yang Nintendo can
be very in their own heads they
overthink it to the point where they
don't do anything they become paral lies
with indecision so the pair go on to say
that the name that was given to this
while they were there was analysis
paralysis and they discussed how
multiple times went faced with a
significant decision people in the
company would in their words Tor
themselves to death and end up doing
nothing this isn't unusual in Japan
which has a very different corporate
culture to the West in common with many
Japanese businesses they follow the
principle of Nashi which is the practice
of building consensus and following all
perspectives this does have the
consequence that often putting the
brakes on can be easier than hitting the
accelerator with so many voices if there
are only a few holdouts the company is
more likely to default to waiting but if
Nintendo had analysis paralysis often
during kit and Christ's long stint to
Nintendo just think of the tenor of
discussions about the launch of
something as Monumental and critical to
their future as switch 2 so what does
this mean for the next year or so at
Nintendo I do think they will look to
spike sales of existing titles and so I
think price drops of titles switch
selects or whatever they may be are much
more feasible as a result of course
there is another consideration which is
that because they're making more profit
per unit even if they sell fewer units
if they do nothing they could still make
pretty decent money off the games that
they've got therefore I'd still put it
at the 50% likelihood that they will
launch a full line of cut price games
but they definitely can offer more
flexibility for different regions to
have sales on particular titles
especially for digital purposes where
the margins are higher as for switch 2
they can't delay indefinitely so my
hunch is that they will wait until they
see a big change in the exchange rate
between the Yen and especially the
Vietnamese dog on the new Taiwan Dollar
and then go all in to manufacture the
reason for the at least March 2025
statement from fukawa makes a lot of
sense seen in this light because while
their internal development schedule May
motivate some of the decisions I really
think the world financial markets are
also bearing down on their
considerations I'm putting on screen my
previous Financial Deep dive my recent
look into big selling Nintendo games
that they could use to plug the gaps in
2024 and some of my deep Dives on the
screen right now please give one of them
a click otherwise see you next time for
another Nintendo
forecast
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