Smash NX: Sooner than Later

Super Smash Bros director Masahiro Sakurai briefly mentioned that he already has his next job. Although it is possible he is working on another title, I cannot help but to think that the newest title will be another entry into the Super Smash Bros series.  With Nintendo’s new system, code-named the NX, on the way, it’s not outside the realm of possibilities. PushDustin has compared and contrasted the reasons for when Smash for NX will launch. Instead, I want to present the financial reasons why it would be in Nintendo’s best interest to release the newest Super Smash Bros. titles sooner than later.

It should be no secret to anyone that it’s the software that sells the hardware.  It was late former Nintendo President Yamauchi that said the NES is just a box to play Mario on.  And that is no different in this day and age. Hardware manufacturers will compete to have exclusive content on their system.

And this is precisely the issue with the 3DS and the Wii U. Both systems had significant droughts which hampered their performance.  The Wii U released with New Super Mario Wii U and Nintendo Land.  Both games sold 2.01 million and 2.33 million as of year-end 2012. Soon after release, the system lost momentum.  As Nintendo of America and Chief Operating Officer Reggie Fis-Amie stated in an Nintendo E3 Analyst Briefing “Wii U has lost momentum due to the release pace of software titles after the launch period. However, just as Nintendo 3DS has been revitalized by consecutive software releases, we believe the basic principle of the video game business is that software sells hardware.” Unfortunately, many of the titles Nintendo relied on such as Bayonetta 2, Wonderful 101, Pikmin 3 and The Legend of Zelda: Windwaker HD, performed mediocrely.  

Nintendo’s line-up, but many had weak performances.

The console business is momentum based, and the Wii U’s struggle has been its inability to gain any momentum in the market.  As Tatsumi Kimishima describes “the success of a video game platform business depends greatly on its momentum, and it inevitably takes time to rebuild the business once the platform has lost its momentum.” Nintendo relied on many of the aforementioned titles; however, these titles did not perform as expected, resulting in poor sales for the hardware. However, Super Smash Bros. continues to sell. Super Smash Bros. for Wii U has sold 4.61 million units making it one of the best selling games for the Wii U. Much like Mario Kart, Super Smash Bros. is a series Nintendo can rely on.

Nonetheless, Super Smash Bros. for Wii U was released far later compared to Super Smash Bros. Brawl.  The Wii was released in November of 2006 while Super Smash Bros. Brawl was released in Japan on January 2008, approximately 15 months after the Wii’s released.  However, the Wii U was released on November of 2012 while Super Smash Bros. for Wii U was released in November of 2014, approximately 25 months after release.  To put this into perspective, Super Smash Bros. Brawl was planned to release during the Wii’s second holiday season, yet Super Smash Bros. for Wii U was released during the third holiday season.

Satoru Iwata and Tatsumi Kimishima have both spoken about returning the company to “Nintendo like profits.” Nintendo’s earnings performance has benefited from sales of amiibos and downloadable content; however, in order for sales to reach this “Nintendo like profits,” the NX needs to sell well.  To demonstrate the impact of game and console sales on Nintendo’s performance, consider sales of the Gamecube, Wii and Wii U. Below is a chart comparing Sales, Operating Income and Net Income for the years when the Wii, Gamecube and Wii U were sold.  Since all three systems were released during the holiday seasons, I am able to compare a similar point in time for all three.

*Sales, operating income and net income are expressed in million yen

**System sales are expressed in millions

As you can see, the sales of a system have a significant impact on Nintendo’s earnings. With the Gamecube selling nearly 16 million at the stage of its life, operating income was 31,036 million yen greater and net income 34,979 million yen greater that compared to the Wii U.  It goes without saying that the Wii did significantly better which resulted in higher profits.

Nintendo’s new system is a mystery, but it may very need Smash to succeed.

It’s clear that Nintendo needs a success; hence, the company needs hit software.  Nintendo can not wait another 5-7 years from the next Super Smash Brothers. So when would Super Smash Bros. for the NX launch in relation to the system’s life.  Let’s assume the NX releases at the end of 2016. This corresponds to Nintendo’s other systems which all launched during the 4th quarter of the year.  Let’s assume that Super Smash Bros. takes about 3 years to complete. If so, it would release around 2018 holidays/2019 Spring.  This would put the title releasing during the third holiday season, which is similar to Super Smash Bros. for Wii U.  Of course, this is still late in the system’s life, and it could be rushed out toward the spring of 2018, which would be roughly 2 and a half years of development.  

It’s clear that Nintendo needs hit titles for the NX to succeed and Super Smash Bros. is one of those titles.  How the next Super Smash Bros. will progress remains unclear. Will Sakurai be involved again or will he be in an advisory role? Will it be a full game or will it be a re-release of Super Smash Bros. for Wii U? And when will it launch. That all remains to be seen. What is clear is that, from an earnings standpoint, Nintendo needs the next Super Smash Bros. to come out sooner than later.