Posted by: seanmalstrom | October 24, 2016

Email: $200 is wishful thinking…

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Think about this from a Nintendo perspective. The reason why they say Switch is ‘first and foremost a home console’ is so they can charge $60 for games. Nintendo has never made money from hardware. They make their money from the software and licensing. If the hardware is profitable, it is very slight, and Nintendo expects parts to get cheaper. New versions of the hardware are made to be cheaper too.
The ‘Nintendo like profits’ came from DS, Wii, and even Famicom/NES where the hardware was priced very low. Also, the reason why Nintendo hardware is designed to be resistant to failing or breaking is so you can spend more money on software instead of replacing hardware. The profit margins are in the software.
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Nintendo would rather have you buy a Switch and buy three games instead of you buying a Switch and buy one game. Even if the profit is identical because in the first case, they take more of a hit on the hardware. The hardware is not the relevant part of this business. Nintendo knows this. (They tried to make hardware the product with 3DS and Wii U and it backfired on them.) In other words, people are going to buy the Switch to get to Mario and Zelda. They want you to buy $60 for Zelda: BoW and then pay $10 + $10 + $5 + $10 +5 + $10 for DLC which has you actually paying over a $100 for Zelda. Oh, and there are Amiibos too which Nintendo will gladly sell you.
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I know the focus is on the hardware right now, but Nintendo’s business model, and the console game business model, does not focus on the hardware to gain profit. The profit will come from accessories and games. The initial hardware (the Switch) has to be as cheap as possible in order to create a market.
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Was I wrong about NX abandoning backwards compatibility despite every Nintendo console having it (not home consoles Gamecube and prior)? I could see that because of the business patterns emerging. PS4 didn’t have backwards compatibility, it didn’t hurt it. Remasters is another way for them to help ease up the transition period.
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Iwata spoke much about the transition period and how it is the scariest time. What is even more scary for Nintendo is that this transition period is RISKIER than normal because there is ONE HARDWARE. They cannot allow another Wii U or Gamecube because they have no handheld console like a Gameboy to carry them (and smartphone games aren’t going to carry them as those are not a platform with licensing). I wouldn’t even be surprised if Switch was $150, but I don’t think Nintendo will be THAT aggressive.
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There is still too early. Nintendo is doing focus group tests now. They may not have even decided how much memory is going to be in the Switch. Will Switch include a game? And what is the price point they think consumers will go for?
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On big element to this is the ‘other shoe to drop’ from Nintendo concerning their strategy in converting mobile gamers to Switch gamers (this appears to be their strategy). No mobile gamer is going to pay $300+ to play Switch games when they already have a tablet or smartphone. If I go to Google ‘Shopping’ and put in 8″ tablet, I see tablets come up from $55 (!) to $160. “But those are not gaming tablets.” That is true. That is why I linked to the Nvidia Shield tablet, about the same size, which is $200.
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I think those looking at the Switch pricing from a Gen 7 pricing are much closer than those looking at it from a Gen 8 pricing.
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It is no weird hardware in the Switch. It is a tablet that has some wireless plastic controllers and can connect to a TV. And it has a kickstand. There is no additional ‘gamepad’ that it must stream. There is no ‘omg 3d’ expensive tech that was in the 3DS (and Nintendo did take it in the shorts to price cut the 3DS after a terrible launch). The parts of the Switch are not much different from any other Tablet part out there. Nvidia likely gave Nintendo a great deal on the chip since Nvidia was so hungry to sign up a console maker (Yamauchi specifically targeted ‘hungry’ manufacturers when he made deals to make the Famicom. I assume this practice still goes on at Nintendo).
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Every indicator is telling me that among the available price range, Nintendo will aim on the lower side. Nintendo will not risk milking profit from the hardware. It’s too risky! For their ONLY hardware? No. Instead, Nintendo will milk profit from the accessories and games. In other words, it is a Wii like strategy, not a Wii U like strategy.
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Nintendo wants another Wii, not another Wii U.
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It is also the strategy of the NES. Hardware was sold for cheap but the GAMES were sold like Godiva chocolates.
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Here are the previous Nintendo hardware launch prices. Behold:
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NES- $199 (Pack in Super Mario Brothers)
SNES- $199 (Pack in Super Mario World)
N64- $199 (No Pack in)
Gamecube- $199 (No Pack in)
Wii- $249 (Pack in Wii Sports)
Wii U- $299-349
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Surprisingly, Wii broke the pattern of $199 price launches by being $249. “But inflation!” Yeah, but that is offset by cheapening technology. Mobile computer parts are the fastest depreciating tech parts around at the moment. There are already gaming 8″ tablets for $199 TODAY. In 2017, you think $199 is wishful thinking? Nah.
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Again, much depends on what the package holds. But there is no Funky Tech going on here.
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What is going to shock Nintendo and going to shock the game industry, though, is how the value of the games has radically been upgraded by putting them back on Game Cards. You won’t believe how many people are going to be willing to BUY more games than they imagined because the Game Card is a different value proposition than a DVD/Blu-Ray disc or download. There was a time when game cartridges would sell for $80 back during the 16-bit era. While people look at that as a negative and say, “This is because cartridges are too expensive and raise the price,” it should be seen as a positive as “carts raise the VALUE”.
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Game Card vs Optical Disc vs Digital Download
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Game Card wins in value hands down. It’s not even a competition. Gamers, today, would be more willing to pay for the extra cost of a Game Card (should it exist) in order to have it on a Game Card then to have it a few bucks cheaper on an optical disc. Due to the media change of carts on a home TV, the value proposition of Switch games has risen dramatically. I’d much rather collect games for the Switch than an optical console. I know many, many others agree with me too. And they all are the deep pocket gamers who spend $200 for a cartridge game from 1990. There will be people buying every Switch game simply because it is on a cartridge…
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If I was Nintendo marketing, I would keep hinting at a high price, even outrageous ones, such as $399 to get people’s expectations of an expensive price. And then when it comes down to a price reveal, go “BAM $199 mother fuckers”.
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“There is no precedent for that!”
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Yeah, there is. PlayStation’s price announcement, for example, shocked the world and destroyed Sega as a console company. PS3’s stickershock made the Wii’s price look even better. Price matters much in with game consoles. I’m guessing $149-249 for the base hardware. Switch is DOA if it goes much higher than that.
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Seeing how there are $199 niche Nvidia gaming tablets you can buy TODAY at that price point, I don’t see how $199 is wishful thinking… considering for a price point for a product half a year from now and mass produced so the parts are bought cheaper.
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