The list of offers from Japanese gaming giants Nintendo and Sony this holiday season is not very diverse, so there are fears that the season will end in failure. One company is relying on sales of the seven-year-old console, while another is appealing only to hardcore gamers with a new premium offering that critics say is overpriced, the Financial Times writes.
Image source: Nintendo
Nintendo traditionally roughly doubles its revenue in the December quarter compared with the September quarter, but this fiscal year it cut sales forecast for its legacy Switch console from 13.5 million to 12.5 million and is unlikely to see a surge in sales in the holiday quarter. In turn, the $700 Sony PlayStation 5 Pro console, released last week, received mixed reviews.
«For a number of reasons, in particular due to the PlayStation and Switch console cycles, the sector has quieted down a bit, says Bernstein analyst Robin Zhu. “The list of new game launches looks set to remain small for the rest of the year.”
The typical life cycle of a console generation is five years, but the Switch is now in its eighth year of sales and has sold 146 million units since its launch in March 2017. Since the PS5 went on sale in November 2020, more than 65 million units have been shipped, and manufacturers and game developers are now trying to figure out what the demand will be for.
It is possible that the future will be “post-hardware”, when the gaming industry moves to the cloud, games become platform independent, and the only slot machines for the mass market will be those with a built-in portable component.
Microsoft’s strategy is to sell more of its games on rival consoles, promoting its Game Pass subscription service with games that can be played on its own Xbox, PC or streamed online to other devices for a monthly fee. The PlayStation 6 or new Xbox could carve out a niche as high-margin, premium products that are not a core part of the business.
The success of the Nintendo Switch, which can be used as a handheld device with the ability to connect to a home dock, is forcing other game companies to reconsider their approach to portable gadgets, even if it takes a long time to develop a new model.
«“Nintendo is in an awkward transition period where it still needs to support its current console but hold back real blockbusters to successfully launch the next one,” said Serkan Toto, head of consulting firm Kantan Games. “Looks like she’ll have to make do with a few very quiet blocks before the next device comes out.”
The problem for console makers is that they are becoming increasingly expensive to produce, yet the overall installed base has remained stagnant for many years. “It looks like consoles have hit this very, very tight demand ceiling and they can’t get past it,” says Gareth Sutcliffe of Enders Analysis.
PlayStation 5 Pro. Image source: Sony
It is also noted that the PlayStation 5 Pro is unlikely to change sales dynamics, since Sony still plans to sell 18 million consoles this year, including Pro. The fact that experts called its price too high does not bother the company. PlayStation 5 Pro “is designed for high-end hardcore users, so we didn’t initially plan for it to contribute much to overall sales,” Sony President Hiroki Totoki said last week. “At this time, we do not see the price of the PS5 Pro as having a negative impact on our plans.”
However, experts believe this could open up opportunities for Nintendo. “From a public opinion perspective, the online outrage over PS5 Pro pricing should provide cover for Nintendo to sell the Switch 2 at $400 or even $450 without causing a backlash,” Robin Zhu said.