Nintendo absolutely nailed the Switch

It’s been a rough time for the gaming industry. This year, over 10,000 employees (!) have been made redundant – a figure that’s already surpassed last year’s dismal record. Countless developer studios have had to shut down, endless games have been cancelled.

The current crisis in the industry is primarily due to rising production costs and ever-longer development times for AAA games. As a result, profit margins are getting thinner and thinner. If a game doesn’t sell millions of copies, it’s promptly labelled a flop and the studio responsible is closed. This is also being felt by console manufacturers, who are desperately looking for new growth and cost-saving opportunities.

All console manufacturers? No. Nintendo seems to exist in its own parallel world, spared the harsh reality of the video game industry. The company has been riding an unbelievable wave of success with the Switch for years, and it doesn’t seem to be slowing down. In short: Nintendo absolutely nailed the Switch.

Nintendo’s journey into the Blue Ocean

The Switch can trace its current success to a drastic change in strategy during the Gamecube era. Despite its state-of-the-art technology, Nintendo’s purple lunchbox was unable to beat the competition in the early noughties. Sony and Microsoft dominated the AAA games market with expensive, graphically sophisticated and grown-up games.

Nintendo’s president at the time, Satoru Iwata, recognised the signs of the times and announced a new strategy. «What Nintendo is currently discussing is not about state-of-the-art technology for enhancing processing power. What I, Miyamoto and Mr Takeda are discussing is what should be done to entertain people in a new way,» the president revealed in an interview with Gamespy in 2004.

Their next home console and future Nintendo handheld follows the so-called Blue Ocean strategy. With this risky business approach, a company leaves a highly competitive market (the Red Ocean) in order to create a new market (the Blue Ocean). The original competition plays no role in this new market. Nintendo wants to tap into new target groups in this Blue Ocean and define market rules itself.

What Nintendo is currently discussing is not about state-of-the-art technology for enhancing processing power.

The result of this strategy shift in Nintendo’s handheld division is the Nintendo DS, a Gameboy successor released in 2004. Instead of incorporating more powerful hardware into a new Gameboy, Nintendo takes a risk and installs two screens in the device, one of which is a touchscreen. This enables new control options and, with its simple operation, also appeals to people who haven’t played games before.

Nintendo takes even more risks with their home console. The successor to the Gamecube, the Wii, is launched in 2006 and doesn’t play by the rules dictated by Sony and Microsoft in the console war. Nintendo completely abandons the expensive technological arms race – the Wii is only marginally more powerful than the Gamecube. Instead, it offers innovative motion controls, which the company uses to tap into new casual target groups.

The plan works, the Nintendo DS develops into the company’s most successful console to date and the Wii is also a huge success. It’s the foundation for an even bigger success story the company will write around ten years later with the Switch.

The Switch – the latest ship on Nintendo’s Blue Ocean

After its foray into the Blue Ocean with the DS and Wii, Nintendo doesn’t return to the highly competitive Red Ocean.

Even the colossal flop the company experienced with the Wii U didn’t throw the Japanese ship off course. Nintendo’s first HD console with a tablet controller aimed to build on the success of the Wii and once again appeal to new target groups – this time tablet and Apple users. The experiment fails miserably. But this is also part of the risky Blue Ocean strategy – taking risks and accepting failure.

After the Wii U, Nintendo goes one step further with the Switch. The tablet idea is expanded upon. However, ideas from older consoles, such as the Wii’s motion controls, are also integrated into the new device. The Switch, with all its unique features, feels like the culmination of the innovation-driven business strategy that Nintendo consistently pursued for a good 20 years.

The Switch is also technically outdated at launch in 2017. It can’t even come close to competing with the PS4 and Xbox One. But that doesn’t matter, because the Switch offers something that the others don’t. Nintendo’s hybrid hardware blurs the boundaries between stationary consoles and mobile gaming devices. Being able to play actual console games on the move is a dream come true for many.

Nintendo once again creates a new Blue Ocean market with the Switch, while the competition tears itself apart with huge battleships in the Red Ocean.

At this time, it seems the small console is set to become Nintendo’s biggest success. The company has sold 141 million units to date. Analysts are certain that Nintendo will soon overtake its previous record holder (Nintendo DS – 154 million) and the PS2 as the best-selling console of all time (approx. 160 million).

Nintendo games are free from the shackles of the AAA market

Nintendo’s move away from the technological arms race of consoles and the PC world with its Blue Ocean strategy is paying off for the company, especially during the Switch era.

Graphical leaps between console generations are getting smaller and smaller – the difference between the PS1 and PS2 is galaxies greater than the difference between a PS4 and PS5. Many consumers can hardly tell the difference between last- and next-gen.

Despite small visual upgrades between console generations, development costs are rising exponentially. Higher resolutions, more detailed models and computationally intensive effects such as ray tracing cost a lot of money, time and human resources.

Nintendo doesn’t have to deal with these problems on the Switch. With comparatively little effort, the company releases a bunch of games for the technically outdated portable console. Nintendo’s output in the Switch generation has been massive. The incredibly strong software library full of exclusive titles contributes significantly to the console’s success. Since the launch of the Switch in March 2017, Nintendo has released over 120 (!) games for the console. An incredible number. By comparison, Sony has released just over 30 games for the PS5 after a good four years.

In addition to the gulf in number of games published, the enormous difference in the range of genres and game sizes is also striking. Nintendo’s Blue Ocean mentality has an influence on both the development of new hardware as well as the software lineup. While Sony almost exclusively releases million-dollar AAA games such as Spider-Man 2 and Horizon: Forbidden West, Nintendo also lets off steam with more experimental titles such as Princess Peach: Showtime or Kirby and the Forgotten Land.

Sony and Microsoft are doomed to produce blockbuster after blockbuster due to the costly competition in the red AAA gaming ocean. Every game has to be even bigger, more beautiful and more spectacular than the last and sell even better. Meanwhile, Nintendo enjoys a lot of freedom in its Blue Ocean parallel world, producing small and big hits as it pleases.

Experimenting with different games, genres and game series pays off. Of the more than 120 Nintendo games on the console, no less than 64 (!) have already sold over a million copies. 21 games have sold over ten million units. These are incredible figures that other publishers can only dream of.

The consequences for failure are also much lower in Nintendo’s blue world than in Sony and Microsoft’s red AAA sphere. For a mammoth project like Spider-Man 2 with a production budget of over 300 million dollars to be profitable, several million copies have to be sold. If the game doesn’t meet these sales targets, there’s a threat of redundancies and studio closures. Despite record sales, Spider-Man 2 studio Insomniac has to lay off a bunch of employees. The game is successful. But not successful enough in the Red Ocean.

If, on the other hand, the upcoming 2D The Legend of Zelda: Echoes of Wisdom flops, the consequences for Nintendo will be minimal. On the one hand, because production costs are likely to be significantly lower than for a AAA PS5 game. And on the other hand, because Nintendo has diversified its game portfolio to such an extent that a failure doesn’t immediately rock the whole boat and lead to redundancies.

Is the harsh reality of the gaming industry catching up with Nintendo too?

The launch of the Switch 2 is imminent. Analysts and industry insiders assume the company won’t make any radical changes to the Switch concept, so the successor will once again be a mobile console that can be played on a TV via a dock too.

New hardware also means more power, and current Nintendo President Shuntaro Furukawa warned at an investor conference in May 2024 that the development of games will be «even longer, more complex, and more sophisticated in the future» due to more powerful hardware. Will Nintendo face similar problems with stronger hardware as Sony and Microsoft have for many years?

Game development will become even longer, more complex, and more sophisticated in the future.

For me, another question arises: is Nintendo still sailing on a Blue Ocean with the Switch 2? Is it enough to stick with the same console-handheld hybrid concept and just pack in more powerful hardware?

After all, other manufacturers from the PC sector have gained a foothold in the handheld market with superb hardware, first and foremost Valve with the Steam Deck. And according to rumours, even Microsoft is working on its own Xbox handheld. With these new players, the technological arms race is also making its way into the previously calm Blue Ocean.

It remains to be seen whether Nintendo will be able to build on the success of the Switch in the face of additional expenses caused by technological progress and new competition in the handheld market.

I hope to write a similar article at the end of the next console generation – «Nintendo absolutely nailed the Switch 2». After all, in a deep red gaming ocean full of studio closures, mass redundancies and scrapped games, there’s still a need for ships that sail boldly into uncharted, blue waters.