Game Marketing Tips, Analysis, and News

Tuesday, March 8, 2016

Nintendo's NX vs. Xbox One vs. PlayStation 4

Nintendo is currently working on its next console system, the NX. The company has announced no details as yet about the hardware, the software, the release date, or the price. Rumor has it that Nintendo has shipped NX development systems to key developers, who are already hard at work on software for the system. Given how Nintendo's sales of the Wii U and the 3DS are going now (the company just revised its forecast downward yet again for its current fiscal year), it's safe to say we should see the NX sooner rather than later.

The obvious, traditional launch plan (and Nintendo has great respect for tradition) would be to announce the NX at the E3 show this June, and ship it to stores prior to the Thanksgiving weekend -- perhaps as early as mid-October.This provides time to build up excitement and pre-orders, and maximize initial sales for the holidays.

The NX Hardware
There's a persistent rumor that the NX system will be both a home console and a handheld device, merging Nintendo's two main hardware lines into one line. This would simplify the company's production and marketing, as well as third-party development efforts. However, it leads to the core design problem facing Nintendo: Cost versus power. Nintendo could make the NX more powerful graphically than the Xbox One or PS4 with the advantage of the relentless advances in CPU and GPU power -- the NX design is at least a couple of years in advance of the Xbox One and PS4, which means CPUs and GPUs have gotten much better at the same price. Portability, though, is much harder to achieve with graphics that exceed current consoles. You quickly run into issues of power consumption and heat, not to mention increased costs for trying to put powerful chips into a portable package.

Even if the handheld rumor is not correct, Nintendo will still have to decide what the NX retail price should be -- which controls how powerful the console is. Nintendo could conceivably beat the Xbox One and PS4 in terms of graphics power, but probably not for much less than those consoles are selling for right now.So, will Nintendo try for a higher price point for the NX than the competition (roughly $349 now) or will it try to undercut the current console pricing?

Nintendo has had great success before with undercutting the competition's price (the Wii was a great example of this), but may well choose to make the NX more expensive in order to put in desired features. A hybrid home console/handheld will have to deal with screen costs and battery costs, and if the entire system is to be competitive graphically with current consoles (or better than them) that means there will actually be two parts to the system -- a portable part and a base station, where the base station has additional graphics capability (at least; it may also have more storage and connectivity options). That adds significant costs as well.

The bottom line is this: If the NX is more powerful than Xbox One/PS4 and has a portable component, it's going to be more expensive than Xbox One/PS4. Now, Nintendo has stayed away from the technological arms race for decades -- it's been content to be less powerful graphically than the competition, preferring to have a lower cost and some unique feature to set itself apart, as well as its own extremely popular IP.

The NX Software
If the past experience from Nintendo's previous hardware is any guide, don't expect too much from the system software or interface for the new NX console. All of the basic functionality will be there, of course, and there may be some added features like connecting with mobile devices.

The issue of backwards compatibility will n doubt be raised, but this is something you shouldn't expect -- at least not right away. If Nintendo changes the basic system hardware to a different platform (a distinct possibility), then compatibility will be much harder to achieve. The company's resources would be better spent on getting new games ready for the system.

The most important thing for Nintendo to get right is its first-party software. The Wii U should have shown quite clearly the danger of not having key Nintendo franchises ready at launch. The really good Wii U games didn't begin to arrive until the console had been out for almost a year, and that certainly didn't help sales. Thankfully, we have an obvious candidate for an NX launch title in the new Zelda game, which coincidentally (ahem!) is due to come out this year. Hopefully the game will launch for both the Wii U and the NX, with the NX version showing some very clear improvements that will help convince fans to buy the new hardware. A truly compelling Zelda game for the NX could motivate more than a few people to spend $400 or $500 for the new console, regardless of what else is available.

NX Marketing
We can hope that Nintendo will budget a significant amount for NX marketing. First, though, the company should make sure to name the system properly -- "Wii" was widely acknowledged as a lousy name, and Wii U compounded the error by giving many people the impression it was not a new console at all, but merely some sort of peripheral. Or, if it was a new console, Wii U didn't make it clear that it was better in any way. If Nintendo uses the word Wii in any way for the NX console's name, that would be a huge mistake.

We should expect plenty of TV advertising, because that's what Nintendo has done in the past. It would be nice to see some events (Nintendo has done well with these in the past few years), and hopefully get the new hardware and software into the hands of influencers. Maybe Nintendo can truly embrace social media for the first time, and let people stream NX experiences. Building a launch around streaming would be a clever plan, but it requires that Nintendo break free of its inherent conservatism. Let's hope they can.

The Prospects for the NX
It's one thing to point out all the positive things Nintendo could do to make the NX launch a success, but what Nintendo is likely to do is quite different. Nintendo will probably price the NX higher than it should, design it with less power and fewer features than it really should have, and have fewer software titles than it should have at launch. That's just the way the company has tended to do things in the past decade.

We may or may not see Nintendo rally good third-party support for the NX, but that's probably not the deciding factor in how successful this new platform will be. The alliance with DeNA may be more important, if it means Nintendo gets a good back end for online services and perhaps some help in creating mobile titles that connect with NX titles.

The difficult thing for Nintendo to realize is that the world is fundamentally different in many ways from the world of Nintendo's greatest success. Back then, there was no Internet to speak of; multiplayer games were something you did with all players sitting in front of the same TV. Consoles had the best animations, graphics, and sounds. Mobile gaming was only available on a Game Boy.A free-to-play game? Oh, you mean a demo?

Nintendo thrived in that world, especially with the lock-in provided by its console hardware. Selling hardware was a key part of the strategy. Now, great gaming hardware is all around -- everybody has at least one great gaming device, and usually more than one (a tablet or a PC in addition to a smartphone). Yet Nintendo is persisting in trying to sell proprietary hardware, with its low to non-existent profit margins. Meanwhile, a company like Supercell has 100 million daily active users across only four games, and pulled in over $1.5 billion last year with about 100 employees.

Yes, Nintendo has created many iconic characters and memorable game franchises. But how long has it been since Nintendo created the last such character or franchise? A decade? Two decades? When its greatest hits of the last few years have been the third or fourth or 8th or 10th version of a franchise, you have to wonder how creative the company still is. Splatoon is great, and fresh, but it's not a new Zelda title.

So I'm skeptical that the Nintendo NX will change the overall course for Nintendo. At best, it will help keep the company going forward, as it overall share of the market dwindles with the continuing strong growth of the rest of the industry. Nintendo was once directly or indirectly responsible for about 90% of the game industry revenue, some 25 or so years ago. Now it's under 5%, and that percentage will continue to fall. Let's enjoy it while we can, and celebrate when the company can come out with another great game, for as long as that continues to happen. Unless major changes in direction happen, that won't be forever.

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