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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Gamers, start your engines, let's a go. If that sound

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Speaker 2: brings back memories, You're likely one of the hundreds of

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Speaker 2: millions of people who's owned or currently owns a Nintendo

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Speaker 2: gaming device, and this week the company is hoping to

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Speaker 2: add to that number when it releases the next generation

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Speaker 2: of its most popular console, the Switch.

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Speaker 1: To Nintendo Switch to joyconto controllers that attach in a

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Speaker 1: snap and a big, vivid hid. The Switch has been

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Speaker 1: a massive hit for Nintendo.

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Speaker 2: Your Road Ready is a Bloomberg opinion columnist based in Tokyo.

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Speaker 1: Nintendo have made about one hundred billion dollars in revenue

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Speaker 1: over the lifetime all the Switch that is sold over

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Speaker 1: one hundred and fifty million units worldwide, and it has

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Speaker 1: absolutely rejuced Nintendo's price.

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Speaker 2: The Switch launched back in twenty seventeen, and it's on

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Speaker 2: track to become Nintendo's most successful device. Ever, eight years later,

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Speaker 2: the company is hoping to recreate some of that magic

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Speaker 2: by dropping a new premium product. What's new about the

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Speaker 2: Switch too?

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Speaker 1: It is everything that you love about the Switch one

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Speaker 1: powered up. It has a much better and larger screen

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Speaker 1: than the original Switch. I've seen it myself. It looks fantastic.

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Speaker 1: It's going to have a whole host of new games,

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Speaker 1: starting with Mario Karts World. It's only going to be

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Speaker 1: available on the Switch too.

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Speaker 2: To outsiders, it may seem like Nintendo is riding high,

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Speaker 2: but Garod says this is actually a risky period for

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Speaker 2: the company. That's because Nintendo's business is almost entirely reliant

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Speaker 2: on this one device, Unlike its closest competitors Sony, who

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Speaker 2: makes the PlayStation, and Microsoft with the Xbox.

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Speaker 1: Nintendo right now would seem to be at the top

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Speaker 1: of the world. Their stock is just off an all

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Speaker 1: time high. But this is also the riskiest time for Nintendo.

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Speaker 1: They really need to make a success out of this right.

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Speaker 1: If they don't, they don't have something else to fall

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Speaker 1: back on, like Sony or Microsoft.

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Speaker 2: This is the Big Take Asia from Bloomberg News. I'm

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Speaker 2: one High. Every week we take you inside some of

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Speaker 2: the world's biggest and most powerful economies and the markets,

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Speaker 2: tycoons and businesses that drive this ever shifting region. Today

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Speaker 2: in the show, Nintendo's big bet on the Switch Too,

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Speaker 2: and why it can't afford any missteps this time around.

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Speaker 2: Brod did you grow up playing video games? Do you

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Speaker 2: remember your first video console?

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Speaker 1: Absolutely, I've been playing video games almost for as long

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Speaker 1: as I can remember. The first Nintendo console that I

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Speaker 1: remember having was the NES, Nintendo's first console on the

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Speaker 1: first game that I remember playing on that was the

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Speaker 1: original Super Mario Brothers.

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Speaker 2: We were actually the first kids on the block who

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Speaker 2: also had the original NES. This is the one that

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Speaker 2: came with the robot. Maybe it was the second edition

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Speaker 2: for the American markin Oh.

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Speaker 1: Well, you had the robot rob the robot. Yeah, it

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Speaker 1: was so cool.

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Speaker 2: All the kids came through our house and I remember

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Speaker 2: we're all dazzled by the robots. When I first heard

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Speaker 2: about Nintendo in the early eighties, its products were cool

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Speaker 2: and cutting edge. Would you be the one to witness

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Speaker 2: the birth of the incredible Nintendo Entertainment system, the one

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Speaker 2: to play with rob the extraordinary video robot batteries not

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Speaker 2: included help tech. We are talking about Nintendo's launch of

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Speaker 2: the switch to today, and I wonder as we're talking

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Speaker 2: how much of its success is really about nostalgia.

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Speaker 1: I'm not sure if nostalgia is really the right word

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Speaker 1: so much as connection to those characters Nintendo. I think

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Speaker 1: has been uniquely good at being able to create characters

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Speaker 1: and maintain them over the course of so many years,

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Speaker 1: so it's almost more like a timeless quality to these characters.

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Speaker 1: Just as you know Disney has been able to do

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Speaker 1: with Mickey Mouse, Nintendo has been able to do with Mario, Zelda,

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Speaker 1: and so on across these franchises.

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Speaker 2: In the fiscal year of twenty twenty four, Nintendo sold

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Speaker 2: more than eight million units of Mario Kart eight Deluxe,

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Speaker 2: a game first released more than a decade ago, and

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Speaker 2: altogether the company has sold more than seventy five million

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Speaker 2: units without giving any discounts. On top of that, the

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Speaker 2: majority of the games sold on the Switch are created

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Speaker 2: by Nintendo and played exclusively on the device.

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Speaker 1: Nintendo's secret SOSS is the intellectual property that they've built.

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Speaker 1: That's a cold way to describe what is a very

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Speaker 1: warm collection of different franchises and different characters that so

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Speaker 1: many people across different generations love. These are characters that,

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Speaker 1: in this case it's something like Mario or Zelda, several

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Speaker 1: generations have now grown up with, and that I think

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Speaker 1: is really the thing that separates Nintendo from its competitors

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Speaker 1: is that they're almost stewards now of these characters of

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Speaker 1: these franchises that are so beloved across the world.

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Speaker 2: Besides the games, Nintendo is also famous for its unique

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Speaker 2: hardware designed to create new experiences rather than just upgrading

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Speaker 2: existing hardware with flashier graphics, something it's competitors like Sony

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Speaker 2: has done with the popular PlayStation with.

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Speaker 1: The PlayStation you know, he went for the PlayStation one,

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Speaker 1: PlayStation two, PlayStation three. Each generation is broadly similar to

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Speaker 1: the previous one. Of course, the hardware inside is very

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Speaker 1: different and much improved from one generation to the next,

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Speaker 1: but the main focus of the style of playing doesn't

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Speaker 1: really change that much. The name doesn't really change that much.

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Speaker 1: Nintendo withdrew from that kind of way of doing things

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Speaker 1: quite a long time ago and decided to focus more

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Speaker 1: on play experiences. They have generally gone into each new

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Speaker 1: generation of product trying to do something new. From the

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Speaker 1: Super Nintendo to the Nintendo sixty four, it has a

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Speaker 1: different way of playing. They go from the Nintendo sixty

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Speaker 1: four to the GameCube. They went from the GameCube then

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Speaker 1: to the wi and yet with each one of these

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Speaker 1: you're seeing the name changes, the philosophy changes, what they

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Speaker 1: want to do with the changes, and oftentimes they have

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Speaker 1: a hardware innovation that keep users coming back for a

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Speaker 1: new experience.

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Speaker 2: That's why Nintendo takes its time with research and development,

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Speaker 2: meaning fans often have to wait years for new products.

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Speaker 1: The late president Satoriwata talked about the need to surprise

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Speaker 1: gamers and to give them something new, much to the

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Speaker 1: chagrin of shareholders over the years, They're not focused on

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Speaker 1: extrac taking as much profit from their business as they

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Speaker 1: possibly can. They're very much focused on the player, and.

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Speaker 2: For the most part, Nintendo's player focused strategy has paid off.

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Speaker 2: One of its most successful breakthroughs was the Wei console

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Speaker 2: in two thousand and six. It was an instant success

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Speaker 2: in Nintendo's best selling game system for fifteen years.

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Speaker 1: It was on every late night talk show. South Park

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Speaker 1: had a whole episode around the kids trying to get it.

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Speaker 2: There you are, Eric, what are you doing here? I'm

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Speaker 2: waiting for the new Nintendo we to come at.

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Speaker 1: The controller did not look like anything that a traditional

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Speaker 1: controller looked at the time. A lot of the games involved,

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Speaker 1: you know, using motion sensing technology, and the idea was

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Speaker 1: that they could bring in people who were intimidated by

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Speaker 1: traditional sort of like game controller, which has lots of

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Speaker 1: buttons and knobs and dials and stuff like that, and

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Speaker 1: can be quite dimidating to people who don't know what's

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Speaker 1: going on.

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Speaker 2: But I remember having dance parties with the kids using

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Speaker 2: the Wii after it launched right absolutely.

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Speaker 1: It really broke the mold and pushed Nintendo back into

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Speaker 1: the mainstream, and for a while it was one of

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Speaker 1: the most desirable products in the world.

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Speaker 2: The Wii was a hit, but when Nintendo attempted to

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Speaker 2: follow up with the WIU six years later, it stumbled

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Speaker 2: big time.

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Speaker 1: People didn't actually know it was a new console. People

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Speaker 1: thought that it was maybe just an add on for

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Speaker 1: the Wei. Nintendo had three straight years of operating losses.

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Speaker 1: Their stock was absolutely tanked basically by this.

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Speaker 2: After its failure with the Wiu, Nintendo spent five years

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Speaker 2: making the Switch that combined two different lines of hardware,

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Speaker 2: the home console, the controller that you play while sitting

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Speaker 2: in front of the TV, and the handheld like the

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Speaker 2: game Boy into one device.

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Speaker 1: The Switch could do everything right. If you want to

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Speaker 1: have it as a home console, if you just want

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Speaker 1: to have it under your TV, you can do that.

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Speaker 1: If you want to take it out play it in

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Speaker 1: the park, bring it on playing. You can do that

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Speaker 1: as well. You're not really compromising on either one of

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Speaker 1: those things. It's same games, it's the same data, that's

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Speaker 1: exactly the same device, and no one had, really, to

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Speaker 1: the best of my knowledge, thought of trying that. There's

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Speaker 1: no device in the world basically that functions like a

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Speaker 1: switch does.

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Speaker 2: The Switch generated some one hundred billion dollars in sales

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Speaker 2: and propelled Nintendo's shares to record highs. It's one of

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Speaker 2: the highest selling consoles of all time, coming in a

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Speaker 2: close second to the PlayStation two. With the runaway success

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Speaker 2: of the Switch, Nintendo has been feeling the pressure to

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Speaker 2: come up with an even better console with the Switch too,

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Speaker 2: and this time Gerode says the company's trying to learn

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Speaker 2: from its past mistakes. It's deviating from its traditional approach

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Speaker 2: of delivering something completely new.

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Speaker 1: This is the first time they've just basically taken the

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Speaker 1: same concept and souped it up, put a two at

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Speaker 1: them the end of it, and said, it's everything that

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Speaker 1: you love about the original device, but.

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Speaker 2: More after the break the Switch to comes to market,

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Speaker 2: will a change in strategy work. Nintendo Switched to officially

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Speaker 2: hit stores on June fifth, but pre orders for the

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Speaker 2: console have already sold out. Despite the jaw dropping price

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Speaker 2: tag at four hundred and fifty dollars, the Switch To

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Speaker 2: lands on the expensive end of what most analysts expected.

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Speaker 2: But the real jolt is the price of the games.

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Speaker 2: It'll cost seventy dollars to get Donkey Kong Bonanza and

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Speaker 2: eighty dollars for Mario Kartworld. That's a hike of as

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Speaker 2: much as thirty percent, and gamers are up in arms.

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Speaker 1: No price dropped four point fifty. That is not good,

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Speaker 1: not good. Charging eighty dollars for a video game isn't

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Speaker 1: just ridiculous, but it's dangerous.

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Speaker 2: To expense it four hundred and forty nine dollars. Adding

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Speaker 2: to the challenge on pricing is President Trump's tariffs. Hours

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Speaker 2: after Nintendo revealed the price for the new Switch, Trump

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Speaker 2: announced sweeping tariffs on countries around the world, including China

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Speaker 2: and Vietnam, where Nintendo produces most of their devices, and gerode.

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Speaker 2: The US is the biggest market for Nintendo. How's that

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Speaker 2: going to impact Switch To sales?

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Speaker 1: It is impossible to tell right now what that actual

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Speaker 1: impact is going to be. China and Vietnam obviously both

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Speaker 1: of those countries potentially in the line for tariffs or

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Speaker 1: potentially not. However, I think it's very hard to believe

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Speaker 1: that they would be able to sell the switch to

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Speaker 1: for much more than that's going to retail for it

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Speaker 1: four hundred and fifty dollars in the US. It's hard

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Speaker 1: to see how they would you be able to have

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Speaker 1: a device. As much as I am looking forward to

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Speaker 1: the switch to, I don't think it's a six hundred

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Speaker 1: dollars device, which some estimates say that it would cost

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Speaker 1: if the taruffs go. You know, the worst case scenario.

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Speaker 2: Which for sure, is that Nintendo needs to sell its

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Speaker 2: latest console and lots of it because it has no

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Speaker 2: plan B.

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Speaker 1: And typical year, anything from ninety three to ninety five

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Speaker 1: percent of their revenue is coming directly from their video

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Speaker 1: game business. They've had other successes over the past couple

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Speaker 1: of years. They had the Mario movie, they have Nintendo

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Speaker 1: stores and increasing number of cities they have theme parks

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Speaker 1: these days in collaboration with Universal Studios. They really need

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Speaker 1: this to be a success and that primes them for

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Speaker 1: success going forward.

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Speaker 2: That's a big reason why Nintendo is shifting its strategy

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Speaker 2: this time. Around building on what's worked so well with

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Speaker 2: a switch and avoiding a repeat of what happened with

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Speaker 2: a follow up to the Wii.

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Speaker 1: I think they definitely learned the lesson of the marketing

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Speaker 1: of the WU. The WU was a very confusing proposition,

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Speaker 1: so I think that's why they've gone this time with

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Speaker 1: quite a conservative by their approach take on the switch too.

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Speaker 1: It started with the name, you know, there was a

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Speaker 1: lot of speculation over you know, or were they going

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Speaker 1: to call it? What was it going to look like?

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Speaker 1: They've decided to keep the same basic form factor of

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Speaker 1: the switch it as the monitor. It has the two controllers.

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Speaker 1: Now this time instead of clipping on, they go on

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Speaker 1: via magnets. But you can look at it and you

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Speaker 1: just immediately know that is a switch, and I think

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Speaker 1: they are banking on that to avoid the confusion that

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Speaker 1: they had with the WU GROT.

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Speaker 2: It seems like there really isn't another hybrid machine on

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Speaker 2: the market that can really compete with the switch. Is

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Speaker 2: that going to change anytime soon?

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Speaker 1: There are rumors that both Microsoft and Sony are looking

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Speaker 1: at doing some sort of portable device. I wouldn't be

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Speaker 1: surprised to see one or either of those companies come

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Speaker 1: out with a device that was a portable. However, what

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Speaker 1: I would say there is that Nintendo has it has

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Speaker 1: a moat that is very hard for any competitor to copy.

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Speaker 1: It's not the unique design of the switch, which you know,

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Speaker 1: at this stage is nearly a decade since it was

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Speaker 1: first announced. It is their incredible range of intellectual property.

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Speaker 1: And I think any competitor who tried to go against Nintendo,

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Speaker 1: even with something similar, does not have that range of

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Speaker 1: games and experience to fall back on.

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Speaker 2: And that's what investors and die hard Nintendo fans are

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Speaker 2: banking on. Nintendo spends a shocking amount of time and

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Speaker 2: energy antagonizing the gaming community. And yet I bought a wee.

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Speaker 2: I bought a wee. You, I bought a switch. I

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Speaker 2: bought an old switch, and I'm gonna buy a switch too. Why?

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Speaker 2: Because nobody does what an intent do. This is The

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Speaker 2: Big Take Asia from Bloomberg News. I'm wan ha To

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Speaker 2: get more from The Big Take and unlimited access to

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Speaker 2: all of Bloomberg dot Com, subscribe today at Bloomberg dot

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Speaker 2: com slash podcast offer. If you like the episode, make

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Speaker 2: sure to subscribe and review The Big Take Asia wherever

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Speaker 2: you listen to podcasts. It really helps people find the show.

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Speaker 2: Thanks for listening, See you next time.