When Nintendo Switch was first revealed in October 2016, there were mostly two crowds that reacted. One group had been following the rumors for years and scoffed at the Switch’s graphics power and hardware capability. Another group absolutely adored the puppy-ear resemblance and hailed the system as an innovation in the physical multiplay space.
Both crowds are right, and the reason is because they aren’t the same user demographic. One sees the Switch as an Xbox-PlayStation status quo contender that has some portable gimmicks. The other group sees the console as a console-class handheld that supports TV output. With a product poised to be both a living room and handheld console, Nintendo is targeting an extremely lucrative and strong market as well as an anemic and declining segment at the same time. This dying category, of course, is the handheld market — the once glorious group of culture icons that has been experiencing a steady YoY decline of sales in the past decade.
Fundamentally, I see the Nintendo Switch as a handheld console, so I want to share some of my thoughts on why I think its primary market is handheld and how it might fare in the handheld market.
Value of Sophisticated Handheld Games
To understand why despite the decline handhelds still have the potential to provide value for consumers, we need to understand handheld games. The decline of this category is not necessarily invalidating the value of sophisticated, in-depth handheld games once loved by kids and adults alike. Titles popular on handheld consoles often require tens of hours to complete the whole story (e.g. Fire Emblem, Legend of Zelda, etc.). For a lot of people, a forty-dollar title can provide enough content for half a year. Some presenting intricately written plots or thoroughly thought-out worlds where you can spend as long as you want exploring and playing. This level of depth and sophistication is what the vast majority of smartphones games sorely lack.
In theory, any device with a processor can run the most stupidly simple to the most mind-bogglingly complex games. But in reality, a device tends to attract publishers that take best advantage of its input/output technologies and form factor as well as align best to its marketing narrative and first-party support. Consumers with different entertainment needs will gather around the consoles most suitable for them, and publishers reinforce these buckets by releasing the titles these users want. That’s why platforms generally have different genre makeups than that of their competitors (e.g. best selling games on the 3DS vs PlayStation Vita), and by extension, different consumer behaviors as well.
The Current Market
After making the connections between consumer behaviors, game genres, and gaming consoles, I did some plotting to visually understand where handhelds sit in the market against two axes: game sophistication and portability:
Now let’s annotate this graph with their respective revenues in 2016 and their YoY changes.
No surprise here, the handheld market is having a revenue drought. Most people have chosen to just play games on their smartphones instead because of convenience.
But who are these would-be handheld users?
Users of Switch
On Nintendo’s official YouTube channel, there are 60 something promotional videos. The majority of them are previews of games, but the crucial few that were also the earliest trailers of the console were exclusively focused on the Nintendo Switch lifestyle. Take First Look at Nintendo Switch for example, Nintendo demonstrates three main uses cases:
- Home mode: Switch as a home console where you can enjoy in-depth gameplay at ease (Zelda + Pro Controller)
- Handheld mode: Sliding the handheld off the dock, you get a fully functioning handheld for your own enjoyment
- Tabletop mode: Switch transforms into tabletop console effortlessly and continues to function as expected with the two detached Joy-Con’s and the tablet propped up. In this mode, you can play a game with friends in the same room by sharing the Joy-Con’s.
The message is clear, Switch is intentionally designed for a very particular kind of users. These are the people who desire a more enriching gameplay experience than the one unfulfilled by most disgraceful freemium apps on smartphones. These are also professionals juggling social, work, and personal lives with limited time to spare for video games. Nintendo Switch represents the perfect combination for these folks:
- It allows you to play in-depth games on the go
- It lets you enjoy the immersive experience at home
- It’s a shareable social console to connect with people offline without requiring other people to own the device.
Jasper has approached this target demographic analysis from a behavioral change angle on why the Switch is a great example of growing with your users. I recommend giving that a read if you want to drill down deeper.
But nevertheless Nintendo is boldly confronting two difficult and picky markets simultaneously. How exactly is Nintendo Switch going to win over a significant portion of those people to buy an extra device? How is Nintendo going to revive the in-depth gameplay of handheld titles? It all starts with product design.
Sociable Product by Design
The look and feel of the Switch is a good balance between the cute and approachable design on the 3DS and the sleek, muscular impression given by the PlayStation lineup. But the top highlight of this device I want to talk about is sociable design.
The ability to go anywhere and literally just hand a controller to a friend and say: “wanna play a game?” is incredibly liberating. It was complicated before the Switch. You two first had to have bought the same devices, share two copies of the same game, and then registered online accounts, (maybe even had to be in the same region), as well as had added each other as a friend on some network. For the same reason why sometimes giving you a good old piece of paper is less hassle than trying to navigate layers of digital tools and gates, the Nintendo Switch is a modern gadget with the simplicity and tangibility of an old-school physical toy. To borrow my friend Jasper’s words in his piece on Nintendo Switch:
The Switch’s use of controllers bring back the memories of huddling in a group of friends on the elementary school playground during lunch — connecting our gameboy colors together to trade Pokemon and battle.
You hand a Joy-Con to a friend, you start playing and have a good time. To me, this is the unique value of Nintendo Switch that no other handheld or living room consoles can come close to deliver.
Now we got a potential market and an innovative product, people need to know about it. As much as people associate the word “marketing” with “deception” and “manipulation,” a product’s marketing defines its first impression and heavily influences subsequent purchase decisions. It is extremely important to get it right. Nintendo historically struggled with proper marketing, but this time around, has done a great job to demonstrate the social value of the device as well as its immersive capabilities. Most of what I would say here is nicely summarized by this Forbes piece by Paul Tassi titled The Switch Has Had Nintendo’s Best Marketing Campaign In Years. In a nutshell and with my clumsier wording: the marketing for Switch has been very consistent, understandable, and well targeted.
Alongside traditional marketing channels (which is a fiercely competitive and noisy space), Nintendo really went beyond and creative in educating the public its product and company values.
In the months leading up the big launch, Nintendo hosted a series of “Switch and Play” hands-on events around the world with consistent messaging and demos. I happened to be in Japan during the first hands-on event at Tokyo Big Sight. One of the main areas was set up with a three-part series of the Switch in its three configurations. You start out sitting on the sofa with 7 other participants playing Mario Kart, each of you equipped with a Joy-Con Wheel. You then move onto a ramen counter-like station where you get to fool around with the device in handheld mode, and end with a paired session playing Snipperclips with detached Joy-Con’s.
Furthermore, Nintendo even set up unexpected random popups to get the gadget in more people’s hands, much like Google’s move with the Pixel phone.
By exposing journalists and early adopters to clearly defined use cases of this product, Nintendo made sure people knew exactly what and who the Nintendo Switch is for.
A Few Words on Pricing
Nintendo Switch is one of the most affordable home consoles launched in the past decade. Xbox One was priced at $499, PlayStation 4 at $399, Wii U costed $299 at least, and only Wii costed $50 less than the Switch.
In the handheld market, both the original PS Vita and 3DS launched at $249, so Switch definitely sits on the higher end of handheld launch prices. For young adults and working professionals, the statement of a $299 toy sits comfortably between the “I don’t care I just play Candy Crush to kill time” apathy and the stereotypical gamer obsession with expensive gears. This is important to the positioning of the product, considering that Nintendo wants you to bring something more than a smartphone around to play with friends.
Wrapping It Up
In a dying handheld market, Nintendo is hoping that the built-in simplicity and social nature of the Switch at a justified price will convince you to escape the plague of quick-fix freemium games and come back to the sophisticated handheld titles for a more fulfilling, enjoyable, and social play experience.
Is this the console to deliver both living room, mobile, and social entertainment? Will this omnipotent and uniquely shareable experience take over the general public’s gaming needs?
It’s a steep challenge, but the ingenuity of this product is full of potential. I’m very optimistic about its future.