Hardware Hurdles

Are you willing to spend to spend $250 on a device for the opportunity to spend $40 per game? For a long time, this has been the premise of handheld gaming. On home consoles, it’s an even worse proposition. Yet, for a long time, this had been a successful strategy in gaming. It was still better and more convenient than the old arcade model of feeding a machine upwards of $20 per day. This was why the dedicated game console model worked. The home console was a better bargain and far more convenient than the arcade machine. However, times change and the old console model is being supplanted by the free to play model on mobile devices. The majority of the population agrees that they need a mobile phone before a gaming handheld or home console. It’s only natural that some are questioning whether they need any dedicated gaming hardware at all.

Now, dedicated consoles do provide a unique gaming experience that cannot be replicated on phone in terms of input (buttons) and scale. No one is going to make a free to play game for 100 million dollars. Well, not yet anyways. Most mobile games are simply variations on the old skinner box concept. The problem is that most consumers do not take games as seriously as anyone reading this sentence. For most, it’s just a way to kill time, and doing that for free on a piece of hardware they already own is a far more palatable arrangement. But maybe there is a segment of these gamers who would appreciate the scope and scale of a console game if they were to give it a try. The key is to get the game into their hands. In order to do that, the barriers between gamer and game have to be broken down. One of those barriers is the hardware itself.

There are persons who buy a console to play a solitary game or franchise. I know a lot of people who have a console simply to play every iteration of FIFA and Call of Duty. I know a few more who are willing to play these games but are not willing to shell out $400 on a console. For most hardware manufacturers, margins are poor to say the least. Game companies make most of their money on software sales. So gamers don’t want to buy dedicated hardware and most companies (except Nintendo) are not too enthused to make them. It has always been looked upon as a necessary evil. However, with increased competition for the gaming dollar, companies are looking for alternatives. Many are transitioning from being a hardware company to becoming a platform in the way steam has been for PC gaming for many years.

If rumors are to be believed, the next piece of hardware from Nintendo is a hybrid. It’s a handheld that can be docked and played on a TV. Nintendo has been struggling in the console space for quite some time. With the exception of the Wii, their decline has been consistent.
NES - 62 million
SNES – 49 million
Nintedo 64 – 33 million
Gamecube – 22 million
Wii – 101 million
WiiU – 11 million (max 15 million to be sold?)

The WiiU and the Playstation Vita have done equally terribly. Sony has indicated that a Vita 2 is highly unlikely. They currently have no further interest and have withdrawn from the dedicated handheld market in the face of competition from the mobile sector. But Nintendo are being a bit cleverer about its retreat from the console space.

Nintendo’s best results over the years have come from a handheld launched at $150 (DS) and a home console launched at $250 (Wii). The $250 3DS and $350 WiiU struggled out the gate. The pricetag of $600 is simply too great of a hurdle for most consumers to experience the entire software lineup from Nintendo. In particular, the $350 hurdle is too much for a home console with substantial software droughts, which includes many titles that lack mainstream appeal. The NX lies more on the spectrum of handheld than home console. As a result, it has to be priced accordingly. A $200-250 handheld may still work now that Sony is gone from the picture and Nintendo may be best advised to consolidate its efforts behind its dwindling but still very profitable handheld sector. The 3DS should have taught Nintendo that handheld should not cost more than $200 for mainstream success as they now have a range of hardware option ranging from the 2DS to the new 3DS. There is still no guarantee that they learned this though or they may no longer be concerned with the mainstream mobile–content users.

The current rumors indicate that the dock may have processing power to upscale the NX games. If this is all that it does, then the dock is nothing more than tokenism. It allows Nintendo to potentially be a part of the living room. It means that they “technically” do have a console in the living room. With (comparatively) modest hardware specs, it also means that they don’t have to contend with the exorbitant budgets associated with current home console games. Effectively, they would have left the (living) room but are yet to shut the door behind them. They are lowering the barrier between gamers and their software by eliminating some of the hardware.

A dockable portable is hardly a revolutionary concept. I have a surface tablet in a dock serving as my home PC. But here’s an interesting idea. What if the docking station does more than simply upscale the NX games? What if they can combine (voltron-style?) to form a more powerful console? The handheld can play games from the proprietary carts. When docked, these games can be upscaled to be played on a TV. But what if there is software that can only be played when the dock is present? What if they combine to produce a console on par with the PS4? If this is even possible, then Nintendo may have found a way to have a $200 portable and a $400 home console for the price of $400. It’s a big IF. One thing I am sure about is that they are not making a handheld on par with the current consoles. That would be suicide from a price perspective.

Beyond hardware, Nintendo have been dipping their toes into the mobile market that is currently cannibalizing the dedicated handheld space. It’s a market that is progressively being dominated by large companies like Activision who have recently acquired King. Nintendo have seen that their partners have had runaway success with Pokémon Go. Still, they maintain that their mobile presence is geared towards attracting players to their platform. That is no easy sell, but Nintendo have always been adamant about having their games on their own hardware. It offers a measure of control that any company would welcome. Not every Nintendo IP can safely make this trip to a button-less platform, but the success of Pokémon Go may add momentum to the investor push for an increased presence on the mobile platform. It is something that will be considered more carefully in the future.

Sony has already conceded the handheld market to Nintendo. Supporting two hardware platforms isn’t an easy proposition for any company. Their focus on the PS4 has paid dividends. But even Sony is prepping for the day when the hardware hurdle can no longer be ignored. The PS Now game streaming platform seeks to provide users in select regions with the option of streaming games for a monthly/yearly subscription fee. No game purchase needed. No additional hardware needed if you have a compatible TV and controller. No disc needed. No 15 gig day 1 patch needed. No game install needed. No system update needed. No broken game at launch that has to be returned or stared at until it gets patched. As you can tell, I’m not enthused with some of the current trends in console gaming.

PS now has already made its way to some television sets, and is available to those with select hardware (PS4, PS3, Vita, blu-ray players, tablets and phones). However, the service will most likely be limited to well-populated areas and to those with a better than average internet connection. The service is still well in its infancy and it will be a while before internet speeds are good enough for this to replace hardware globally. It will be an option, a way for some users to get to the games without additional hardware purchases. The key for Sony would be to partner with as many hardware manufacturers as possible (TVs, monitors, Blu-ray players) to have the service as a standard. The lack of interest in bringing PS now to the PC platform should not last. Another option would be to have a piece of hardware that cheaply facilitates streaming. For example, you can get a Vita TV easily below $50 if you try. That’s not too big of a hurdle. The only thing left would be to have a better fee structure for those who do not want to commit to $100 per year up-front.

Last but not least, even Microsoft has started to hedge its console bet by pushing its Universal Windows Applications, or UWAs. The alleged intention with UWAs is to have games run across multiple devices including PC, Xbox, tablet, or phone. Sony already has a version of this in the form of cross-buy where some games purchased on PSN can be played across multiple devices including PS4, PS3, Vita and PSP. Microsoft clearly does not like the idea of having to rely solely on diminishing hardware sales to get that gaming dollar. The move to peddle their wares on PC once more has been met with some criticism but clearly Microsoft is hedging its bets here. The message to gamers is a clever and unique one. If you buy games on their platform, you can still enjoy them in the future (on PC) even if you find yourself without a home console. Of course, this has led to many rumblings and predictions about MS leaving the home console market, but no smart company operates without some sort of exit/evolutionary strategy.

Clearly, there is a lot of uncertainty about future hardware. Nintendo have decided to release a single console that effectively puts one foot on either side of the handheld/home console fence while sticking a toe into the mobile waters. At the very least, they seem to understand that 2 pieces of hardware is too much of a hurdle to get to their much appreciated software catalog. With Sony, they are done with handhelds but see a future where some may be able to access their games with the hardware that they already own and consider indispensable (eg PS now on television sets and mobile phones). Microsoft seems to also want to allay fears about their future interest in consoles by telling gamers that all their games will be available on PC even if they retreat from hardware manufacture. A future without dedicated gaming hardware may be not be immediately feasible, but the major players in the industry seem to agree that it is indeed a possibility.