E3's Slow Shrinkage Continues

Yep, that pretty much describes E3

As someone who attended the earliest Electronic Entertainment Expos (the E3 show) and continued to attend over many years, the slow shrinkage of the show has been apparent for years. The E3 show has been shrinking in many ways -- relevance, floor space, attendees, and importance. This last year saw two of E3's major exhibitors, Activision and Electronic Arts, abandon the show floor altogether. EA instead opted to produce EA Play, a show aimed at fans (not the professionals who attend E3) that took place at Club Nokia, the small expo facility located next to the LA Convention Center where E3 is held. This year, EA just announced that EA Play will again be held, but this time it's in Hollywood at the Palladium Theater, some seven miles away.

There's really not much reason to attend E3 any more. Most of the major events are livestreamed, and there will be extensive coverage on the show floor via Twitch and other streamers. The games being shown are often difficult to get in to see -- sometimes the lines can take hours to get through. Even with a press pass, some games are difficult to get hands-on time with. If you have face-to-face meetings with executives, that could be worthwhile -- but that time is hard to book, and the noisy environment often makes it difficult to conduct interviews.

Originally the intent of E3 was to show off the upcoming holiday product lines to retail buyers in order to book sales for the next several months. That was hugely important, because the holiday months represented the bulk of game sales and profits. Now, of course, things are much different. Retail sales account for less than half of console game revenue. Console games are no longer the largest segment of revenue in games -- that's been taken over by mobile games. Heck, even PC games are getting close to topping console game revenues, and PC games aren't even sold in stores any more.

The E3 show once occupied the entire LA Convention Center, including the downstairs Kentia Hall. That enormous space is no longer used. The two main exhibit spaces are no longer jampacked with booths -- in fact, there's plenty of open spaces, with large areas devoted to lounges (chairs and tables), non-profit exhibits (of old games), or just bare concrete with some tables for the thinly used food concessions selling highly overpriced convention food. (Nowadays, anyone who can visits the food trucks parked across the street, which offer a variety of tasty cuisine at prices lower than the convention center's tired menus.)

The fact that big companies like Activision see no point in spending millions to put on a big E3 show should tell you just how important the show is these days. You should expect even more defections from the show this year, until at some point the whole thing shrinks into a smaller space or a very different event.

The reality is that publishers like EA and others realize it's far more important to connect directly with consumers than to connect with retailers or journalists. Besides, in an increasingly more platform-agnostic market, brands are more important than promoting a specific hardware platform. You'll see that Sony and Microsoft will still have plenty of reasons to show hardware, of course -- that's still a strong seller at retail.

As for me, I plan once again to take in E3 remotely and avoid the traffic and the crowds. It will be interesting to see what Sony, Microsoft, and Nintendo will show off, but going hands-on can wait for a less frenetic venue.

Nintendo Switch: Off or On?

Nintendo's Switch is little more than a month away from launch, and the early reviews are decidedly mixed. Some of the games look great, but the high costs and limited support don't look so good. My assessment is that Nintendo's Switch is headed for a Wii U-scale disaster if it keeps to its current course -- but it's possible Nintendo could turn things around with the right moves. They've done it before with the 3DS, which if not a success on the scale of the DS at least can be counted as reasonably successful.

Let's look at the pros and cons of the Nintendo Switch, as we know them so far.

Nintendo Switch Pros

• Good-looking, reasonable size screen (720p, 6.2")
• Zelda: Breath of the Wild is a strong launch title
• Flexible play options (home, handheld, tabletop)
• (Probably) Easier to develop for than previous Nintendo systems (because it's likely based on Android)
• Good variety of input options for developers (detachable controllers with motion and gyroscopic sensors, IR vision, multi-touch screen, lots of input buttons, two analog sticks)
• Some future software looks exciting (Mario Kart 8, Splatoon 2, Super Mario Odyssey)

Nintendo Switch Cons

• High price ($299 with no game included)
• Limited system memory (only 32 GB before OS takes out a chunk)
• Games will mostly be cartridges (otherwise you have to buy MicroSD card storage, which is not cheap)
• Limited launch software (5 titles, only one major one, two ports, two very weak games)
• Limited 2017 lineup (Only 23 titles for this year, most are ports of older software, only 3 or 4 look great)
• There will be no Switch versions of the latest games from top third-party publishers (the system is too different, and not powerful enough to handle Xbox One/PS4 games)
• High software prices ($60 for top games, $50 for a throw-away like 1-2 Switch)
• Limited 3rd-party support (All titles from major publishers are simple ports of old titles)
• Joy-Cons are very tiny and buttons are difficult to reach even for average-size hands
• High prices for accessories ($79.99 for a pair of Joy-Con tiny controllers; $70 for Pro controller; $90 for a dock; $49.99 for a single Joy-Con)
• Online service will cost starting in the fall; some features through a smartphone; one free game a month, which is either an NES or SNES game that you can only play for one month)
• Not competitive with other home consoles in power, price, or software
• Not competitive with smartphones or tablets in power, price, or software
• Little pre-marketing (there's been no long campaign to drive awareness or purchase intent)
• Confused marketing (videos so far targeted at Millennials, but kids are entirely left out -- though the colorful games are classic Nintendo that should appeal most strongly to kids)

When you look at the list and think about what those pros and cons mean, you get the idea that Nintendo fans will buy a Switch right away, but after those folks (a few million, perhaps) buy a Switch, it will be tough to convince other to do so when they look at other options.

Essentially, the Switch is a fairly expensive handheld console that can display games on a TV, though its horsepower is nowhere near comparable to Xbox One or PS4 (let alone PS4 Pro or Scorpio). The console is up-gunned when it slots into the dock, but that just means more work for developers who essentially have to create and test two versions of every title (see tech analysis here). The whole thing is shaping up to be a debacle a lot like the Xbox One launch or the Wii U launch.

If Nintendo keeps going the way it is, I think the Switch will look a lot like the Wii U or the 3DS initially. As always, when Nintendo announces a new console there's plenty of enthusiasm among the hardcore (and journalists, who are mostly Nintendo fans). The first month in sales will look great, as it always does. Then the product will meet reality, and sales will plummet a month or three after launch.

It's at this point that Nintendo could decide to make some changes, the way it did with the 3DS. If you'll recall, the 3DS did well for a while, but then it became obvious the device wasn't selling. Nintendo dropped the price an unprecedented amount (from $250 to $180), which rescued the 3DS (along with marketing shifts that de-emphasized the 3D display, which almost everyone turned off).

What could Nintendo do to rescue the Switch? One suggestion has been to release a version without the home-console items -- the dock, the grip, the straps. That could drop the price to $199 for the purely mobile version. Pack in the 1-2 Switch game instead of trying to get $50 for it. I would also get Niantic to create a version of Pokemon GO for the Switch, and include that as well. Focus the marketing around the mobile and tabletop play. Then you'd have a much better value proposition.

Of course, that would likely mean either dropping the 3DS line entirely, or reducing the price on that substantially so it would no longer be in direct competition. A 3DS XL should be $149, or perhaps $129, to really look good against the Switch. That could also help substantially boost 3DS software sales, which would be a nice profit boost.

Will Nintendo actually make such a gutsy move? They have done it before with the 3DS (well, the price cut part, at least). I doubt they will, though. The company is to wedded to the idea of selling hardware. So if Nintendo does make a move to rescue the Switch, it will likely be too little, too late. The Switch will limp along, selling a few million units a year. Then Nintendo has to hope it will finally figure out how to price mobile games and make some money from that. The fact that Niantic made $950 million in six months, with a very fat profit margin (likely in the 50% range even after licensing fees) doesn't seem to have gotten through to Nintendo.

Seriously, Nintendo's got iconic brands and characters that can be worth billions, if they put them on widely accessible hardware. Which Nintendo's proprietary hardware will never again be, not in today's world. Someday, Nintendo will figure out they should primarily be a software company, but they'll have to lose billions before they even have a chance of grasping that, it seems.

Nintendo's Switch: Will it Succeed or Fail?

Nintendo revealed more details about the Switch recently, and it's an interesting risk for Nintendo. The launch of a new console these days is anything but a guarantee of success (just look at the Wii U, the worst-selling console in Nintendo's history). There are some strong points to the Switch, but there are far more weaknesses or question marks. Will the Switch succeed for Nintendo, or become another failure like the Wii U? Let's look at the situation.

First, the hardware. It's $299 to get the console, the dock (for connecting to your TV), two controllers (called "Joy-Cons", tiny controllers with an analog joystick and four buttons the size of the original NES controller that slide onto the sides of the console, or can be used separately, or used by two people, or slotted into a Grip to make it like an Xbox or PlayStation controller), two straps for the controllers, a charger (using USB-C), and an HDMI cable. There is no game included.

Basically, the Switch is a 6.2 inch tablet with a 1280x720 (720p) multi-touch screen, running off an Nvidia Tegra chip (which means it's probably a modified version of Android OS underneath Nintendo's interface), where you can attach small controllers to the sides. You can also dock it and connect it to a TV, where it boosts the resolution to 1080p (though Zelda: Breath of the Wind runs at 900p). Or you can set in on a table, propped up with its built-in kickstand, and share the controllers to play a multiplayer game. As a handheld device, the battery life is about 2.5 hours to 6 hours depending on the game (the joycons last for about 20 hours); with Zelda, you get about 3 hours of play.

Software: There are only two launch titles from Nintendo: Zelda: Breath of the Wind (a Zelda open-world game) and 1-2 Switch, a very simple set of minigames using the joycons (like milking a cow or a quickdraw game, for instance). Other launch titles are Just Dance from Ubisoft (of course) and a Skylanders game from Activision. Some 80+ titles are in development according to Nintendo, but major ones like Splatoon 2 won't hit until summer, and Super Mario Odyssey won't be out until the holidays (a grand Mario game in the tradition of Super Mario Sunshine and Super Mario 64, from the brief video that was shown). Most software will be $60, though some like 1-2 Switch may be only $50.

One other important note: Nintendo will have an online service that you will need to use in order to play games with other people online. It will be free until the fall (as a trial run), when it will become a paid service (no price point announced). The service will give you access to some old Nintendo games every month, but you will only be able to play them for that month – then they go away. Unless, presumably, you want to buy them (just like you've repurchased other Nintendo games over time).

Interestingly, Nintendo's videos are centered on adults in their 20s and 30s... and some that look even older. Kids are almost nowhere to be found. (Probably because the kids were all too busy playing Minecraft or iPhone games.)

Here's what Nintendo hasn't talked about: Graphics power. No doubt because the Switch is probably somewhat less powerful than an Xbox One or a PS4, probably more like an Xbox 360 or a PS3. Certainly it doesn't compare to the latest iPhones or Android devices in terms of screen resolutions or graphics power, either. So Nintendo is wisely choosing to avoid talking about all that.

The graphics power does matter, though, when it comes to getting third-party publishers to create games for the device. The third-party lineup Nintendo announced was really quite lame – ports of old games like Skyrim or FIFA or Skylanders, or bringing back old icons like Sonic or Bomberman. What you will not see on the Switch are the big AAA titles that are the latest from the top publishers – because that would require a whole lot of work and expense for an unknown payback. No Battlefield or Call of Duty or Grand Theft Auto or Assassin's Creed, or any of the upcoming games from top publishers. Maybe someday, if the Switch were to sell 100 million units, but even then those top titles would arrive on the Switch a year after launch on other consoles, simply because of the massive effort required to port them.

So in the end, as a Switch buyer you will be left with Nintendo's titles and a number of second-string titles, mostly from small Japanese publishers. And it already seems clear that Nintendo will not be able to push out its very best titles very quickly – probably one a quarter if we're lucky. And unlike previous Nintendo handheld consoles, games will not be cheap. $60 this time, noth the $40 from the 3DS days.

Can the Switch succeed? Maybe, but it seems unlikely. Sure, Nintendo will sell several million in the first month or two (if they can make that many) to all of the diehard Nintendo fans out there. Beyond those people, it's going to be an uphill fight to sell this console. If you look at the Switch as primarily a home console, it will be more expensive than its competition (Xbox One S and PS4 Slim can be found for $250, with a game or two included) and far less powerful... and with a far smaller library of software, not just now but forever.

If you consider the Switch as a portable gaming device, it's not a very good deal compared to your smartphone or tablet. Poor battery life and screen, nice controllers, middling graphics power, and insanely expensive games compared to what you can find on tablets or smartphones. As a tabletop gaming device... it may get used that way occasionally, but likely no one will buy a Switch with the primary intent of playing it on a table.

While the Switch may beat the Wii U in sales, I don't think it will be an enormous success – nowhere near the 100 million units of the Wii. In the end, I don't think people want to carry around another portable device, especially one that cannot fit in your pocket. Everyone will always take their phone along, but the Switch will be a distant second choice. The $299 price point is going to be a difficult sell against the Xbox One S and PlayStation 4, especially once you start to look at the software libraries and other entertainment features.

The Switch will be a second console purchase for some, particularly Nintendo fans who will line up to buy it. After the first 5 million units are sold, it's going to be tough for Nintendo. Could the Switch succeed? Yes, especially if you define success as "selling 20 million units in two or three years." Beyond that, the Switch will have a difficult time, and it's not going to be the kind of profit engine Nintendo really needs to return to its gloriously profitable days of the Wii.