Nintendo (OTCMKTS:NTDOY) had a bumpy 2018, with sales of its Switch console slowing and its Labo cardboard accessories failing to catch on with consumers. However, the release of Super Smash Brothers for the Switch came just in time for the holiday shopping season and drove Nintendo stock rally in 2019 that lasted until today. On Friday, Nintendo announced that Metroid Prime 4 for the Switch is going to be delayed. Today, Nintendo stock is down more than 5% on the news that there’s no release date in sight for this highly anticipated Switch game.
At the E3 video game conference in 2017, Nintendo announced that Metroid Prime 4 was in development for its newly released Switch game console. It was a big deal at the time. The Switch was brand new and games were in short supply. The Metroid franchise hadn’t seen a core entry in a decade, so there was considerable pent up demand. The confirmation that Nintendo was working on Metroid 4 for the Switch was a big selling point.
On Jan. 25, Nintendo fans got on update on the game’s status. They had been expecting to hear about a 2019 release date — some stores already have the game up for pre-order. Instead, the company not only announced a delay, but made the announcement that they were essentially throwing away the work already done on the project to start from scratch.
“The current development status of the game is very challenged and we have made a very difficult decision as a development team. We have decided to reexamine the development structure and change it. This change will essentially mean restarting development from the beginning, so the completion of the game will be delayed from our initial internal plan. It will be a long road until the next time we will be able to update you on the development progress, and development time will be extensive.”
This degree of candor from a company is unusual. Many Metroid fans and Switch owners were upset and spent the weekend venting on social media, while others pointed to Nintendo’s move as a positive — taking a big hit to ensure the game it delivered lived up to its standards.
Part of that hit included Nintendo stock, which dropped more than 5% in early morning trading on Monday.
The Impact of Delaying a Key Game Title
The reason why investors were punishing Nintendo stock wasn’t just a knee-jerk reaction. For this company especially, the delay of a key game title can have a real economic impact.
Look at 2018. Nintendo stock hit 10-year highs in February, before taking a beating for much of the year as Switch sales began to slow. It didn’t help that the Labo cardboard construction kits the company launched for the Switch failed to catch on with consumers. Nintendo stock closed out 2018 down about 40% from its highs from earlier in the year. But then things looked up and the stock rallied, gaining over 20% through January. Why?
Super Smash Brothers Ultimate.
The long-awaited Nintendo game arrived with the just three weeks left in the holiday shopping season. Despite the late year release, Super Smash Brothers Ultimate became the top-selling Switch game of 2018. It was also the top-selling game — period — for any platform, for December. It set platform exclusive launch records, surpassing Halo: Reach for Microsoft’s (NASDAQ:MSFT) Xbox 360 in 2010. And on the strength of Super Smash Brothers Ultimate, Switch console sales got a big holiday boost, overtaking Sony’s (NYSE:SNE) PS4 as the best-selling game console of 2018, despite the PS4 leading in every month through October.
Super Smash Brothers Ultimate proved that a single exclusive title can be a game changer for Nintendo. That’s why there was significant investor disappointment over the news about Metroid Prime 4 needing to be re-done. This was seen as another game that could not only fill Nintendo’s coffers based on massive software sales, but it could potentially have the same effect of Super Smash Brothers Ultimate in boosting Switch sales.
The good news is that there are other exclusive titles on Nintendo’s 2019 release list, including Animal Crossing, Luigi’s Mansion 3 and Yoshi’s Crafted World. And rather than being a complete loss, Metroid Prime 4 might just show up to give the Switch a late-life holiday boost as 2020 winds down.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.