Super Mario Is Winning the Console Wars

Nintendo is close to updating its popular Switch console. Unlike Sony and Microsoft, it can take its time with powerful new features.

It’s an eternal question for parents over the holiday period: Should I get the kids a videogame console? And which one?

For many who grew up with them, Nintendo is almost synonymous with videogames. Its Nintendo Entertainment System basically established the home videogame market in the 1980s. With Sony’s PlayStation and Microsoft’s Xbox joining the fray, console makers increasingly compete on better and better graphics, driven by ever more powerful hardware. Launched in 1994 and 2001, PlayStation and Xbox consoles are now in their fifth and fourth iterations, respectively.

Sony’s PlayStation consoles are now in their fifth iteration. Nintendo has managed to blaze a different path. Instead of jumping into an escalating arms race of realistic and often violent titles aimed at teenagers and young adults, Nintendo focused on making fun games that appeal to a broader audience, including people who aren’t typically gamers. Switch and Wii, its previous smash hit, both feature games that allow families and friends to play together in casual settings.

As a result, Switch doesn’t need to have hardware as powerful as its rivals. What it lacks in raw power it makes up for in creative form factors: The Switch doubles as a portable console with detachable microcontrollers.

But all consoles have had to contend with the rise of the pocket-size computers nearly everyone carries with them these days. Premature obituaries have long been written for videogame consoles ever since the rise of smartphones. Mobile gaming has indeed grown by leaps and bounds. It is now the largest gaming segment. commanding about half of the $184 billion market by sales last year, compared with 28% for consoles, according to industry tracker Newzoo. But there is plenty of game revenue to go around, with console gaming continuing to grow in the past decade.

For the industry, and especially for Nintendo itself, much will be riding on the company’s coming console. Nintendo’s own history provides a painful lesson about how that could go badly. Before launching the Switch in 2017, the company was mired in a hangover from the runaway success of the Wii console. Wii U, the Wii’s successor, was a major flop, selling fewer than 14 million units. Nintendo lost money for two consecutive years, in 2013 and 2014, during that dark time.

Just four years ago the Switch was among the hottest lockdown commodities, selling in the secondary market for well above its list price, with its Animal Crossing game a runaway hit. It earned $1 billion in a single quarter, and that wasn’t even during the typically hot holiday period. Now, though, Switch’s sales are firmly in decline. Nintendo’s revenue nearly halved year-over-year last quarter, making it more urgent to make its successor a quick hit.

But even if Nintendo succeeds in matching Switch’s design genius, the console wars are morphing into something very different. Microsoft, for example, said in February that it will bring some of its exclusive titles to Sony’s and Nintendo’s consoles. Likewise, Sony has also been releasing some of its games on Windows. Meanwhile, Microsoft is making more games available on its Netflix NFLX 0.10%increase; green up pointing triangle-like game subscription service called Game Pass.

Having exclusive games has long been the business model for videogame consoles. Consumers pick a particular one because there are certain games they want to play that are only available on that platform. That in turn has helped console makers to lock in gamers and sell them other games. That is why Microsoft’s $75 billion purchase of game maker Activision Blizzard hit Sony’s nerves. Activision’s shooter game series, “Call of Duty,” has been a money spinner on PlayStation. Microsoft agreed to keep the series on PlayStation for 10 years, in part to assuage competition concerns.

But it also makes commercial sense. One factor driving the industry’s tectonic shift is that making games has become so expensive. Developing the biggest titles, the so-called AAA games, often takes years and represents a massive investment. Sony’s post-apocalyptic adventure game “Horizon Forbidden West,” released in 2023 on its PlayStation consoles, reportedly took five years and more than $200 million to make—on par with Hollywood blockbusters.

Before Nintendo launched the Switch, its Wii U console was a major flop. Such games have realistic and incredibly detailed graphics. Many include voices of celebrities and are played in vast, virtual worlds that could take hundreds of hours for gamers to explore. Given those costs, and the commercial risks of a flop, it makes sense for game makers to spread the cost over more platforms. That is especially the case today because they have to compete for time and attention with mobile games.

Exclusive titles are in particular Nintendo’s bread and butter. Gamers buy Nintendo’s consoles mostly to play its games. But, unlike its competitors, the company’s properties have carved out a niche that avoids the inflation of game-development costs. That has made it more profitable than Sony’s game division in recent years. Its long history also created many game characters such as Super Mario that have become household names, making the jump to other media such as the silver screen and Universal’s theme parks.

Microsoft is making more games available on Game Pass, its Netflix-like game-subscription service. Nintendo, with its unique positioning, has what it takes to keep the game going, especially if its new console is successful. Sony, which has always been a step ahead of Microsoft in the console wars, can leverage its larger user base. Microsoft’s bet on subscription services such as Game Pass is more uncertain, but its deep pockets, as demonstrated by its Activision acquisition, can help keep it in the game.

Despite the challenges from smartphones, videogame consoles—dedicated hardware optimized for gaming that can be used on big screens—are probably here to stay. Whether or not that leaves enough room for three profitable players is another question.

(http://www.autoadmit.com/thread.php?thread_id=5572999&forum_id=2#47946461)

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—cowgod

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