Nintendo stock is on fire and it's thanks to its newest console and the focus on the platform opportunities inherent in its design. As I wrote back in October, this focus would bring great reward for Nintendo.

In the past couple months, Nintendo's stock price has bounced to record highs, on a surge even greater than the one fueled by the Pokémon Go madness late last summer. Check the graphic below; note the stock price is listed in Japanese yen (JPY/¥), not US dollars.

Sales for the Switch console have been so strong, the gaming company is expecting to manufacture 10 million units over the next fiscal year and sell pretty much all of them. By contrast, the much-maligned Wii U, Nintendo's last console, sold only 13.1 million units over the device's entire lifetime.

After the company's big reveal of the console in October, the company saw an unexpected dip of 7% in its stock value, but the company doubled down on its plans and has been pushing to capture new gamers as customers in the face of stiff competition for attention from smartphones.

How Did This Happen?

Within its first month of public life, Nintendo shipped nearly 3 million units and every last one was sold, which is extra noteworthy due to March being a typically slow selling season for console makers.

This success was fueled by a few different factors. First, the console launched in conjunction with a very promising title, a new Legend of Zelda game called Breath of the Wild. Hailed by critics as a much-needed refresh for the series and a game of genuinely superb quality, the sales figures backed up the fanfare.

Nearly everyone who purchased a Switch also bought the newest Zelda game, which is remarkable when one considers that it wasn't bundled with the console, a common tactic used to drive console sales at launch or around holiday seasons. This figure speaks to the promise of future titles for the console.

Additionally, the market has changed since the launch of Nintendo's last console. The average age for gamers jumped from 29 to 37 from 2004 to 2011, and it's doubtful that number has dropped significantly since then. Typically, that gap in age would lead to more disposable income and customers more likely to buy a new console.

Finally, Nintendo remembered that it's a platform company and is making the right moves to seize on the inherent potential.

Platforms Win, Period

Switch customers in Japan have cause for excitement as Capcom announced its newest installment in the legendary Monster Hunter series is coming to the Switch in August of this year.

Nintendo should be pleased as well. If more third party game companies come onboard and launch titles for the Switch, that means more people will be buying consoles to play those games using the Switch's innovative hardware.

That's what makes a platform: third parties making the end product while the transaction owner (the Switch in this case) facilitates the consumption of the product's value. The Switch is a vessel for players for enjoy games made (ideally) be studios outside of Nintendo.

If the Switch is to succeed and grow sustainably, Nintendo will need to prioritize the demands of third-party developers and studios so console sales will experience organic, low-cost growth.

As well, the Switch was designed to foster social interaction while gaming, giving it access to the oldest source of platform success: face-to-face human interaction. Whereas other consoles have steadily moved toward online multiplayer gaming, Nintendo has always valued in-person multiplayer, whether cooperative or competitive.

The company should look for new features and games that support more in-person multiplayer and continue to market on that.

Nintendo's growth is exciting, but its position is precarious. Unlike its competitors Sony and Microsoft, Nintendo is completely dependent on the sale of its consoles and game titles. If there's a bad season for games, Nintendo feels that pain entirely, whereas Sony and Microsoft can absorb it with revenues from other segments.

As well, Nintendo does a poor job with mobile and licensing out its properties. Pokémon Go was a roaring success for the company, but it failed to effectively capitalize and it took a long time for the company to accept it culturally.

For your own sake, Nintendo, please welcome outside innovation and ideas. Open systems win; just ask Google and Microsoft.

Published on: May 28, 2017
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