During its last investor meeting, Nintendo lowered its annual expectation for Switch sales. Originally, the company predicted that it would sell 20 million Switch units in the fiscal year ending Mar. 31, 2019. Nintendo will fail to meet that goal. Nintendo President Shuntaro Furukawa ultimately revised the prediction down to 17 million units for the year. In a new Q&A session from Nintendo, Furukawa gave his analysis for why the Switch failed to hit the initial sales target. While Furukawa gives a few concrete reasons why the Switch came up short, he is only half-right in his analysis.
What was right
And from the viewpoint of our full-year unit sales forecast for this fiscal year, while we expected that releasing titles during the holiday season would help to increase sales, the year-on-year sales increase during the first half of the fiscal year (April to September) turned out not big enough, which also affected the revision of the unit forecast as we looked back now.
Furukawa is absolutely correct that the sales forecast was already dead after the first six months of the fiscal year. The Switch sold less than 2 million units during the first three months of the fiscal year. In the following three months, roughly 3 million more units were sold. This meant that Nintendo had to sell 15 million more units in just six months. This number would have been insurmountable by any metric. Even with the absolutely stellar holiday season that Nintendo had — the Switch sold more than the PS4 and Xbox One combined in December — the failure to move Switch units off shelves the first six months doomed the forecast.
The bigger mistake Nintendo made was failing to revise the forecast down after the first six months. Instead of admitting a miscalculation, the company instead decided to stick to its guns. Nintendo failed to acknowledge failure, which made it all the more inevitable. When Nintendo revealed its new sales forecast after the holiday season — 17 million units — it made it seem like the company had failed. In reality, 17 million units sold is an incredible feat. Had Nintendo swallowed its pride in October, it could have averted looking bad coming out of the holiday season. Instead, Nintendo is forced to wallow in failure even though the Switch had an excellent year. Nintendo’s failure to admit it was wrong early erased its success in the future.
What was wrong
As we look back so far (for this fiscal year), we now evaluate that our efforts to fully convey the appeal of Nintendo Switch hardware and software to the number of new consumers we originally hoped to reach were insufficient.
We will talk about the next fiscal year in more detail at a later time, but basically we want to further increase both our hardware and software unit sales more than this fiscal year. We want to further enrich our software lineup and convey its appeal to consumers, so that they decide this (calendar) year they would buy Nintendo Switch.
These two quotes from Furukawa don’t really grasp the reality Nintendo faces in the game industry today. Rather than apologizing for setting an unrealistic sales target, Furukawa says here that the sales target was fine. The real problem, according to this quote, is that Nintendo did not market well enough.
I’m sorry; is that Wii U-speak?
Here is where I disagree. Nintendo did market the Switch well. We know this because the console is going to sell 17 million units in a single year. That’s a lot! We consider the PS4 to be a massively successful console; the Switch is selling PS4-like numbers. Yes, the lack of big hitters for the first half of the year hurt the Switch, but the problem here is not marketing.
Sometimes you just have to be happy with the number of units sold. Sometimes you have to cut your “losses” and admit that your expectations were unrealistic and that you actually did pretty well. By failing to admit that reality here, Nintendo is setting itself up for failure yet again.
Furukawa closes out by saying that next year’s forecast will be higher than sales for this fiscal year. Most consoles do worse in their third year compared to the second year on the market. Furukawa thinks that the Switch will escape this fate. By once again setting up the Switch for unrealistic expectations, Nintendo is making it far more likely to face failure for another year in a row.
Sometimes you just have to accept that you did good enough. Selling 17 million units in a year is a heck of a lot more than the 3.5 million units per year that the Wii U used to hit.