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.

Outlines

00:00

📊 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.

05:00

💰 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.

10:00

📉 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.

Keywords

💡Nintendo Switch 2

The Nintendo Switch 2 is the speculated sequel to the popular Nintendo Switch gaming console. The video discusses the potential reasons for its delayed release, including financial considerations and market conditions. It is a central topic as the video delves into Nintendo's strategic decisions regarding its release.

💡Financial Data

Financial data refers to the quantitative information that companies use to analyze their financial health and performance. In the context of the video, Nintendo's financial data is crucial for understanding their decisions, such as delaying the release of the Switch 2. The video suggests that Nintendo's financial situation, including the depreciation of the yen, plays a significant role in their strategic planning.

💡Manufacturing Arrangements

This term refers to the processes and logistics involved in producing a product, such as a gaming console. The video highlights how Nintendo's manufacturing arrangements, including the location of production and labor costs, are influenced by global financial contexts and impact the timing of the Switch 2's release.

💡Global Financial Context

The global financial context encompasses the economic conditions and trends that affect businesses worldwide. The video argues that Nintendo's decisions, particularly regarding the Switch 2, are influenced by the global financial situation, such as currency exchange rates and inflation concerns in Japan.

💡Yen Depreciation

The yen depreciation refers to the Japanese yen losing value against other major currencies. This has implications for Nintendo's profits, as it affects both the value of foreign sales and the cost of production materials from abroad. The video suggests that the timing of the Switch 2's release is closely tied to the yen's performance in foreign exchange markets.

💡Game Drought

A game drought is a period when there is a lack of new, compelling games for a gaming platform. The video mentions Nintendo's desire to avoid a game drought similar to what happened with the 3DS and Wii U, which could negatively impact the success of the Switch 2 upon its release.

💡Software Lineup

The software lineup refers to the selection of games available for a gaming console. The video emphasizes the importance of a strong software lineup for the success of a console, as seen with the Nintendo Switch. Nintendo is cautious about releasing the Switch 2 to ensure a robust lineup of games is available from the start.

💡Analysis Paralysis

Analysis paralysis is a state of indecision caused by overthinking or overanalyzing a situation. The video suggests that Nintendo may experience this, leading to delays in decision-making, including the release of the Switch 2. This concept is used to explain potential internal challenges within Nintendo's strategic planning process.

💡Price Drop

A price drop refers to the reduction in the selling price of a product. The video discusses the potential for Nintendo to lower the prices of existing games or even the system itself to boost demand and sales before the launch of the Switch 2. This strategy could help clear inventory and increase profits from existing titles.

💡Inventory Management

Inventory management involves the control and optimization of stock levels. The video touches on the importance of managing inventory effectively, especially in preparation for the launch of a new console. By reducing inventory, Nintendo can minimize costs and prepare for the Switch 2's release.

💡Exchange Rate

The exchange rate is the rate at which one currency can be exchanged for another. The video highlights the significance of exchange rates, particularly between the yen and other currencies like the Vietnamese dong and the New Taiwan Dollar, in determining the manufacturing costs and potential profits for the Switch 2.

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