Earlier today, we reported on the latest Nintendo Switch 2 market analysis from DFC Intelligence. The analysts reckon it’ll become the fastest-selling console ever with 15 million units sold in 2025, although the impact of the tariffs, should they be here to stay, is impossible to fully predict.
When we received the report, we also got the opportunity to speak with founder, CEO, and principal David Cole to learn more about their insights on the Nintendo Switch 2 and the potential impact of the US tariffs on the whole games industry.
Hello, David. Were you expecting that $450 price, or were you, maybe, like many other colleagues, waiting for Nintendo to announce a $400 price?
We were concerned about the tariff issue before the announcements. Obviously, there are a lot of moving parts. They get parts from all over Asia that go into the system. With tariffs going into effect, we were concerned the price would be $500 or more, so when it came in at $450, we were actually pretty happy. $400 would obviously have been the best-case scenario, but we thought $450 was a solid market price.
Obviously, when they announced on Friday that they were going to put the pre-orders on hold, that’s a whole new ball game. Clearly, this is an ongoing issue that I think everybody’s trying to figure out. We met with Nintendo executives last week and they were confident in the pricing, but it’s an economic environment that nobody can really predict. The decisions are made out of Japan on that pricing and it has to tie closely into what they feel they can lose.
Nintendo is a public company that’s very much dependent on hardware sales to, if not generate a profit, at least not generate a loss. They’re not like Microsoft, which has taken a big loss on hardware just to try and build an installed base. Nintendo doesn’t tend to do that, so we are very concerned about the issue of, will they be forced to increase the price? Will they limit their manufacturing? Right now, they’re cranking up the manufacturing and building up the inventory. They have quite a bunch of Nintendo Switch 2 inventory ready for launch, but going forward in the next few months, they may start to scale back on manufacturing a little bit.
There just may be another case of shortages, hopefully not as bad as what we saw with the
PlayStation 5, but they may start to control inventory more, which would affect our topline forecasts because there would not be enough units to meet demand.
That makes sense. It looks like they didn’t factor in the tariffs for their initial Nintendo Switch 2 pricing. In your report, you’re expecting a 20% price increase over the next couple of years. Were you referring to the Switch 2 or just generally across the industry?
I think we’re looking at prices on hardware, accessories, and software. Everything is set to increase and we’ve modeled that in our forecast. There will be declines in prices hopefully within the 2-year period. Obviously, it’s a changing environment out there. The latest news I heard was that there would be a 90-day hold on these tariffs, but I think that’s probably fake news. People are speculating every which way, which makes it very difficult to forecast accurately, knowing that it can really hit on two, with fewer products getting manufactured where they scale back on accessories.
Obviously, they have things like a camera and all kinds of different accessories. One of the first things they’ll do is probably scale back on how much inventory is produced because they definitely don’t want to build up inventory. You get a situation where the cost of manufacturing is higher and the cost of passing that on to the consumer is higher. You also have consumers knowing that this tariff price increase is probably temporary, so prices will hopefully come down. I’m going to wait a few months. Now that they’ve announced that $450 price, it’s going to be tough to roll it back. That’s a real catch-22 because I think if they were forced to increase the price and pass that on to consumers, a lot of consumers would look at it and say “Well, they announced the $450 price. They’re increasing it because of the tariffs, but I’m just going to wait and wait till the prices roll back.” It’s a real catch-22.
I was wondering if you think Microsoft might be forced to raise the price of the Xbox consoles. Of course, it’s a US company, but the consoles are not actually manufactured in the United States.
Exactly. The impact is far-ranging and it’s not just the video game industry, it’s all consumer products, so you have this huge macroeconomic situation where prices are increasing across the board. The video game industry is definitely not isolated in this issue.
Indeed. You believe that the Nintendo Switch 2 could potentially engage more directly with the PlayStation and Xbox fanbases compared to the original Switch, right?
Exactly. We’ve done all kinds of research on that topic because what we’ve seen is really that the Switch had nice penetration among PlayStation and Xbox owners who are looking for a second system. If you bought a PlayStation, instead of buying an Xbox, you tend to buy a Switch. Even among the core PC gaming community, if you’re a big PC gamer, you know a lot of those games you play are going to be available on the PlayStation and Xbox, but you go buy a Switch because the products that Nintendo puts out aren’t available anywhere else.
I think what you see with the Nintendo Switch 2 is Nintendo really focusing on that audience with a lot of third-party content and features like mouse controls. It’s pretty interesting how they’re able to offer a unique platform that in many cases for these core users is a secondary platform, but could become more and more of a primary platform, especially now that you can get a lot of sports titles and more mature titles like Cyberpunk 2077. Then you have products from FromSoftware, which I thought was really interesting. They’re bringing Elden Ring to the Switch 2, but they’re also announcing an exclusive title from From Software, which was interesting because Sony has been investing and partnering heavily with From Software (they made an acquisition late last year to become the largest minority shareholder in From Software’s parent company). That’s a pretty big feather in Nintendo’s cap to have such an exclusive.
At the same time, of course, they have that core Nintendo fanboy base that goes along with whatever Nintendo is putting out in most cases. I think that is going to be a huge change for the game industry. In the past, people said Nintendo was kind of their own ecosystem and not really competing with what Sony and Microsoft are doing. Now, they are stepping up to say “Hey, we’re going to be a platform for serious AAA third-party game publishers.” They’ve realized that the audience is expanding and they’re definitely going after it. There’s a real potential to shake up, more on the console side, not so much on the PC side, where you’d still see the Nintendo Switch 2 Switch as a secondary system.
In addition, Microsoft promised a while ago that they would bring Call of Duty to Nintendo platforms. The Nintendo Switch 2 seems a perfect fit for that, especially with the mouse-like controls.
Exactly. It gives options to people who may want to play in different ways. Some people want to play with a controller and then you got a huge audience that loves to play with mouse controls. They’re delivering more versatility.
Do you think that the new Nintendo console may eat more into the Xbox base or the PlayStation’s?
Well, the Xbox base is pretty weak right now, so I think it’s going to eat more into Sony’s PlayStation base. Microsoft’s strategy remains unclear. They’re focused on diversifying across platforms, they’re looking at what kind of new hardware form factor to deliver. The PlayStation 5 is the really competing console platform right now out there. Whether that changes when Microsoft announces something new remains to be seen, but right now, it’s really going directly after the PlayStation base.
The Nintendo Switch 2 is doubling down on the handheld capabilities. Just yesterday, Phil Spencer teased an Xbox handheld once again, and there have been rumors even of PlayStation considering another handheld. Do you think there is space in the market for new PlayStation and Xbox handhelds, or is it just getting saturated with the Steam Deck and other PC handhelds?
The problem with Sony and Microsoft, with both the PlayStation 5 and the Xbox Series S|X, was that they were basically just power upgrades. They were more powerful versions of what came before, and they didn’t really shift the market dynamics, so I think both Sony and Microsoft are scrambling, knowing that this is an era where portable gaming is huge. They don’t really have an option for that. Sony tried major efforts with the PSP and the PS Vita back in the day, but they just were not able to gain any market traction. Sony has clearly said the PlayStation 5 is on the downtail of its life cycle. They’ve missed forecasts the past two years and it did great at launch. Now, sales are not weak, but they’re not as strong as Sony expected and they’ve come out and said it’s clearly on the decline.
The question is, what answer will Sony and Microsoft have in terms of new hardware? Do they reinvent their systems to become more like a Switch with a portable option? Nintendo has had 30-plus years in portable gaming devices, while Sony’s had some failed experiments. The track record is not strong for either of those companies. They need to try and come up with something, but whether they can, that’s the open question right now.
Returning to the Nintendo Switch 2, one of the big shocking points of the reveal was, of course, the pricing, especially for Mario Kart World at $80 (€90 in Europe). Some people are still a bit shocked. Do you think it may be more of an exception than the rule?
Yeah, it’s going to be more of the exception rather than the rule. There’s already quite a wide range of price points. Third-party titles are coming in and they’re not going up to that price range. There’s a lot of flexibility on pricing with types of software. Nintendo said that Mario Kart World has a huge amount of content and they think consumers are willing to pay $80 for it. Most people will probably buy the $500 bundle that includes the Switch 2 and the game, so that breaks the price down to $50.
The price will probably drive a lot of sales of that bundle. They’re also doing a lot of these upgrade packs, which I think are a really interesting concept. They’re going to use that whole upgrade model to enhance the existing games for the Switch, adding new features and then either sell it for $10 to $20 or give it away if you become an online subscriber, so there’s just all kinds of flexibility in the business model.
Do you think that the tariffs could even impact software pricing?
Yes. Obviously, hardware has more of a direct impact, but you do have a lot of issues on the software side. Pricing could increase. Whether the publishers will eat that cost or not remains to be seen. I think it could show up in less discounting on products. One of the great things in the video game business is that you don’t have to buy a game on day one; you could wait a while, and the price would come down. You might see an impact on that. I don’t think it’ll be as great as with hardware, but it definitely could have an impact.
Analysts from Media Research thought that part of the reason Mario Kart World was priced at $80 was to drive users toward digital purchases, which are $10 cheaper. Do you agree?
It could be, but I really don’t think so. One thing you have to consider when buying digital titles on Nintendo, especially when they’re full games like Mario Kart, is it doesn’t have a lot of onboard memory to store these games. Clearly, Nintendo is hoping to sell more of its proprietary memory cards. Digital buying on the Switch is growing, but I don’t think Nintendo is necessarily trying to drive that any more than would naturally be the case.
They probably realize that people who buy physical copies have a higher price tolerance than people who buy digital games. They want the physical part to decline as much as possible, but at the same time, having a physical presence is still great.
Do you think the Game Chat feature will be a major factor in the success of the Nintendo Switch 2? It seems like they’re making a big thing out of it this time around.
Yes. We were talking to all our headset clients and saying, “You got to look at the Nintendo Switch 2 and putting headsets out for that because I think it is going to be pretty big.” Having a younger audience, Nintendo has always been a little intimidated by chat and the can of worms that can potentially open. They’ve taken a slower approach to that, but I think it’s clear with what they’re doing with the Switch 2 that they’re going all in on the chat.
I’m sure they are spending a lot of time ensuring that parental controls and all that good stuff make the chat system robust but also safe. When you’re in that business, same with Roblox and other companies that target a younger audience, you have to be very careful in those areas, but the chat is a much-needed feature and I think it’ll be extremely appreciated by the audience.
Thank you for your time.
