Niko Partners take on Nintendo Switch 2 reveal

Nintendo has officially revealed everything about the Nintendo Switch 2, eight years after the original Switch launched in 2017. The new console will release globally on June 5, 2025, at a retail price of $449, which is $150 more than the Switch’s launch price. Here we outline key insights from the announcement, assess implications for the global console market, and evaluate growth prospects in Asia and MENA.

Switch 2 iterates on the original Switch:
The Switch 2 is more of an iteration than a reinvention of the wheel, keeping the same naming scheme, design, hybrid form factor and software platform of its predecessor, allowing for full backwards compatibility. Nintendo is clearly prioritizing platform continuity here, a strategy that it originally outlined prior to the Switch launch. This approach is also being taken given the Switch still has 129 million annual active users, with the company planning to transition them to the new console. While the Wii-to-Wii U transition didn’t succeed, we believe the Switch 2 naming continuity and backwards compatibility are a smart move in 2025.

New features help it stand out:
The Switch 2 retains many of the features of its predecessor and is less powerful than a PS5, yet the company introduced new game chat features, mouse controls for the Joy-Con 2 and game share functionality. GameChat, which includes screen sharing and video calls, is Nintendo’s attempt to build a larger social element into the Switch 2 ecosystem. This comes as Nintendo looks to recapture time played on its platforms given gamers have increased time spent on social media, entertainment and social games on other devices.

The Joy-Con’s new functionality as a PC-style mouse is a targeted design choice to attract PC-native titles and players, particularly as the PC gaming handheld market expands. Game share expands on previous local play options by allowing gamers to play a title together on multiple Nintendo Switch 2 consoles using one copy of the game. While these new features aren’t game changing, they do offer an advantage compared to other console platforms.

$150 more than Switch at launch:
At $449, the Switch 2 will launch at a significant premium compared to its predecessor ($299). We currently anticipate strong early adoption through 2025 and 2026, driven by pent-up demand for a new Nintendo console and first party IP, but note that it may not sell faster than the original Switch after the first 2-3 years due to the higher cost of the console and increasing satisfaction among gamers with existing gaming platforms and live service titles.

Like with the prior generation, we do not expect a price drop for the Switch 2 within its first five years, especially given recent reciprocal tariffs and higher component costs. That being said, the portability aspect and the potential introduction of a “Switch 2 Lite” at a lower price should extend sales and lead to multiple units sold within 1 household like with the original Switch / Lite.

Key first party titles shown:
Historically, Nintendo’s first party titles have accounted for 75% of its net software revenue, indicating the importance of Nintendo IP as a driver of hardware sales. While Nintendo showed new first party titles such as Mario Kart World, Donkey Kong Bananza, Kirby Air Riders and a new Hyrule Warriors from partner Koei Tecmo, there was no flagship Zelda, 3D Mario or an Animal Crossing sequel, and the pipeline is somewhat lacking through the end of the year. Nintendo has looked to offset this with upgrades to existing Nintendo Switch games, some of which have an upgrade fee, that will offer new gameplay modes and features on Switch 2. Nintendo’s ability to frontload strong IP at launch remains its most effective sales tool, and we do expect more titles for 2025 and 2026 to be announced closer to the launch date.

Rising third-party contribution:
Contrary to popular belief, third-party games accounted for 53% of software unit sales on Switch over the past two years, and it’s clear from today’s showing that third-party will play a large role going forward. Multiple third-party partners were showcased with key franchises such as EA FC, EA’s Madden NFL, NBA2K, Street Fighter and Final Fantasy making their way to the platform. It’s also apparent that high-end titles such as Elden Ring, Cyberpunk 2077, Borderlands 4 and Star Wars Outlaws will be able to run on the console.

We believe the increased ease of porting third-party titles, due to architectural continuity and AI upscaling technology, will allow for a stronger AAA presence on the platform, though not at full parity with PS5 / Xbox Series X|S. While we did get a look at an exclusive third-party game from FromSoftware (The Duskbloods), a new PvPvE action game set to release in 2026, many of the games showcased had already been released on other platforms. There was also no Call of Duty announcement (given the agreement with Microsoft) and Grand Theft Auto VI will only be available on PS5/Xbox Series X|S when it releases this fall.

Focus on digital, subscriptions and ARPU:
Nintendo’s online service peaked at nearly 40 million subscribers and now generates over $1 billion annually in recurring revenue. Online services and digital content represent a key opportunity for Nintendo who further expanded the online service today, offering GameCube classic games to subscribers of the higher priced Nintendo Switch Online + Expansion Pack service. The recent additions and updates to game sharing, family sharing and virtual cards show that Nintendo is fully committed to a digital future. We expect Switch 2 to expand on the foundation it has built with additional content in the Expansion Pack service.

While there has been some sticker shock regarding the price of games increasing from $60 to $70 or $80, these price points are set to become industry standard over the next two years, especially so for Nintendo first party games. One reason for the higher price is the increased cost of the new and faster Game Cards themselves, with higher capacities being more expensive to manufacture than a PS5 blu-ray disc. When combined with the greater focus on subscriptions and additional DLC and live ops in first party games, we expect to see an increase in ARPU across the board. Recurrent revenue from digital and subscriptions will also help smooth the transition period for Nintendo between Switch 1 and Switch 2.

Expansion in Asia & MENA:

Nintendo has been steadily increasing its presence in Asia (excl. Japan) & MENA over the past few years, including new partnerships to distribute the console in Saudi Arabia and Thailand, a new subsidiary in Chinese Taipei, and full entry into the mainland China market via Tencent. While eShop availability remains inconsistent across some markets, Nintendo’s transmedia initiatives (films, merchandise, parks) are expanding IP touchpoints in all markets and increasing the appeal of Nintendo’s first party titles, which can only be played on its hardware. Asia & MENA is home to a growing middle class and increased entertainment consumption, positioning the regions as key growth markets for Nintendo. The company has already seen strong growth in markets like China and South Korea with Switch.

In Asia & MENA, younger digital native audiences predominantly favor mobile and PC as their main platforms for gaming. Switch 2 sales in these regions will hinge on its ability to act as a complementary platform, supported by popular first- and third-party IP, localized services, and regional pricing. While we do see increased support across all three points, the high price of the console at launch may limit early adoption in these regions given its offering and pricing is now in line with the PS5 and mid-range PCs. According to Niko’s 2024 Gamer Behavior & Market Insights Reports, PlayStation is the leading console brand by market share in Asia excluding Japan.

In Japan, the Nintendo Switch 2 is launching with a two-tiered price system: a Japanese-language only edition at JPY 49,980 ($340), over $100 less than its US price, and a multi-language system at JPY 69,980 ($470). The Japanese language system will only be linkable to accounts with their country/region set to Japan, intended for use in Japan only. This is to discourage reselling of the new system by foreign buyers who leverage the console’s lower price point in the country to resell the title to regions with a higher price – an issue faced by the first Nintendo Switch. In Southeast Asia, Nintendo has confirmed that the Switch 2 will launch in Singapore, Malaysia, Thailand and the Philippines between July to September. There has been nothing announced for a China launch at this point, with the market having to rely on grey market imports if they want to buy a console at launch.

Market Outlook:

The console games market declined in 2024 due to lower hardware sales and a lighter premium games slate. We expect a return to growth in 2025 with the Nintendo Switch 2 shipments reaching 14.5 million units by the end of 2025. We remain cautious about whether Switch 2 can replicate Switch 1’s 150-million-unit sales, however. The major challenge for Nintendo will be sustaining demand beyond its first 3 years, assuming a Lite version launches within this period. Sustaining momentum beyond 2027 will depend on Nintendo’s ability to regularly deliver first party system sellers and foster broad third-party support to appeal to PC and mobile gamers.

There is a lot at stake for Nintendo here. Despite diversifying beyond console into mobile games, theme parks, movies, merchandise and more, Nintendo continues to generate more than 90% of its sales revenue from the Switch. We currently forecast the console to sell-in just under 50 million units by December 31, 2027, and eventually reach 100 million, making it another success for Nintendo. However, we are not convinced the console will reach 100 million faster than Switch 1 at this point or go on to reach the 150-million-unit milestone. We plan to reevaluate our forecast once additional games and initiatives have been announced.

Conclusion:

The Switch 2 builds on the success of its predecessor, rather than disrupting the console space. Early adoption looks promising, supported by key first party content, backwards compatibility, and a growing third-party ecosystem. While we expect this to be the fastest selling console for Nintendo at launch, its long-term success will depend on Nintendo’s ability to sustain engagement and penetrate emerging markets like Asia (excl. Japan) & MENA with greater localization and content alignment.

Note on tariffs and trade: The higher cost of the console in the US compared to Japan is likely a calculated move on Nintendo’s part, driven by tariff impacts, the weak Japanese yen and local market conditions. Japan accounted for nearly 25% of global Nintendo Switch unit sales, with Nintendo offering a cheaper Switch 2 SKU in this market to stimulate early adoption and maintain momentum. While the company has shifted some of its manufacturing to Vietnam to offset US tariffs on China, the looming threat of reciprocal tariffs prior to the Switch 2 showcase will have also forced Nintendo to consider a higher price for the rest of the world. The reciprocal tariffs on Vietnam and Japan have come in higher than expected, and Nintendo will feel the impact of this if the tariffs go into full effect. That being said, we think it’s unlikely that Nintendo will raise the price of the console at this point, but it’s also unlikely to see a price drop in the next 5 years.

For specific analysis on the console market in Asia & MENA, please contact research@nikopartners.com.