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CASE 22 NINTENDO'S SWITCH Did Nintendo's Switch Have the Flair to consoles, which was double the yearly quantity of 8 mil- lion, Nintendo's traditional production target. Company Turn On the Gamers? management was highly optimistic about the Switch, and On March 3, 2017, Nintendo launched its latest gaming con Nintendo believed that it could sell about 10 million units sole called Nintendo Switch. It was their ninth-generation of Switch consoles within a year after the launch." portable gaming platform, initially launched with 58 com- One of the key topics of discussion in the popular press patible games. Nintendo Switch came with a pair of new was whether or not the Switch console defined the next and innovative controllers called Joy-Con Controllers, generation of gaming. This echoed similar press concerns a hybrid of an attachable game pad and a controller that after the launch of Nintendo's previous console, the Wil could be used separately for multiplayer game play. A pair U. Prior to the launch of the Switch, its predecessor the of Joy-Cons was included in the $299.99 price tag of the Nintendo Wii U console had been on the market for only Switch console. The Joy-Con came in two color options a short while, with the addition of innovative controls and for customers to choose from, one grey and red/blue and new game titles. Then there had been uncertainty among the other grey and black. A more innovative feature in the industry experts, such as Gabrielle Shrager of Ubisoft and new gaming console was that it could be transformed into Mikael Haveri of Frozenbyte, as to whether or not the a 6.2-inch high-definition on-the-go gaming screen if a user improved power and new controller interface justified that decided to move away from the TV. The new Switch con system's being considered a new generation. sole also marked the release of Nintendo Switch's very first The Wii U initially was launched with 50 available epic game called "The Legend of Zelda: Breadth of the games and a new controller interface, termed the GamePad. Wild," which could be played both on Switch and Wii U While the GamePad offered a new take on the Wil's con- consoles for a price of $59.99. Nintendo of America's COO trols, the new console was still compatible with the same and president, Reggie Fils Aime, said, "Nintendo Switch motion-sensing controllers of the original Wul. However, the makes it easy for anyone to enjoy their games in the liv- WH U console was not sold with these controllers included. ing room and then quickly take them on the go." The new Instead, it came with just one of the new GamePads. gaming console design meant that console-gaming was not Incorporating traits from tablet devices, the GamePad inte- only limited to one stationary TV anymore and could be grated both traditional input methods such as buttons, dual experienced anywhere anytime. analog sticks, and a D-pad (directional pad) and a touch- The launch of Nintendo's Switch caught the attention screen. The touchscreen could be used to supplement a game of consumers and mostly received a positive response, but by providing alternative functionality or an alternative view apparently the news did not impress the investors, leaving of a scenario in a game. With the Of TV Play function, the company's stock tumbling. This may have reflected con the screen could also be used to play a game strictly on the cerns regarding the battery life of the portable console, its GamePad screen without the use of a television display at price, and third-party support. Nevertheless, a flood of cus all. With the WH U console turned on the GamePad could tomer orders led to stock shortages in stores like GameStop be used to display the same picture on its screen as would be and Toys R Us, among others. Addressing the stock short- seen using a TV display. There were also nongaming funo age, Reggie Fils Aime said, "Our focus is making sure that tions, such as the ability to use the GamePad as a television the consumer who wants to buy a Nintendo Switch can buy remote. While Nintendo was the first of the competitors to a Nintendo Switch." The initial plan had been to ship 2 mil release its new gaming console, there was no doubt that both lion consoles. Nintendo decided to double the production Sony's PlayStation and Microsott's Xbox would be close to deal with the shortage and meet the strong demand. behind in releasing their own upgraded systems. To meet demand for one year out, ending April 2018, Nintendo's inability to leap ahead of its competition according to The Wall Street Journal, the company's could be seen clearly in its financial figures. As of 2017, management decided to manufacture 16 million Switch Nintendo's income was off from previous years (see Exhibits 1 and 2). * This case was prepared by Professor Alan B. Eisner and graduate students Saad Nasir, Eshe.Gorsheis, and Eric S. Engelson of Pace University. Background This case is based solely on library research and was developed for class discussion rather than to illustrate cither effective ce ineffective handlingen Although Nintendo dated back to 1889 as a playing-card administrative situation. Copyright 2017 Alan B. Eistics maker, Nintendo's first video-game systems were developed C154 CASE 22 - NINTENDO'S SWITCH EXHIBIT 1 Income Statement (1 USD = 112.3095 JPY es of March 31, 2016) Year Ended March 31 Previous fiscal year Current fiscal year (From April 1, 2014 (From April 1, 2015 to to March 31, 2015) March 31, 2016) (Millions (Millions (Millions of of yen) of yen) dollars) Net sales 549,780 504,459 4,464 Cost of sales 335,194 283,494 2,508 Gross profit 214,584 220,965 1,955 Seling. general and administrative expenses 189,814 188,083 1,644 Operating income 24,770 32,881 290 Non-operating income Interest income 4,018 4,693 41 Foreign exchange gains 34,051 Gain on redemption of securities 5,233 6,801 60 Share of profit of entities accounted for using equity method 952 1,887 16 Other 1,788 1,168 10 Total non-operating income 46,043 14,550 128 Non-operating expenses Sales discounts 205 106 0 Foreign exchange losses 18,356 Other 77 178 1 Total non-operating expenses 283 18.641 164 Ordinary income 70,530 28,790 254 Extraordinary income Gain on sales of non-current assets 47 9 0 Gain on sales of investment securities 398 3 Gain on sales of shares of subsidiaries 3,689 Total extraordinary income 3.737 407 3 Extraordinary losses Loss on disposal of non-current assets 446 351 3 Restructuring loss 1,729 1,130 10 Total extraordinary losses 2,176 1,482 13 Profit before income taxes 72,091 27,715 245 Income taxes current 25,922 2.482 21 Income taxes-deferred 4,306 8,714 77 Total income taxes 30,228 11,197 99 Profit 41,862 16,518 146 Profit attributable to non-controlling interests 18 13 0 Profit attributable to owners of parent 41,843 16,505 146 162 Source: http://financials.meringstar.com/income statement CASE 22: NINTENDO'S SWITCH C155 EXHIBIT 2 Balance Sheet (1 USD = 1123095 JPY as of March 31, 2016) Year Ended March 31 Previous fiscal year Current fiscal year (As of March 31, 2015) (As of March 31, 2016) (Millions of yen) (Milions of yeni (Millions of dollars) Assets Current assets Cash and deposits 534,706 570,448 5,048 Notes and accounts receivable-trade 55,794 38,731 342 Securities 380,587 338,892 2,999 Inventories 76,897 40,433 357 Deferred tax assets 15,597 6,597 58 Other 34,466 26,401 233 Allowance for doubtful accounts 1451) (369) (3) Total current assets 1,097,597 1,021,135 9,036 Non-current assets Property, plant and equipment Buildings and structures, net 42,447 39,977 353 Machinery, equipment and vehicles, net 1,330 1,120 9 Tools, furniture and fixtures, net 4,770 3,791 33 Land 42,925 42,553 Construction in progress 14 309 2 Total property.plant and equipment 91,488 87,752 776 Intangible assets Software 11,190 9,408 83 Other 1,240 568 5 Total intangible assets 12.430 9,977 Investments and other assets Investment securities 96,294 125,774 1,113 Deferred tax assets 30,558 32,195 284 Net defined benefit asset 9,174 7,092 62 Other 15,399 12,974 114 Total investments and other assets 151,426 178,037 1,575 Total non-current assets 255,346 275,766 2.440 Total assets 1,352,944 1,296,902 11,477 Liabilities Current liabilities Notes and accounts payable - trade 58,464 31,857 281 Income taxes payable 16,529 1,878 16 Provision for bonuses 2,220 2,294 20 Other 67,018 62,407 552 376 continued C156 CASE 22 - NINTENDO'S SWITCH EXHIBIT 2 Continued Year Ended March 31 Previous fiscal year Current fiscal year (As of March 31, 2015) (As of March 31, 2016) (Millions of yeni (Millions of yeni (Millions of dollars) 144,232 98,437 871 208 25,416 15,739 41,155 185,387 23,546 14,017 37,563 136,001 124 332 1,203 10,055 89 10,065 13,256 11,734 117 Total current liabilities Non-current liabilities Net defined benefit liability Other Total non-current liabilities Total liabilities Net assets Shareholders' equity Capital stock Capital surplus Retained earnings Treasury shares Total shareholders' equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Total accumulated other comprehensive income Non-controlling interests Total net assets Total fiabilities and net assets 12,401 1,409,754 (270,986) 1,160,578 1,401,359 (250,563) 1,174,118 (2,217) 10,390 105 16,671 19,804) 6,866 110 11,909 (25,250) (13,341) 124 1,160,901 1,296,902 (223) (118) 1 10,273 11,477 1,167,556 1,352,944 Source: http://financials meetingstar.com in 1979 and known as TV Game 15 and TV Game 6. In The Nintendo 64, like its predecessors, used cartridges to 1980 Nintendo developed the first portable LCD video play its games, but at the time the competing Sony and Sega game with a microprocessor. In 1985 Nintendo created systems were using CDs for game storage. Cartridges could the Nintendo Entertainment System (NES), an 8-bit video store 64 megabytes of data, while CDs could store around game console. The original NES was very successful, as its 700 megabytes. Also, CDs were much cheaper to manufac- graphics were superior to any home-based console available ture, distribute, and create the average cost of producing at the time. As a result, more than 60 million units were a Nintendo 64 cartridge was $25, compared to 10 cents to sold worldwide. The NES set the bar for subsequent com produce a CD. Game producers passed the higher expense soles in platform design, as well as for accepting games that to the consumer, which explained why Nintendo 64 games were manufactured by third-party developers. tended to sell for higher prices than Sony PlayStation When competitors began developing 16-bit devices, such games. While most Sony PlayStation games rarely exceeded as Sega's Genesis system and NEC's PC Engine, Nintendo $50, Nintendo 64 titles could reach $70. To increase profits responded with its own 16-bit system, the Super Nintendo and to take advantage of the programming possibilities of Entertainment System (SNES). The Super Nintendo was the larger storage space, many third-party game developers released in 1991 and, when purchased, came with one that had traditionally supported Nintendo platforms began game-Super Mario World. In 1996 Nintendo released creating games for systems that used a CD platform (such Nintendo 64. The Nintendo 64 was the company's third as the PlayStation). generation video game console and was named after the In 2001 Nintendo released its GameCube, which was 64-bit processor. During its product lifetime, more than 30 part of the sixth-generation era of video game systems. million Nintendo 64 units were sold worldwide. These systems included Sony's PlayStation 2. Microsoft's CASE 22 : NINTENDO'S SWITCH C157 Remote Xbox, and Sega's Dreamcast. Although the GameCube did serve as a controller, but it also had a built-in speaker and not use cartridges, Nintendo began producing its games a rumble feature for even greater tactile feedback and game using a proprietary optical-disk technology. This tech involvement. Exhibit 3 shows the Wil and Wii Remote. nology, while similar in appearance to CDs, was actually The second part of the Wii Remote innovation was the smaller in diameter and could not be played using a stan- Wii Nunchuk. The Nunchuk was designed to perfectly fit dard CD player. the user's hand, and it connected to the remote at its expan- Genyo Takeda, general manager of Integrated Research sion port. The Nunchuk had the same motion-sensing capa- and Development for Nintendo, explained that innovabilities that the remote had, but it also had an analog stick to tion and creativity were fostered by giving several different help the user move his or her characters. The ambidextrous development teams free rein to couple a dedicated control nature of the Wii controllers was something seldom seen in ler or peripheral with a GameCube title and then seeing other game controllers, the Wil controllers permitted the whether or not the end result was marketable. This project user to hold the remote and Nunchuk whichever way felt gave rise not only to the Donkey Kong Bongos and the most comfortable. In addition to the analog stick, the Dancing Stage Mario Mix Action Pad, but also to a number Nunchuk had two buttons that gave the user quick access of ideas and designs that would find their way into the Wii to other game functions. Thus, the Nunchuk offered some of the benefits of a standard game controller coupled with When Nintendo released the Wii video game console the high-technology motion sensors of the remote. Users in 2006, it was already in the midst of a very competitive could hold a Nunchuk in one hand and the Wii Remote in market. The previous generation of video game consoles the other while playing the Wii Sports boxing game and be consisted of the Sega Dreamcast, Sony yStation 2. transported into the boxing ring with on-screen opponents. Nintendo GameCube, and Microsoft Xbox. These sys- The game controls were intuitive for jabs and punches. tems were all released between 1999 and 2001 in the (However, a missed block did not hurt as much as if one United States, and although the GameCube sold more sys- were really in the boxing ring.) tems than did the Sega Dreamcast, it fell into third place While the WH U was still compatible with the original behind the PlayStation 2 and the Xbox. The PlayStation Wii controllers, Nintendo revamped the controller usability 2 sold more than 115 million units worldwide, more than when designing the Wii U. The new GamePad sold with the twice the combined unit sales of the GameCube and Xbox Wii U allowed the user to be more in touch with the game (21 million and 24 million, respectively). and provided more depth by offering multi-perspective capabilities on the Pad's screen. While using the TV dis- The Term Wii play, players could now multitask within a game by using a In 2006 Nintendo released its direct successor to the variety of functions on their controller and could even play GameCube, the Wil (pronounced "we"). There were using solely the GamePad, with no TV display necessary many reasons cited as to why the name Wir was chosen. With the game console turned on, players had the option of but perhaps the most compelling reason was that "WW' using the GamePad as their main viewing screen without sounded like 'we.' which emphasized that the console was the need for a TV monitor display (see Exhibit 4). for everyone. Wil could be remembered easily by people around the world, no matter what language they spoke Nintendo Switch Features No confusion. Initially the system was known by its code Nintendo Switch came with a portable game console with name, Revolution, but later the name was changed to Wi. a built-in screen, a pair of Joy-Con controllers, Joy-Con Nintendo stated that it wanted to make the Wii a system that would make anyone who tried it talk to his or her EXHIBIT 3 Wi Console and Remote friends and neighbors about it. The Making of the Remote The original Wii was created to establish a new standard in game control, using an innovative and unprecedented inter- face, the Wii Remote." The Wii Remote was what made the Wil unique. The remote acted as the primary controller for the Wii. Its motion-sensor capabilities allowed the user to interact with and manipulate objects on the screen by mov- ing and pointing the remote in various directions. The Wii Remote was the size of a traditional remote control, and it was "limited only by the game designer's imagination. 12 For example, in a game of tennis it served as the racket when the user swung his or her arm, while in a shooting game it served as the user's gun. Not only did the remote @McGraw Hill Education/Hill Braaten, photographer C158 CASE 22 - NINTENDO'S SWITCH EXHIBIT 4 Wii U GamePad Controller player profiles to sign in to maintain exclusive game prog- ress similar to what most people do using their personal computers. The top right corner of the screen showed bat- tery status along with the time, Prior to Nintendo Switch, the company had intro- duced Amiibo figurines that depicted popular Nintendo characters, and each contained a wireless antenna and flash memory. They allowed consumers to include digital versions of their favorite characters in compatible video games. The "toys to life" segment had been created in 2011 when Activision Blizzard launched the hugely suc- cessful Skylanders line of games and figures. (Disney subsequently jumped into the ring by launching a compet- ing product, Disney Infinity, in August 2013.) Nintendo's first round of Amiibo characters were Mario, Peach, Yoshi, Donkey Kong, Link, Fox, Samus, Wii Fit Trainer, Robin Van Lonkhuisen/epa/News.com Villager, Pikachu. Kirby, and Marth. Accompanying the launch of Nintendo Switch on March 3, 2017, the com- pany introduced a new game called "The Legend of Zelda: Straps, a Joy-Con grip, and a Nintendo Switch dock. Breadth of the Wild that hosted Nintendo's most popu- The controllers' straps were detachable from the grip to lar character Zelda. be used with the portable screen to turn the Switch into In the past, Nintendo had hoped to penetrate the a portable video game. The 6.2-inch detachable screen segment and boost sales of its Wii U console and 3DS console came with a standard USB c plug for charging. Along with the traditional method of playing games by combined both WH U console and 3DS into a single gam- handheld in the process. However, in 2017, the company using buttons, the Joy-Cons could also be used for motion ing platform that was Nintendo Switch. sensitive games just like their predecessors. Nintendo also offered an additional controller called Nintendo Switch ProController, which could be bought separately at a price Demographics of $69.99, had the same features as Joy-Con, but looked According to Nintendo, one of the key differences between like a traditional gaming controller. This was not the first the Switch and competitors' systems was the broad audi- time Nintendo had surprised the market with such a new ence that the Switch targeted. Many of the Switch games design. For instance, the company had done it in the past could be played by people of all ages and experience, and the when it introduced motion-sensitive controllers. However. Switch's Joy-Cons were easier to use than the complicated this time, in a way, Nintendo had combined the GamePad controllers of the Sony PlayStation 4 or Microsoft Xbox controller with the Wii U console to design the Switch One. Nintendo's TV commercials for the Switch showed Gamers could play games by attaching the Nintendo people playing the Switch at home by connecting the game Switch dock with the TV or could convert it into a por console to TV and outdoors by connecting the Joy-Cons table handheld game by attaching the controller straps with the portable screen. The Switch offered something for with the 6.2-inch high-definition screen (720p), which also included a kick-stand to be placed on a flat surface and multi-touch features for various compatible games to EXHIBIT 5 Switch Console and Joy Con Controller enhance the gaming experience. The gamers could also take a screenshot of the game they played using a capture button on the left Joy-Con, which then users could share with their friends or put on the social media. Similar to the past Nintendo controllers, both Joy-Cons included the motion controls. (See Exhibit 5.) Switch supported the Nintendo eShop, an online game store that could be used to download games from differ- ent publishers and developers. Switch also supported the games by third-party publishers including Electronic Arts, Activision, and Ubisoft, among others. The user interface of NINTENDO the Switch software was a UI design. The home screen dis- SWITCH played several different icons, including icons for featured games, settings, controllers, albums (screenshots, videos). Nintendo eShop, and options. Users could make different Dmitry Loshkin/123RF CASE 22: NINTENDO'S SWITCH C159 both the advanced gamer and the person who had never the Joy-Con distinguished itself from its competitors, it played a video game before, according to the company. The created a hurdle for developers. When developers created a advanced gamer would enjoy the remote's unique features, game for the PlayStation, they could create the same game whereas the novice gamer could use the remote as his or for the Xbox and vice versa. When developers created a her hand and wouldn't need elaborate instructions on how game for the Switch, however, it required significant rework to play a new game straight out of the box. to deploy the title for the other platforms. Converting a title Although the Nintendo games were easily played by a from the Xbox or PlayStation also required significant work greater range of ages and featured improved graphics, the to modify the game to incorporate code for the Joy-Con's company's competitors Xbox and Sony were offering 4K special features. resolutions, best in the market at the time. While Nintendo While this uniqueness had served Nintendo well in hoped to target people of all ages, it had long been seen the past, the Joy-Con's incompatibility with the likes of as a system that made video games for children, as evident Microsoft and Sony limited the selection of games imme- from its Mario, Zelda, and Donkey Kong series. However, diately available to the Nintendo Switch's audience. The despite the limitation of this reputation, the innovation and selection of games had to be fulfilling enough to keep uniqueness of its game play were enough to lure the masses, Nintendo's audience happy without leaving them feeling and sales were excellent. that they were missing out on games available only on the Success, of course, bred competition. Upon seeing other platforms. the success of the movement-sensing Switch, Microsoft and Sony moved quickly to release competing systems. The Competition Microsoft released its Kinect for the Xbox, while Sony If the launch of Nintendo's Switch was a foray into the released the Move for the PlayStation. Both the Move and fierce competition among such existing models as Xbox Kinect used camera systems for their motion detectors, One and PS4, Switch's competitors were offering many fea- but in different ways. Move's camera sensed the move- ment of the light-up Move controller, whereas Microsoft's tures that Nintendo didn't offer. The price of $299 for the Kinect sensor tracked skeletal motion, eliminating the basic Switch included a portable game console with a built- need for a controller. While it was inevitable that gam- Joy-Con grip, and a Nintendo Switch dock. The price of the in screen, a pair of Joy-Con controllers, Joy-Con Straps, a ers would have their favorite of the bunch, the relevant PlayStation 4 was also $299 (500 GB edition), and the new point was that it didn't take long for Microsoft and Sony Xbox One was $229, as well. At a base price of $299 the to catch up to Nintendo. They moved forward to the new generation(s) of gaming quickly, maintaining an even Switch was intended to compete with the upper echelon of the next generation of gaming consoles-unlike the low-cost playing field among competitors for gamer interaction and motion detection position of the original Wii. Apart from pricing, there were many differences among the performance specifications of Switch in comparison to its fiercest competitors (for exam- Gaining the Interest of Game Developers ples, see Exhibits 6 and 7). As evident from the history of game consoles, game devel- opers had tried to make games more and more complex Xbox One with each new generation of systems. This meant that more The Xbox One by Microsoft was released in November money was invested in the production of each subsequent 2013. While the configurations were changed several generation of games. Because game developers were spend times, the Xbox One was available at two different prices: ing more money on developing games, they were at great $299 for the 500-GB model and $349 for the 1-TB model, financial risk if games did not succeed. Thus, many devel- as of 2017. However, although its higher-end model was opers felt more secure in simply creating sequels to existing pricier than the Switch, Microsoft was in fact losing games, which restrained innovation. The Switch's innova- money on every Xbox sale, due to costs of production and tive controller, the Joy-Cons, now required a rethinking and manufacturing. reengineering of the human interface by game developers One of the important features of the Xbox One was and programmers. Another issue with developing games Xbox Live. This feature allowed individuals to play online for the Switch was that its graphics were not quite as good against other users around the world. Thus, Microsoft had as those of the PlayStation 4 and Xbox One, and therefore created a community of individuals who were able to com- game developers had to be more creative and develop spe-municate with one another by voice chats and play against cial Switch editions of their games each other in a video game. Another service offered by Many game developers used virtual-machine software Xbox Live was the Xbox Live Marketplace, which enabled in developing new games. It was believed that game devel- users to download movies, game trailers, game demos, and opers could develop games for the Switch and then make arcade games. It was estimated that more than 70 percent them for other platforms on the basis of the same program- of connected Xbox users were downloading content from ming, thereby reducing production costs. However, while the Xbox Live Marketplace, totaling more than 8 million C160 CASE 22 - NINTENDO'S SWITCH P54 8x AMD Jaguar 1,600MHZ EXHIBIT 6 Game Systems Comparison, 2017 Featurs Switch CPU: Cores 4x ARM Cortex A57 CPU: Clock speed 1.020M CPU: Cores 256 Nvidia CUDA CPU: Decked speed 768MHZ CPU: Undocked speed 307.2MHE HDR No? Memory 4GB Storage 32GB flash (microSD-expandable Physical game formats Game Card USB ports 2x USB2, 1x USB 3.0 Xbox One &x AMD Jaguar 1,750MHZ 768x AMD Shaders 853MHZ Yes (One S) 8GB 500GB HDD Disc 1152 AMD shaders 800MHZ NA BGB 500GB HDD Disc 3x USB 3.0 Video output HDMI HDMI Audio ports 2x USB 3.1 gen 1) HDMI (HDR supported Optical Gigabit Ethernet -140W None None Networking ports Power consumption Optical Gigabit Ethernet - 125W Unknown Source: Trusted Reviews, http://www.trustedreviews.com/opinionsintendo Switch-wpstand baco. Xbox One P54 P54 Move pair 17 17 touch 18 2 2 2 Yes Yes Yes Yes EXHIBIT 7 Game Controllers Comparison, 2017 Feature Joy-Con palr Switch Pro Control buttons 18 touchscreen 18 Analogue sticks 2 2 Vibration Yes Yes Wireless Yes Yes Battery capacity 525mAh leacht 1300mAh Battery life 20h (official 40h (official Motion controls Yes Yes IR camera Yes No Removable No No batteries Play and charge Yes Yes Headphone jack No No Yes Yes 1520mAh (eachi NA 1000mAh Variable 7h 10h No Yes Yes No No No Yes No No Yes Yes Yes Yes Yes No Source: Trusted Reviews, http://www.brusted reviews.com/opinions/intendo-switch-stand-alone. CASE 22: NINTENDO'S SWITCH C161 members. According to Microsoft, there were more than 12 individuals to play with other players located in other parts million downloads in less than a year, and because of this of the world. The PlayStation Network allowed users to popularity, major publishers and other independent gamers download games, view movie and game trailers, send text had submitted more than 1,000 Xbox Live games." messages, and chat with friends, and these capabilities were sure to continue. As of February 19, 2017, Sony had sold Kinect for Xbox One about 53.4 million units of PS4 worldwide, which evidently In October 2014 Microsoft introduced Kinect for Xbox made PS4 the most successful video game console in the One, which was based around a webcam-style add-on gaming industry." peripheral for the Xbox One console. It enabled users to control and interact with the Xbox One using gestures PlayStation Move and spoken commands, without the need to touch a game In September 2010, Sony released the PlayStation Move, controller. Kinect allowed the Xbox One to see the user which basically copied the Wil's wand-like controller but and act according to the user's motions and gestures. This with more accuracy. As with the Wii, users could wave took the concept of the Wii and pursued it to its natural the Move's controller around and swing it like a bat and culmination, making the user the game controller. Kinect hit the ball on the screen. The PlayStation Move com- used software technology that enabled advanced gesture bined a video camera with a physical controller packed recognition, facial recognition, and voice recognition. With motion-sensing electronics, making it a technologi- Some critics believed that the concept used by Kinect had cal cross between the Kinect and the Nintendo Wii. The potential far beyond games and might even become a new Move Motion Controller, or "wand." combined a gyro- way of controlling computers of all kinds. It automatically scope, accelerometer, and magnetic sensor to track the identified who one player was and paused when the player controller in three dimensions, while the glowing ball at left its vicinity, so it was not hard to imagine this ingenuity the end gave the PlayStation Eye camera a visual refer- controlling all kinds of devices, such as a PC, smartphone,ence for handling aiming cursor movement, and other or tablet. Microsoft also released Xbox One S following motion. While Switch's graphics were of low resolu- the release of Xbox One. The Xbox One S was more com- tion and inferior detail, PS4 was a high-definition pow. pact in design, lighter in weight, had slight performance erhouse. Moreover, the PS4 played Blu-ray movie discs and graphic improvement, and supported better HDMI and could display 3-D images, two things the Switch connectivity options. However, these changes were not so could not do. Also, the PS4 had a full lineup of great significant that critics would count Xbox One S as a next traditional games. Sony had shipped 4.1 million units of generation Xbox PlayStation Move worldwide in the first two months after its release. Although Sony was criticized for merely imi- Sony PlayStation 4 tating Wii's technology, it turned out to be a successful Sony PlayStation 4 was released in November 2013. It imitation. However, Nintendo's new controllers, Joy. was available at two different prices in two variations: Cons, priced at $80 were still less pricey as compared PlayStation 4 Pro was priced at $400 with 4K resolution, to PS4's Move priced at $100. The least expensive ver and PlayStation 4 was priced at $300 with Blu-ray video sion of the PlayStation 4, which did not include Move, quality. The PS4 included 8 GB of GDDRS memory, which cost $300. Thus, Nintendo and Sony offered comparable enabled rapid performance. Also, a player could use the controllers rigged to machines with very different techni. loading power of this memory to power down the PS4 mid cal power and with fairly close prices. Move was a suc game and then later turn it back on and within seconds cessful product offering for Sony. While the 4 Eye was be playing again right where he or she left off. The Ps4 introduced with the PS4 soon after, Sony still intended to supported Blu-ray discs, DVDs, and HDMI output, as well include and utilize the Move as well, but to what degree as analog and optical digital output. The included control was uncertain ler was the DualShock 4 pad. Its design and function were similar to that of the PS3 controller, but it offered upgraded PlayStation 4 Eye vibrations, enhanced motion sensors, and a Vita-like touch- This device was a newly developed camera system that pad. PS4 also launched with the ability to stream games was introduced for the first time with the release of the directly to the PS Vita, Sony's handheld gaming device. PlayStation 4 in 2013. It utilized two high-sensitivity As with the Switch, this allowed users to play on the tablet cameras equipped with wide-angle lenses and 85-degree controller through a wireless connection, without the use diagonal angle views. Sony claimed that the cameras of a TV display. A number games were released for the PS4 could cut out the image of a player from the background including Horizon Zero Dawn, Unchartered 4: A Thief's or differentiate between players in the background and End, Over Watch, Mass Effect: Endormeda, and Battlefield foreground, enhancing game play. In 2016, PS4 released One, among others. Part of the PlayStation Network's suc- an upgraded version of PS4 Eye that had better resolution cess was the ability to play games online. This allowed and performance. C162 CASE 22 - NINTENDO'S SWITCH PlayStation VR become profitable. These traits attract not only end users In October 2016, Sony launched the PlayStation Virtual but game developers as well, allowing the Nintendo to have Reality headset that was developed by Sony Interactive the largest selection of games compared with its competi- Entertainment. Although PlayStation VR had a price tag tors. Although there was not enough data about the number of $400, it was the one of its kind at the time of release of games for Switch at the time of writing this case, histori hence the company was able to charge the high price. It cally, the number of its games indicated that Switch's prede- was a step up in gaming technology as PlayStation VR cessor Wil was obviously a successful system-one that has could be used with PS4 console that could mirror the drawn a good amount of interest from game developers and television screen in a virtual reality view for the user. gamers around the world. PlayStation VR could be used with PS4 DualShock con Microsoft and Sony have started to invade the casual trollers as well as with the PlayStation Move. PlayStation family-user market, a key market for Nintendo, expanding VR had an OLED panel that supported a 5.7-inch dis beyond their former customer base of mainly hard-core play with a full high-definition resolution of 1080p. As gamers. The Xbox and PS4 are becoming more like enter- of February 19, 2017. PlayStation had sold about 915,000 tainment hubs for families. Now, with the Switch on the units of PlayStation VR. 26 market, and introductions from ninth-generation competi- tors expected soon, the competition seems to be better post- Mobile Gaming tioned to combat Nintendo. As motion-sensing gaming-the Recently, another form of competition in the gaming indus- undisputed "next best thing to come out of the gaming try had become widely available. Mobile devices such as it is a matter of whose system is most desirable to the gam- industry-is a capability that all competitors now possess, smartphones and tablets allowed casual gamers to have the ability to download and play a wide variety of free or low determine which system comes out on top. With similar ing population, and whether or not sales volume solely will priced games. The games could be seamlessly downloaded to the handheld device. While the interactivity on these technology being widespread across the industry. it may devices was limited by a lack of controls and features, the and portray itself as the family favorite." as it did in its prove to be more difficult for Nintendo to set itself apart convenience and price were something that console makers early days of the Wu. were starting to notice. Convenience made mobile gaming a $100 billion industry by 2016, a trend which is expected to Nintendo rely on its price and its quantity of games, or To keep winning over the gaming population will increase steadily in coming years." will it have to find a new leg to stand on? With both of Mobile gaming companies like Super Cell and Machine Zone have crossed the billion dollar threshold in annual perhaps the Switch will keep its lead simply by having been its competitors yet to release their next-generation consoles, revenues. Although these companies charge little per pur first to the market. Could the new Amiibo figures be the to collect enormous total revenues. The number of smart key to Nintendo's regaining its position as the pre-eminent phone users has grown dramatically during last decade player in the interactive gaming industry? which automatically grows the potential users for mobile gaming companies, without having to sell game consoles. ENDNOTES Just having a smartphone opens the option of thousands of 1. http://www.nintendo.com/whatsnew/detail/ nintendo-switch-usherinner of console gaming on the games for mobile gamers at a single platform for a minimal 2. http://www.digitaltrends.com/gaming price. The growing trend and popularity of mobile gaming nintendo-reportedly-double-switch-production is definitely posing competition for gaming companies like 3. Ba-Oh, Jorge. 2013. Industry folk comment on Nintendo Wii U Nintendo, among others. potential-new or next pemeration? January 1, www.cubed.com/ Tw/17809/1/industry-fok.comment-on-wii-u-potential.html 4. Nintendo 2008. Annual report, March 3L The Future of Switch 5. Nintendo www.nintendo.com/systemsclassic types While Sony and Microsoft envision long-term profits on 6 Nintendo, 2008. op. cit. software sales for PlayStation 4 and Xbox One, both com- 7. Bacani.C. & Mutsulon, M. 1997. Nintendo's new 64-bit platform its panies experience losses producing their consoles. Among off a scramble for market share. As Week. April 18, www.asisweek. com/week/97/0418/cs.html GamePro 2005. Biggest blunders the three rivals, Nintendo is the only one carning a signifi- May: 45 cant profit margin on each Switch unit sold. According to 8. Nintendo Wiinintendo.com/iwala asks vol2 plin David Gibson at Macquarie Securities and Bloomberg's 9. Morris, C. 2006. Nintendo goes "Wir...CNNMoney.com, April 27. Yuji Nakamura, Nintendo Switch has sold at a profit from money.cnn.com/2006/04/27/commentary/game_overintendo day one.22 Sony's and Microsoft's gaming consoles are index.htm commonly thought of as superior to Nintendo's, perhaps 10.Surette. T. 2006 Nintendo ewe talks Wii online, marketing GameSpot.com, August 17. www.enel.com/ the Switch's smaller processing unit and hardware, but wi0.239036423,240091920,00.htm simplicity and family-friendly appeal, have assisted it to II Nintendo 2006. Annual report CASE 22 : NINTENDO'S SWITCH C163 CASE 22 NINTENDO'S SWITCH Did Nintendo's Switch Have the Flair to consoles, which was double the yearly quantity of 8 mil- lion, Nintendo's traditional production target. Company Turn On the Gamers? management was highly optimistic about the Switch, and On March 3, 2017, Nintendo launched its latest gaming con Nintendo believed that it could sell about 10 million units sole called Nintendo Switch. It was their ninth-generation of Switch consoles within a year after the launch." portable gaming platform, initially launched with 58 com- One of the key topics of discussion in the popular press patible games. Nintendo Switch came with a pair of new was whether or not the Switch console defined the next and innovative controllers called Joy-Con Controllers, generation of gaming. This echoed similar press concerns a hybrid of an attachable game pad and a controller that after the launch of Nintendo's previous console, the Wil could be used separately for multiplayer game play. A pair U. Prior to the launch of the Switch, its predecessor the of Joy-Cons was included in the $299.99 price tag of the Nintendo Wii U console had been on the market for only Switch console. The Joy-Con came in two color options a short while, with the addition of innovative controls and for customers to choose from, one grey and red/blue and new game titles. Then there had been uncertainty among the other grey and black. A more innovative feature in the industry experts, such as Gabrielle Shrager of Ubisoft and new gaming console was that it could be transformed into Mikael Haveri of Frozenbyte, as to whether or not the a 6.2-inch high-definition on-the-go gaming screen if a user improved power and new controller interface justified that decided to move away from the TV. The new Switch con system's being considered a new generation. sole also marked the release of Nintendo Switch's very first The Wii U initially was launched with 50 available epic game called "The Legend of Zelda: Breadth of the games and a new controller interface, termed the GamePad. Wild," which could be played both on Switch and Wii U While the GamePad offered a new take on the Wil's con- consoles for a price of $59.99. Nintendo of America's COO trols, the new console was still compatible with the same and president, Reggie Fils Aime, said, "Nintendo Switch motion-sensing controllers of the original Wul. However, the makes it easy for anyone to enjoy their games in the liv- WH U console was not sold with these controllers included. ing room and then quickly take them on the go." The new Instead, it came with just one of the new GamePads. gaming console design meant that console-gaming was not Incorporating traits from tablet devices, the GamePad inte- only limited to one stationary TV anymore and could be grated both traditional input methods such as buttons, dual experienced anywhere anytime. analog sticks, and a D-pad (directional pad) and a touch- The launch of Nintendo's Switch caught the attention screen. The touchscreen could be used to supplement a game of consumers and mostly received a positive response, but by providing alternative functionality or an alternative view apparently the news did not impress the investors, leaving of a scenario in a game. With the Of TV Play function, the company's stock tumbling. This may have reflected con the screen could also be used to play a game strictly on the cerns regarding the battery life of the portable console, its GamePad screen without the use of a television display at price, and third-party support. Nevertheless, a flood of cus all. With the WH U console turned on the GamePad could tomer orders led to stock shortages in stores like GameStop be used to display the same picture on its screen as would be and Toys R Us, among others. Addressing the stock short- seen using a TV display. There were also nongaming funo age, Reggie Fils Aime said, "Our focus is making sure that tions, such as the ability to use the GamePad as a television the consumer who wants to buy a Nintendo Switch can buy remote. While Nintendo was the first of the competitors to a Nintendo Switch." The initial plan had been to ship 2 mil release its new gaming console, there was no doubt that both lion consoles. Nintendo decided to double the production Sony's PlayStation and Microsott's Xbox would be close to deal with the shortage and meet the strong demand. behind in releasing their own upgraded systems. To meet demand for one year out, ending April 2018, Nintendo's inability to leap ahead of its competition according to The Wall Street Journal, the company's could be seen clearly in its financial figures. As of 2017, management decided to manufacture 16 million Switch Nintendo's income was off from previous years (see Exhibits 1 and 2). * This case was prepared by Professor Alan B. Eisner and graduate students Saad Nasir, Eshe.Gorsheis, and Eric S. Engelson of Pace University. Background This case is based solely on library research and was developed for class discussion rather than to illustrate cither effective ce ineffective handlingen Although Nintendo dated back to 1889 as a playing-card administrative situation. Copyright 2017 Alan B. Eistics maker, Nintendo's first video-game systems were developed C154 CASE 22 - NINTENDO'S SWITCH EXHIBIT 1 Income Statement (1 USD = 112.3095 JPY es of March 31, 2016) Year Ended March 31 Previous fiscal year Current fiscal year (From April 1, 2014 (From April 1, 2015 to to March 31, 2015) March 31, 2016) (Millions (Millions (Millions of of yen) of yen) dollars) Net sales 549,780 504,459 4,464 Cost of sales 335,194 283,494 2,508 Gross profit 214,584 220,965 1,955 Seling. general and administrative expenses 189,814 188,083 1,644 Operating income 24,770 32,881 290 Non-operating income Interest income 4,018 4,693 41 Foreign exchange gains 34,051 Gain on redemption of securities 5,233 6,801 60 Share of profit of entities accounted for using equity method 952 1,887 16 Other 1,788 1,168 10 Total non-operating income 46,043 14,550 128 Non-operating expenses Sales discounts 205 106 0 Foreign exchange losses 18,356 Other 77 178 1 Total non-operating expenses 283 18.641 164 Ordinary income 70,530 28,790 254 Extraordinary income Gain on sales of non-current assets 47 9 0 Gain on sales of investment securities 398 3 Gain on sales of shares of subsidiaries 3,689 Total extraordinary income 3.737 407 3 Extraordinary losses Loss on disposal of non-current assets 446 351 3 Restructuring loss 1,729 1,130 10 Total extraordinary losses 2,176 1,482 13 Profit before income taxes 72,091 27,715 245 Income taxes current 25,922 2.482 21 Income taxes-deferred 4,306 8,714 77 Total income taxes 30,228 11,197 99 Profit 41,862 16,518 146 Profit attributable to non-controlling interests 18 13 0 Profit attributable to owners of parent 41,843 16,505 146 162 Source: http://financials.meringstar.com/income statement CASE 22: NINTENDO'S SWITCH C155 EXHIBIT 2 Balance Sheet (1 USD = 1123095 JPY as of March 31, 2016) Year Ended March 31 Previous fiscal year Current fiscal year (As of March 31, 2015) (As of March 31, 2016) (Millions of yen) (Milions of yeni (Millions of dollars) Assets Current assets Cash and deposits 534,706 570,448 5,048 Notes and accounts receivable-trade 55,794 38,731 342 Securities 380,587 338,892 2,999 Inventories 76,897 40,433 357 Deferred tax assets 15,597 6,597 58 Other 34,466 26,401 233 Allowance for doubtful accounts 1451) (369) (3) Total current assets 1,097,597 1,021,135 9,036 Non-current assets Property, plant and equipment Buildings and structures, net 42,447 39,977 353 Machinery, equipment and vehicles, net 1,330 1,120 9 Tools, furniture and fixtures, net 4,770 3,791 33 Land 42,925 42,553 Construction in progress 14 309 2 Total property.plant and equipment 91,488 87,752 776 Intangible assets Software 11,190 9,408 83 Other 1,240 568 5 Total intangible assets 12.430 9,977 Investments and other assets Investment securities 96,294 125,774 1,113 Deferred tax assets 30,558 32,195 284 Net defined benefit asset 9,174 7,092 62 Other 15,399 12,974 114 Total investments and other assets 151,426 178,037 1,575 Total non-current assets 255,346 275,766 2.440 Total assets 1,352,944 1,296,902 11,477 Liabilities Current liabilities Notes and accounts payable - trade 58,464 31,857 281 Income taxes payable 16,529 1,878 16 Provision for bonuses 2,220 2,294 20 Other 67,018 62,407 552 376 continued C156 CASE 22 - NINTENDO'S SWITCH EXHIBIT 2 Continued Year Ended March 31 Previous fiscal year Current fiscal year (As of March 31, 2015) (As of March 31, 2016) (Millions of yeni (Millions of yeni (Millions of dollars) 144,232 98,437 871 208 25,416 15,739 41,155 185,387 23,546 14,017 37,563 136,001 124 332 1,203 10,055 89 10,065 13,256 11,734 117 Total current liabilities Non-current liabilities Net defined benefit liability Other Total non-current liabilities Total liabilities Net assets Shareholders' equity Capital stock Capital surplus Retained earnings Treasury shares Total shareholders' equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Total accumulated other comprehensive income Non-controlling interests Total net assets Total fiabilities and net assets 12,401 1,409,754 (270,986) 1,160,578 1,401,359 (250,563) 1,174,118 (2,217) 10,390 105 16,671 19,804) 6,866 110 11,909 (25,250) (13,341) 124 1,160,901 1,296,902 (223) (118) 1 10,273 11,477 1,167,556 1,352,944 Source: http://financials meetingstar.com in 1979 and known as TV Game 15 and TV Game 6. In The Nintendo 64, like its predecessors, used cartridges to 1980 Nintendo developed the first portable LCD video play its games, but at the time the competing Sony and Sega game with a microprocessor. In 1985 Nintendo created systems were using CDs for game storage. Cartridges could the Nintendo Entertainment System (NES), an 8-bit video store 64 megabytes of data, while CDs could store around game console. The original NES was very successful, as its 700 megabytes. Also, CDs were much cheaper to manufac- graphics were superior to any home-based console available ture, distribute, and create the average cost of producing at the time. As a result, more than 60 million units were a Nintendo 64 cartridge was $25, compared to 10 cents to sold worldwide. The NES set the bar for subsequent com produce a CD. Game producers passed the higher expense soles in platform design, as well as for accepting games that to the consumer, which explained why Nintendo 64 games were manufactured by third-party developers. tended to sell for higher prices than Sony PlayStation When competitors began developing 16-bit devices, such games. While most Sony PlayStation games rarely exceeded as Sega's Genesis system and NEC's PC Engine, Nintendo $50, Nintendo 64 titles could reach $70. To increase profits responded with its own 16-bit system, the Super Nintendo and to take advantage of the programming possibilities of Entertainment System (SNES). The Super Nintendo was the larger storage space, many third-party game developers released in 1991 and, when purchased, came with one that had traditionally supported Nintendo platforms began game-Super Mario World. In 1996 Nintendo released creating games for systems that used a CD platform (such Nintendo 64. The Nintendo 64 was the company's third as the PlayStation). generation video game console and was named after the In 2001 Nintendo released its GameCube, which was 64-bit processor. During its product lifetime, more than 30 part of the sixth-generation era of video game systems. million Nintendo 64 units were sold worldwide. These systems included Sony's PlayStation 2. Microsoft's CASE 22 : NINTENDO'S SWITCH C157 Remote Xbox, and Sega's Dreamcast. Although the GameCube did serve as a controller, but it also had a built-in speaker and not use cartridges, Nintendo began producing its games a rumble feature for even greater tactile feedback and game using a proprietary optical-disk technology. This tech involvement. Exhibit 3 shows the Wil and Wii Remote. nology, while similar in appearance to CDs, was actually The second part of the Wii Remote innovation was the smaller in diameter and could not be played using a stan- Wii Nunchuk. The Nunchuk was designed to perfectly fit dard CD player. the user's hand, and it connected to the remote at its expan- Genyo Takeda, general manager of Integrated Research sion port. The Nunchuk had the same motion-sensing capa- and Development for Nintendo, explained that innovabilities that the remote had, but it also had an analog stick to tion and creativity were fostered by giving several different help the user move his or her characters. The ambidextrous development teams free rein to couple a dedicated control nature of the Wii controllers was something seldom seen in ler or peripheral with a GameCube title and then seeing other game controllers, the Wil controllers permitted the whether or not the end result was marketable. This project user to hold the remote and Nunchuk whichever way felt gave rise not only to the Donkey Kong Bongos and the most comfortable. In addition to the analog stick, the Dancing Stage Mario Mix Action Pad, but also to a number Nunchuk had two buttons that gave the user quick access of ideas and designs that would find their way into the Wii to other game functions. Thus, the Nunchuk offered some of the benefits of a standard game controller coupled with When Nintendo released the Wii video game console the high-technology motion sensors of the remote. Users in 2006, it was already in the midst of a very competitive could hold a Nunchuk in one hand and the Wii Remote in market. The previous generation of video game consoles the other while playing the Wii Sports boxing game and be consisted of the Sega Dreamcast, Sony yStation 2. transported into the boxing ring with on-screen opponents. Nintendo GameCube, and Microsoft Xbox. These sys- The game controls were intuitive for jabs and punches. tems were all released between 1999 and 2001 in the (However, a missed block did not hurt as much as if one United States, and although the GameCube sold more sys- were really in the boxing ring.) tems than did the Sega Dreamcast, it fell into third place While the WH U was still compatible with the original behind the PlayStation 2 and the Xbox. The PlayStation Wii controllers, Nintendo revamped the controller usability 2 sold more than 115 million units worldwide, more than when designing the Wii U. The new GamePad sold with the twice the combined unit sales of the GameCube and Xbox Wii U allowed the user to be more in touch with the game (21 million and 24 million, respectively). and provided more depth by offering multi-perspective capabilities on the Pad's screen. While using the TV dis- The Term Wii play, players could now multitask within a game by using a In 2006 Nintendo released its direct successor to the variety of functions on their controller and could even play GameCube, the Wil (pronounced "we"). There were using solely the GamePad, with no TV display necessary many reasons cited as to why the name Wir was chosen. With the game console turned on, players had the option of but perhaps the most compelling reason was that "WW' using the GamePad as their main viewing screen without sounded like 'we.' which emphasized that the console was the need for a TV monitor display (see Exhibit 4). for everyone. Wil could be remembered easily by people around the world, no matter what language they spoke Nintendo Switch Features No confusion. Initially the system was known by its code Nintendo Switch came with a portable game console with name, Revolution, but later the name was changed to Wi. a built-in screen, a pair of Joy-Con controllers, Joy-Con Nintendo stated that it wanted to make the Wii a system that would make anyone who tried it talk to his or her EXHIBIT 3 Wi Console and Remote friends and neighbors about it. The Making of the Remote The original Wii was created to establish a new standard in game control, using an innovative and unprecedented inter- face, the Wii Remote." The Wii Remote was what made the Wil unique. The remote acted as the primary controller for the Wii. Its motion-sensor capabilities allowed the user to interact with and manipulate objects on the screen by mov- ing and pointing the remote in various directions. The Wii Remote was the size of a traditional remote control, and it was "limited only by the game designer's imagination. 12 For example, in a game of tennis it served as the racket when the user swung his or her arm, while in a shooting game it served as the user's gun. Not only did the remote @McGraw Hill Education/Hill Braaten, photographer C158 CASE 22 - NINTENDO'S SWITCH EXHIBIT 4 Wii U GamePad Controller player profiles to sign in to maintain exclusive game prog- ress similar to what most people do using their personal computers. The top right corner of the screen showed bat- tery status along with the time, Prior to Nintendo Switch, the company had intro- duced Amiibo figurines that depicted popular Nintendo characters, and each contained a wireless antenna and flash memory. They allowed consumers to include digital versions of their favorite characters in compatible video games. The "toys to life" segment had been created in 2011 when Activision Blizzard launched the hugely suc- cessful Skylanders line of games and figures. (Disney subsequently jumped into the ring by launching a compet- ing product, Disney Infinity, in August 2013.) Nintendo's first round of Amiibo characters were Mario, Peach, Yoshi, Donkey Kong, Link, Fox, Samus, Wii Fit Trainer, Robin Van Lonkhuisen/epa/News.com Villager, Pikachu. Kirby, and Marth. Accompanying the launch of Nintendo Switch on March 3, 2017, the com- pany introduced a new game called "The Legend of Zelda: Straps, a Joy-Con grip, and a Nintendo Switch dock. Breadth of the Wild that hosted Nintendo's most popu- The controllers' straps were detachable from the grip to lar character Zelda. be used with the portable screen to turn the Switch into In the past, Nintendo had hoped to penetrate the a portable video game. The 6.2-inch detachable screen segment and boost sales of its Wii U console and 3DS console came with a standard USB c plug for charging. Along with the traditional method of playing games by combined both WH U console and 3DS into a single gam- handheld in the process. However, in 2017, the company using buttons, the Joy-Cons could also be used for motion ing platform that was Nintendo Switch. sensitive games just like their predecessors. Nintendo also offered an additional controller called Nintendo Switch ProController, which could be bought separately at a price Demographics of $69.99, had the same features as Joy-Con, but looked According to Nintendo, one of the key differences between like a traditional gaming controller. This was not the first the Switch and competitors' systems was the broad audi- time Nintendo had surprised the market with such a new ence that the Switch targeted. Many of the Switch games design. For instance, the company had done it in the past could be played by people of all ages and experience, and the when it introduced motion-sensitive controllers. However. Switch's Joy-Cons were easier to use than the complicated this time, in a way, Nintendo had combined the GamePad controllers of the Sony PlayStation 4 or Microsoft Xbox controller with the Wii U console to design the Switch One. Nintendo's TV commercials for the Switch showed Gamers could play games by attaching the Nintendo people playing the Switch at home by connecting the game Switch dock with the TV or could convert it into a por console to TV and outdoors by connecting the Joy-Cons table handheld game by attaching the controller straps with the portable screen. The Switch offered something for with the 6.2-inch high-definition screen (720p), which also included a kick-stand to be placed on a flat surface and multi-touch features for various compatible games to EXHIBIT 5 Switch Console and Joy Con Controller enhance the gaming experience. The gamers could also take a screenshot of the game they played using a capture button on the left Joy-Con, which then users could share with their friends or put on the social media. Similar to the past Nintendo controllers, both Joy-Cons included the motion controls. (See Exhibit 5.) Switch supported the Nintendo eShop, an online game store that could be used to download games from differ- ent publishers and developers. Switch also supported the games by third-party publishers including Electronic Arts, Activision, and Ubisoft, among others. The user interface of NINTENDO the Switch software was a UI design. The home screen dis- SWITCH played several different icons, including icons for featured games, settings, controllers, albums (screenshots, videos). Nintendo eShop, and options. Users could make different Dmitry Loshkin/123RF CASE 22: NINTENDO'S SWITCH C159 both the advanced gamer and the person who had never the Joy-Con distinguished itself from its competitors, it played a video game before, according to the company. The created a hurdle for developers. When developers created a advanced gamer would enjoy the remote's unique features, game for the PlayStation, they could create the same game whereas the novice gamer could use the remote as his or for the Xbox and vice versa. When developers created a her hand and wouldn't need elaborate instructions on how game for the Switch, however, it required significant rework to play a new game straight out of the box. to deploy the title for the other platforms. Converting a title Although the Nintendo games were easily played by a from the Xbox or PlayStation also required significant work greater range of ages and featured improved graphics, the to modify the game to incorporate code for the Joy-Con's company's competitors Xbox and Sony were offering 4K special features. resolutions, best in the market at the time. While Nintendo While this uniqueness had served Nintendo well in hoped to target people of all ages, it had long been seen the past, the Joy-Con's incompatibility with the likes of as a system that made video games for children, as evident Microsoft and Sony limited the selection of games imme- from its Mario, Zelda, and Donkey Kong series. However, diately available to the Nintendo Switch's audience. The despite the limitation of this reputation, the innovation and selection of games had to be fulfilling enough to keep uniqueness of its game play were enough to lure the masses, Nintendo's audience happy without leaving them feeling and sales were excellent. that they were missing out on games available only on the Success, of course, bred competition. Upon seeing other platforms. the success of the movement-sensing Switch, Microsoft and Sony moved quickly to release competing systems. The Competition Microsoft released its Kinect for the Xbox, while Sony If the launch of Nintendo's Switch was a foray into the released the Move for the PlayStation. Both the Move and fierce competition among such existing models as Xbox Kinect used camera systems for their motion detectors, One and PS4, Switch's competitors were offering many fea- but in different ways. Move's camera sensed the move- ment of the light-up Move controller, whereas Microsoft's tures that Nintendo didn't offer. The price of $299 for the Kinect sensor tracked skeletal motion, eliminating the basic Switch included a portable game console with a built- need for a controller. While it was inevitable that gam- Joy-Con grip, and a Nintendo Switch dock. The price of the in screen, a pair of Joy-Con controllers, Joy-Con Straps, a ers would have their favorite of the bunch, the relevant PlayStation 4 was also $299 (500 GB edition), and the n