The Nintendo Switch Has Upended the Video Game Market (Premium)

Thanks to a blockbuster year, Nintendo is upping its estimate for annual Switch console sales to 15 million units. No, that's not enough to surpass the rate at which Sony sells the PlayStation 4. But it's close, and this success came out of nowhere.

More to the point, Nintendo's hybrid approach to video gaming---the Switch works as both a standalone, traditional game console and a portable gaming device---proves that this firm still has a unique and innovative role to play in this market. And its Switch success has upended our understanding of what the video game hardware market can be.

As I've done before, I will use a bit of math here to put this success in perspective.

Back in December, Nintendo announced that it had sold 10 million Switch consoles in its first 9 months of availability. At the time, Nintendo was selling the Switch at a rate of 1.11 million units per month. This compared to 1.67 million per month for the PS4.

Of course, there are different ways of looking at these numbers. If you compare the Switch's first 9 months in the market to the PS4s, you will see that it also took Sony 9 month to sell 10 million PS4 units. (And it's worth comparing the success of Switch to Nintendo's previous console, the Wii U, which required 2.5 years to reach 10 million units.)

Today, Nintendo announced its earnings for the quarter ending December 31. And it was a blockbuster: The firm posted an operating profit of $1.05 billion (up 177 percent year-over-year) on revenues of $4.4 billion (up 261 percent). This was Nintendo's highest quarterly revenues since December 2009 when, yep, you guessed it---the mighty Wii ruled the market.

As part of its earnings announcement, Nintendo revealed that it had sold 7.23 million Switch consoles in the quarter; that's a rate of 2.41 million units per month, though this was, of course, the holiday period. It also raised its forecast for the Switch to 15 million units; it had previously estimated that it would sell 14 million units in the first year.

That works out to 1.25 million consoles per month. Again, still below the latest Sony figure (1.67 million), but very impressive. This is especially true when you consider that Nintendo doesn't compete with the graphical power of a standard Xbox One or PS4, let alone the newer 4K consoles. Nintendo, as is usually the case, has carved out a space for itself. And, as is always the case, it's a unique space.

In fact, if you were to look back at the past several years, or even the past couple of decades, you'd see a related and interesting trend: Nintendo, semi-uniquely among its competitors, has always dominated the sub-market for mobile gaming hardware. That is, aside from the success (or lack thereof) that it saw with various traditional consoles, Nintendo has always seen great success in mobile. This is a market that Microsoft has never really addressed. And its one in which Sony, the current market leader has repeatedly tried---with the Pl...