Switch 2: How Nintendo Can Break the Curse of Its Predecessors

The gaming industry is abuzz with anxiety about the Nintendo Switch 2, fueled by the notion that the company often follows a successful console with a less-than-stellar one. However, a closer examination of Nintendo's history reveals that this trend is not entirely accurate. The company's handheld business has consistently been robust, with fluctuations in sales that don't necessarily constitute failure. In contrast, its home console sales have been in decline for decades, with the Wii being an anomaly. The Switch, as a hybrid console, defies traditional categorization, but its portability is a significant selling point, making the sales of Nintendo's handhelds a more relevant indicator of its potential performance. Historical data can only provide so much insight, as the gaming industry has undergone significant changes since the Wii U era. The confirmation of backwards compatibility for the Switch 2 is crucial, as it has become an essential feature in the modern gaming landscape. This is due in part to the shift in gamer behavior, with many players happy to play titles that are ten years old or more, and the rise of digital and live service components in games. Backwards compatibility poses a challenge, as seen with the PlayStation 5, as it can make it harder to convince players to upgrade to new hardware. However, it also means that audiences are more likely to stick with their existing ecosystems. Nintendo has an engaged and active audience, with 127 million annual playing users, providing a solid foundation for the Switch 2. The company's decision to prioritize backwards compatibility, although expected, is essential for modern player habits, but it also has its downsides, particularly in terms of new game sales. The Switch 2 will face fierce competition, with thousands of older games available via backwards compatibility, and Nintendo will need to navigate challenges such as lengthening development schedules and dependence on its own games. Nevertheless, the company is taking steps to address these challenges, including expanding its internal development resources and partnering with third-party teams. Ultimately, Nintendo doesn't need to sell a massive number of Switch 2 units to succeed, and its growing digital business, including the eshop and online offerings, has the potential to increase recurrent consumer spending and drive growth.