By Sarah E. Needleman

Nintendo said the successor to its eight-year-old Switch console will go on sale later this year, a launch that analysts expect will give a much-needed boost to the Japanese company's financials because it doesn't appear to stray too far from the original's popular hybrid design.

Here's what we learned Thursday from the widely anticipated Switch 2 announcement.

-- A brief video preview appeared to show a larger screen, a mysterious new button and magnets for more easily removing and reattaching its Joy-Con controllers.

-- No specifications were included but Nintendo said it plans to share further details in April and that the new Switch will come with exclusive games. It will also support some games made for the first Switch.

-- Nintendo is taking a different approach by releasing Switch 2 as a sequel as opposed to a completely new form factor and operating system. The company's track record in hardware sequels has been bumpy. The Wii U and the Nintendo Game Cube both greatly underperformed in comparison with their predecessors.

"They're doing an update to what works," said Wedbush Securities analyst Michael Pachter, who expects Nintendo to sell 16 million of the new consoles and 64 million games in fiscal 2026. "It will sell out."

The first Switch launched in 2017 and has sold 146 million units as of September. Though it quickly became a massive hit when it launched in 2017, introducing consumers to a then novel hybrid console for playing games at home or on the go, sales have long since tapered off. In November, Nintendo reported a 60% drop in net profit from a year earlier for the six months ended Sept. 30.

The overall videogame industry could also use a shot in the arm. Global consumer spending on games grew an estimated 3.6% last year after rising 1.8% in 2023 and shrinking 6.3% in 2022, according to analytics firm Aldora Intelligence. The industry grew an unprecedented 23.4% in 2020 from pandemic-driven demand.

Supply of the new Nintendo console, however, could be constrained to about 20 million units for the first year, according to Pachter. He added that Nintendo will likely cut the price of the current Switch by about $50 prior to the launch of Switch 2 and might decide to bundle the older console with software to make clearance a compelling value for consumers.

Nintendo has been working to diversify its revenue streams by offering other forms of entertainment featuring its popular characters and game series. The Kyoto-based company, whose U.S.-traded shares have risen 6% this year, recently launched a mobile app that lets users download and stream game soundtracks.

In addition to the Switch 2, another expected growth catalyst for the games industry is the launch of Take-Two Interactive Software's "Grand Theft Auto VI," which is slated for the fall.

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(END) Dow Jones Newswires

January 16, 2025 13:42 ET (18:42 GMT)

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