NEXT-GEN GAME PLATFORMS —
We’re not in Kansas anymore.
Nintendo’s Switch 2 is launching imminently and fans and pundits are concerned about their price increases. This also triggers fear about future prices for the Xbox Series X update, Brooklin, and the PlayStation 6. Prices are partly driven by external factors such as inflation and tariffs, but let’s put this into more of a game industry context.
The Switch 2 hardware goes for $449 and the best games will cost $80 or more. But we’re not in Kansas anymore, and Nintendo brands are not just for kids.
The first generation of children that played on the NES are now in their forties and fifties and have kids of their own, and Nintendo happens to be one of the rare brands that appeal to all people of all ages. As the only industry platform with massively popular exclusive brands, nothing compares to the nostalgia for Nintendo’s exclusive and eternal brands like Mario, Zelda, Pokemon and Animal Crossing.
The Switch is much cheaper than an iPhone, and even a parent on a budget can rationalize it as something that will emotionally bond them with their children, who need the status of being able to say they have one on the playground. In many homes it is still the nerdy responsibility of excited dads to procure most of the consumer electronics, but budget requisitions must of course be approved by the mothers, who are more practical. I can guarantee there are clever arguments being made by millions of dads right now, that this is a precious handheld product for the kids, and it will also bring the family together as they play through the TV in the family room (while many dads are no doubt staying quiet about their plans to binge by themselves after the kids are asleep). As a function of play hours and their value, Nintendo’s prices are perfectly reasonable. I fully expect Switch 2 to exceed 100 million units sold in its lifetime, just like its predecessor. This will be the 5th Nintendo platform to exceed 100 million (DS, Switch, GameBoy, Wii, Switch 2) and every one of these has been family-oriented. Sony’s PS1, PS2 and PS4 are the only others in history to sell this well.
By contrast, the Steam Deck is a reasonable success even though it has only sold 4 million units over the last two years, in a world that now has 7 billion smartphones, 2 billion PCs and 2 billion smart TVs. This platform has no chance of ever reaching an installed base of 100 million, as almost all the game content is also available on all the other platforms (including anything any software publisher might want to license, like a sports league, who will demand being on all platforms), and Nintendo is going to dominate market share among children. Yet it’s a smart business to make a PC-derivative portable that you can sell through your own PC-centric distribution pipeline, as Steam is for Valve. I don’t consider it an attractive space for either Sony or Microsoft, as they lack famous exclusive games for children (unless Sony revives Spyro and Crash and is willing to make them exclusive). It would be crazy for anyone else to enter the handheld market because you can’t beat Nintendo with the kids and you have no prized, exclusive games that will pull adults away from playing on their high-powered phones.
As for the next generation of consoles, we’re now in a glide plane where the cloud is everything and it will be far more convenient to have rack-mounted GPUs in data centers than to try to convince the public to buy more consoles, at higher prices, than they have in the past. We will never see another conventional console sell 150 million units, like the PlayStation 2 did (I still own a few of those!). The technical prowess of PCs, current consoles and even the newer smartphones is increasingly comparable and good enough, and even for Sony and Microsoft it will soon make more sense to focus on their game streaming subscription services instead of losing money on hardware manufacturing and marketing. Brands like PlayStation and Xbox can be maintained yet will also be more easily available on PCs and billions of smart devices, for a win-win among the cloud providers, game brands and players.
