Delaying Switch 2 avoided this

Summary

The 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.