3DSSwitchWiiU

The Great 3D-Switch Up

by James Jones - November 17, 2016, 11:51 am PST
Total comments: 3

Is the Switch destined to replace 3DS? It's not that simple.

During Radio Free Nintendo's Switch reaction show (Episode 496: Mighty Switch Facts) [1], we read a listener question asking if Switch was the end of Portable Gaming (for the purposes of this article, “Portable” will mean games for dedicated devices, “Mobile” will mean phones and tablets). Sony’s Vita is largely forgotten by its corporate parent, and Nintendo's recent drive to unify resources seems to indicate that Switch is a replacement for more than just the unsuccessful Wii U.

It’s been inferred that this was the case based on comments from the late former Nintendo president, Satoru Iwata. Calling NX a “New concept, [2]” Mr. Iwata laid out a vision of the dedicated gaming space decidedly more rosy than that of many analysts. It’s important to note that Mr. Iwata had not stated it was Nintendo’s mission to create a single piece of hardware, but rather to ensure architecture was consistent across their platforms to relieve the pressure of creating software across multiple devices. In the QA session, following the announcement of the DeNA partnership and the NX, he mused that a future Nintendo might increase the number of form factors they support. “Currently, we can only provide two form factors because if we had three or four different architectures, we would face serious shortages of software on every platform...we are hoping to change and correct the situation in which we develop games for different platforms individually and sometimes disappoint consumers with game shortages as we attempt to move from one platform to another. [3]”

Combat in Ever Oasis

In both word and deed, Nintendo is pledging some continuation of 3DS support. Ignoring the fact Switch is being labeled a console-first experience; they have already announced: an enhanced version of Animal Crossing [4], a port of two Wii U tentpoles (Super Mario Maker [5] and Yoshi's Woolly World [6]), a new franchise in Ever Oasis [7], and staged a Nintendo Direct for mysterious 3DS "title," Miitopia[41]. In fact, while writing this article Capcom announced Monster Hunter XX [8] for 3DS. All of this is consistent with rumors that Nintendo sees at least another year of life in the now-aging 3DS platform [9].

And all this is without mentioning Pokémon Sun and Moon, due out this year. It would be considered a major disappointment if they sold under 10 million units. Nintendo’s quarterly briefing in late October detailed the boost Pokémon Go has had on the Pokémon brand and the strong preorder numbers for Sun and Moon [10].

Mimikyu, a new Pokémon in Sun and Moon

As it stands, 3DS is still a viable platform in Japan. Undoubtedly down from the heady days of 2012 and 2013, it still regularly sells about 20k+ units a week in the country, and has a host of games in the weekly top 20 - most of them from third-parties. The situation is not as strong in the West. However, the long-held perception that Japan seems to move the needle for Nintendo is based on historical evidence. There is, at least at present, still money to be made on their handheld.

That isn’t to say it’s all rosy; Nintendo revised their worldwide 3DS sales estimates down by a million units earlier this year [11]. Clearly, time is running out for the platform, but numbers make the case that the bottom isn’t quite here yet. A surge in hardware sales was noted from both the release of 2DS in Japan and of Pokémon Go [12].

Pokémon Go...make some money

With that in mind, it would be deeply unwise, and perhaps even corporate malpractice, to abandon the healthier platform the exact moment Switch comes out - a fate the Wii U’s software release schedule seems to indicate they have planned for the failed console. Even if Switch is a roaring success, decimating Nintendo’s wildest fantasies, there is one incontrovertible fact: there are presently exactly zero Switches in homes versus nearly 60 million 3DS units [13]. It is a much easier decision to step away from Wii U, with less than one-quarter the number of systems in the marketplace (~13 million) [13].

Allow me a moment of pure conjecture.

With the hard numbers and Mr. Iwata’s own words in mind, why is Nintendo pushing Switch as a home-first experience and not the hybrid all commentators have always assumed it would be?

Is Splatoon eSports?

Undoubtedly, some of it stems from not wanting to further erode the success of 3DS - especially in the pre-holiday season. Positioning Switch as a replacement for Wii U, a system unlikely to see major sales this holiday season anyway, is a smart tactical move. Indeed, announcing Switch now could be seen as signaling - to Japan at the very least - that there remain other options coming to the marketplace. So-called “current-gen” systems are still struggling in Japan, and Nintendo likely feels they’ve hit on a formulation that will appeal to their home market. Splatoon being the only segment in their trailer explicitly featuring Japanese people wasn’t an accident. In Japan, Splatoon has a 50% attach rate [14], an unthinkable number for a competitive shooter.

Even still, it’s easy to assume that the move to replace 3DS with Switch is just being delayed out of market concerns. However, there are real challenges to offset the tangible rewards of a unified Nintendo: Portable gaming devices are clearly being hurt by Mobile, games for Switch seem likely to be more expensive to make than 3DS, Switch’s form-factor seems rather large for a portable, the price is likely higher than a portable, and battery life would be challenging for such a device.

For proof that Mobile has eroded the Portable gaming space, you really only need to look back at that 60 million 3DS units sold [13]. Even without the healthy competition once offered by Sony’s PSP, the 3DS pales in comparison to the DS - with a whopping 154 million units sold [13]. In fact, the 3DS has sold significantly below Sony’s PSP (~80 million) [15]. Deloitte, a consulting and financial advisory firm, projected Mobile gaming in 2016 would generate $35 billion in revenue, up 20% from last year. [40] This outstrips their estimated $28 billion in revenue for console (defined as Home and Portable) gaming. People haven’t stopped spending money on games, they’re just doing it on devices they already own.

Miitomo: redefining mobile games

Nintendo, despite years of intransigence and declarations that Mobile gaming was “devaluing” games, has entered the Mobile market in a far more aggressive way than long-time watchers could have ever anticipated. In the last 18 months they’ve: invested in a major Mobile games maker, sold their own stock to the same company [16], released a moderately successful Mobile game [17], announced four more (two of them in successful Portable-leaning franchises Fire Emblem and Animal Crossing) [18], announced a Mario game exclusively for Mobile - with iPhone timed-exclusivity, allowed company icon Shigeru Miyamoto to appear at an Apple conference [19], and were involved in a brief Pokémon boom spurred by a Pikachu-based re-skin of Mobile app Ingress [12].

It is tempting to argue that the console-first hybrid with some Portable tendencies, in conjunction with their new Mobile efforts, removes the need for them to have any dedicated Portable gaming hardware. While this might be true for their own products, it would present a challenge for the pure profit that comes from third-party publishers paying to appear on their platforms. As mentioned above, Japanese third-parties are finding success on 3DS, and Nintendo gets a cut of that success. Abandoning them to the arms of Google and Apple effectively surrenders the licensing fees they’ve built their business model around. It’s easy enough to assume some of that would be made back if they improved their relationship with Western third-parties, but there’s nothing that precludes aiming for both. To maintain those games in their ecosystem, Nintendo would need to find a home for them on Switch.

Bravely Second added new features, like sweatshops

Let’s look at Square Enix’s best-selling new franchise on 3DS - Bravely Default. To borrow a phrase from Jon Lindemann, while it is a “well-crafted game...made by professionals,” it obviously was not the product of Final Fantasy XV-level financial outlays. Anyone who played the second half knows where they skimped on the budget. On 3DS, it would be unthinkable to spend Final Fantasy-levels of money, and there’s no meaningful reason to do so. On Switch, an HD platform of indeterminate but at least Wii U power, there’s cause to throw around large sums of cash.

Trying to determine the relative cost of making a Portable versus a Home game is impossible without access to production costs that publishers do not release. We can draw some inference by looking at two comparable titles and seeing how many people were involved in making the game. I can’t think of two more comparable titles than Super Mario 3D World (Wii U) and Super Mario 3D Land (3DS). Unfortunately, we can’t do an apples-to-apples comparison, as 3D World lists all the primary staff under one heading, whereas 3D Land breaks them up by position. However, not looking at localization and “Special Thanks:” 3D World lists 97 staffers [20], 3D Land has 65 (~67%) [21]. Beyond just the cost of employing another 30 developers, the staff that was engaged making 3D World would be unable to work on other projects.

Returning to our example of Bravely Default, if Square Enix wanted to continue to make budget-constrained games like it, would they sell on a platform capable of console-level experiences? It’s not exactly clear; the closest parallels we have are smaller indie projects on PC and consoles. Those games come with smaller price tags than their more involved peers. Would publishers, used to charging ~$40 US for an RPG on 3DS, feel capable of doing the same on a Switch with $60 console-experiences? Would the market support them?

The Lady Layton: please forget about Layton 7

One perk is Switch supports many modern game tools, such as Unity and Unreal Engine 4 [22]. This should make it easier to port to than 3DS or Wii U. In theory, that would make it also easy to port from. This has been a lifeline for the Vita, which continues to get versions of games released alongside PS4 versions. Square Enix could defray the risk of making smaller games by releasing them on all platforms, even if they’re “tuned” for Portable experiences. Clearly, Nintendo has no issue releasing Portable games on their Home systems; the Wii U Virtual Console is currently the exclusive home of GBA and DS games [23]. There’s no reason to think other publishers could not be similarly inclined. Active supporters of 3DS, like Capcom, Square Enix, Level-5, have also been active in porting those games to Mobile (Ghost Trick [24], Ace Attorney [25], The World Ends With You [26], Yo-Kai Watch [27]) or co-developing them for Portable and Mobile (Snack World, The Lady Layton) [28]. Unlike 3DS and DS games, which were isolated by the unique form-factor, Switch could actually be a boon for Portable-style games, precisely because they could go elsewhere - even if they are worse for the transition.

Nintendo, as the platform holder, has a vested interest in making sure all games are welcome and viable on Switch. They can take some steps to make them workable on the platform. Nintendo can ensure that licensing terms are attractive to publishers and flexible for games at different price points. As a publisher themselves, Nintendo can create games that fit into multiple ranges, and help everyone, from publishers to consumers, establish the market position for games of all sizes. Making Switch a safe home for games of all sizes will allow publishers to make larger, riskier, games while also still making smaller, safer titles that are still larger than the much smaller “indie” games.

The most obvious challenges in viewing Switch as a pure 3DS replacement are largely tied up in what Switch is. It’s fairly large, we can presume it’s reasonably expensive, and rumors are - at least for the development kits - that battery life will be a challenge [29]. When thinking of a Portable game platform, designed to appeal in a world where everyone has a Mobile device capable of playing games, I personally find it difficult to think of a device that will appeal to a broad audience. Nintendo knows their audience and presumably has a good feel for how often people take 3DS on the go. Even so, the Switch hardly seems tuned for travel. Beyond the size, the detachable Joy-Cons seem destined to get lost.

A set of Joy-Con controllers, not yet lost

Again, Nintendo themselves are calling this a Home-first experience. It's worth at least considering taking then at their word. Nothing about Switch seems too large to throw in a bag, much like one would a tablet. That said, it's unarguably less travel-ready than the largest of 3DS models. Perhaps concerns like size and battery life are being treated as secondary - as you would expect with the Home-first device.

I'm the end, size alone may not matter. Beyond the ubiquity of large phones and tablets, Nintendo of America explicitly refused release the new 3DS [30], opting only sell the XL model (a position it has only revisited in the context of a game bundle). In Japan and Europe, where the non-XL is available, the larger model greatly outsells the smaller model [31]. Perhaps people are just more comfortably bringing larger device with them, even if it requires a bag.

But let’s be clear, this is no 3DS XL. Eurogamer just recently confirmed that that Switch features a 6.2” screen [32]. Using that information, and a picture of Switch, I was able to extrapolate the remaining dimensions. The 4” height of the console isn’t dramatically larger than the 3.5” height of a closed 3DS XL. The 9.4” width of the Switch is the big difference - dwarfing the 6” 3DS XL. While we don’t have any reliable information on weight, we can assume it will out-weigh any 3DS model. Showing the system being used with a kickstand is a small mercy for our arms.

This is a big system

Batteries are going to be a challenge regardless. The hardware is doing quite a lot. Reports that the developer devices hold three hours of charge [29] are not heartening for people who want to replace the 3DS with Switch. While the 3DS averages around seven hours of life [33], it is important to note that games will impact this number differently. Intensive games, such as Resident Evil: Revelations, will drain the battery considerably faster than simpler offerings, such as Picross 3D: Round 2. Likewise, a development kit may not be representative of final hardware - so while the three hour number might be troubling, it shouldn’t be taken as the final word on Switch battery life. And even if it were, individual games will perform differently.

President Kimishima

Much like battery life, Switch is destined to be more expensive than 3DS. Even knowing only a limited amount about the device, it is a “Home console-first” experience. The hardware of Switch is newer than that in Wii U or 3DS, and the screen is more sophisticated. 3DS struggled early in its lifespan, requiring an emergency 32% price drop less than a year after 3DS launched [34]. Coming off two rocky starts, Nintendo needs to show vibrancy to attract publishers. Nintendo President Tatsumi Kimishima made clear that Nintendo does not intend to sell Switch at a loss, while remaining sensitive to consumer price expectations [35]. It remains to be seen exactly what that means, but price will invariably drop over time.

The fact is, many of the challenges Switch faces as a 3DS replacement can be overcome with time. The integrated circuitry of computer systems become smaller, more efficient to produce, more efficient to power, and more densely populated (and therefore more capable) through a process called die shrink - which is literally the condensing and shrinking chip structures. The trend of rapid progress on this front is called “Moore’s law.” Without getting into the technical specifics, Moore’s law states that chips will become twice as dense every two years [36]. This process has slowed recently, with Intel’s Brian Krzanich setting the target at two and a half years instead.

Nvidia - Nintendo's technology partner for Switch

Let’s talk about the relevancy for Nintendo and the Switch. Nvidia, Nintendo’s hardware partner on Switch, is a semiconductor company with the technical experience to pursue the die shrink process for Switch’s custom chipset [37]. They also have a vested interest in making it cheaper to provide Nintendo the “guts” of Switch - decreasing their own expenses to increase their profit. It’s reasonable to assume some of these cost savings will be shared with their customer, Nintendo, to allow for Nintendo to save on building the Switch and lowering the price for consumers. In theory, a smaller chipset would be cheaper and less power-hungry. Even if Nintendo has no designs on a smaller Switch, this will be important for driving down the price of the known Switch model, over the system’s lifespan.

Put this smaller chipset in a smaller chassis, along with a smaller (and more efficient) screen, and now most of the physical barriers for a 3DS-replacing Switch are gone. The smaller, cheaper, more efficient Switch may not sport removable controllers (for portability), but there’s no reason that it couldn’t still connect to the TV dock. A smaller Switch could still use wireless accessories like the Pro Controller and the Joy-Cons. Rather than viewing this smaller device as a 3DS replacement, and the current Switch as a Wii U replacement, a Switch and a “Switch Micro” are just different form-factors of the same system. And, importantly, they share all the same functionality and all the same games. This isn’t a new platform launch, it’s a hardware revision. It’s the 3DS and the 3DS XL. Consumers who want a more portable system can opt for the smaller revision, and some might even double-dip.

DS Lite introduced many small improvements

As alluded to earlier, current rumors are that Nintendo plans to support 3DS through 2018. With a year and a half between Switch’s launch and end of life of 3DS, that would give Nintendo and their partners time to meet the initial demand for Switch, improve components, and start working on a smaller model. Conveniently, it was about one and a half years between the launch of 3DS and 3DS XL [38]. In fact, the time between 3DS XL and 2DS was also just over a year, and the time between DS and DS Lite was almost exactly a year and a half [39]. DSi and new 3DS took longer, but both of those systems offered new functionality and components their predecessors did not. And the theoretical “Micro” would present Nintendo new sales opportunities, without adding a thing. Nintendo doesn’t even need to decide if they want to pursue this plan of action until they see how Switch does in the market; the process of making their chipsets smaller and more efficient will happen even if they never produce a 3DS replacement - it’s in Nvidia’s interest to do that work regardless.

So, with all of the challenges laid out, what do I think Nintendo will do with Switch and 3DS? Their own commentary has already shown a healthy dose of pragmatism. 3DS is still selling, and there’s no need to rock the boat when they don’t have to. They have a path to leveraging Switch as a 3DS replacement, without pivoting from their current Switch plans. For once, they have the luxury of taking a wait and see approach with their Portable division - possibly for the first time since Sony announced the PSP. If it struggles, then they’re in trouble, because they won't have a lot of time to find a new route for Portable gaming. If it’s early 2018, Switch is a luke-warm success, and Nintendo is announcing 3DS and Mobile games, then we’ll know they’re looking for a new plan. Conversely, if Switch comes out and seems a success and we start seeing Portable-style Switch games from Nintendo in late 2017, I think it’s reasonable to assume the portable Switch will follow soon behind.

Images

Talkback

EnnerNovember 18, 2016

Great work.


I have nothing else to say other than I'll be rereading this to better juggle my own thoughts on the Nintendo Switch and a possible Switch Micro.

ThePermNovember 19, 2016

What if Nintendo exchanged a small percentage of licensing profit to get better hardware. Nintendo quite famously ditched Sony when it wanted the Lion's Share of Licensing. However, if Nintendo exchanged some of that, then nvidia gets a cut on all third party games sold. That means nvidia can exchange extra hardware profit for software profit.

Also, if nvidia runs their own exclusive android app store they can make a buck too. That way games end up on Switch that wouldn't normally end up on switch. That could also be how Nintendo prevents emulators from ending up on the switch store. If nvidia runs their own store(like they do with Shield) then they can control the content. I'd imagine most apps would make it through except emulators, or games available on Nintendo's online store.

TheFleeceNovember 19, 2016

This is an excellent read with a lot of reasonable explanations with proper citations which I appreciate. I'm going to be rereading this over time to unpack my thoughts about this over time.


I initially wrote that email as a knee jerk reaction to seeing the Switch video and running with possibilities. I wasn't considering battery life among many other things when I wrote it. I think right when RFN was going over it I immediately thought up some kind of mock up of a portable Switch. I think Johnny called it a Switch Micro and I can sort of see it conceptually, but I'm not an engineer so I can't explain how it would work.


In time when Nintendo reveals more details we will be able to see more of what the Switch will have to offer and I think hopefully by then we can have a better objective view about the system.



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