Handheld Gaming Devices Trend Again on Tech, Mobile Push

Compared to the last few years, 2021 saw much more activity in terms of handheld announcements on new devices, new technical standards and new sales records. Seven years ago, the popular Sony PSP (PlayStation Portable) was discontinued after selling over 73 million units in 10 years. Nintendo too discontinued numerous handhelds over the years. But why are handhelds again gaining popularity in these times of connected home consoles and PC gaming? It is the technological advancements and increased interest in mobile gaming that have brought handheld gaming back into focus since the last year. The ability to save hundreds of dollars by opting for a handheld device to play a new game with new graphics standards has also appealed to the new-age gamers.

Fall and re-emergence of handhelds

The Nintendo Switch was the most sold console globally in 2021 with around 25 million units. The crossover console also released a new edition of the Switch family with the Switch OLED, which features a bigger and brighter screen, a sturdier dock with a LAN port for high-speed gaming, and larger storage. These technological boosters and quick upgrades are the reasons why the Switch model is doing so well and exactly why the PSP had a rather large falling-off in the gaming market.

The PSP had to compete with advanced mobile gaming, but the graphics and tech upgrades to it could not hold up. But Sony’s latest graphics capabilities combined with the Switch’s popularity could put it back in the realm of possibility. Another new feature that will be required for the comeback device to succeed is the ability to withstand cloud and digital download gaming, as many game developers are now moving to streaming platforms. In the absence of these enhancements, the home console and PC gaming will continue to triumph in the overall user experience.

Outlook for handhelds

Even as new technological standards are being set for handhelds, the next step will be to make the wider scope of gaming accessible in this format, including PC gaming. This segment has already been penetrated by the world of mobile gaming through smartphones. OEMs are pushing up and advertising refresh rates and display resolutions aggressively to appeal to this rising market. Brands like Asus and Lenovo have been topping the market for the phones targeted at the gaming segment.

Although smartphones are a good all-in-one option for gaming, there are still technological and ergonomic restrictions that cannot be removed in the mobile phone format. On the other hand, developments in handheld PC gaming devices have been on the rise, the most anticipated device being the Valve Steam Deck. The success of the handheld PC device will be to make the user experience close enough to a full PC set-up, which will make gamers realize that saving money on the handheld device is worth the inevitable downgrades in gaming. Nintendo has been able to balance this need for quality gaming in a handheld, but it is still not enough for more dedicated gamers who often do complex gaming. In order to be a successful addition to the gaming market, the Valve Steam Deck and successors will need to appease a more niche market that requires higher demands from the hardware and software for optimal gaming.

Valve Steam Deck and Switch OLED Chart

Nintendo Switch OLED Model: Will it be the ‘Switch Pro’ Fans Were Looking For?

On July 6, Nintendo released the announcement trailer for its new addition to the Switch line-up, the Switch OLED model. The console comes four years after the original Nintendo Switch and two years after the release of the Nintendo Switch Lite. The new model is expected to be available on October 8, 2021, at the retail price of $349.99.

The model’s features highlighted in the trailer include a new OLED 7” screen with vivid colors along with an updated speaker to improve the user experience when engaging directly with the handheld device independently from the TV display. A new spec that will improve the TV mode of the device is the LAN port on the dock that will create greater ease for gamers in online play. A new kickstand has also been included to allow the stand to be adjustable at wider angles. These features add $50 to the retail price when compared to the $299.99 Nintendo Switch released in 2017. The refreshed colors for the new device are white, as seen in the trailer, and gold, as seen on the Nintendo website. Both colors appear on the joy-con controllers as well as on the dock to match.

Nintendo has done a great job in creating the anticipation and excitement around this new device. But our initial thoughts on this new addition to the Switch family are mixed. The speculations that have been going around for months about the “Switch Pro” may have had people’s expectations set too high for this new model. The joy-con controllers from the original Switch can be used on the new model, causing fans to be disappointed with no new plans to improve on the problem of “drifting”, or when the motion sensors on the controllers begin to veer off center. That is not to say there is no possibility for updates in this model’s joy-cons or future accessories.

It is not abnormal for Nintendo to release a larger model with other smaller upgrades for its devices. Back in 2013, Nintendo had released the Nintendo 3DS XL, essentially a larger version of the 2011 Nintendo 3DS. Four years after the release of the original Nintendo Switch is a good timespan for people looking for an upgrade or wanting to improve the handheld experience of their Switch.

This year’s Electronic Entertainment Expo (E3) also shed light on some exciting new games that will be released in the next couple of years, the most notable being the second trailer to the sequel of hugely popular ‘Zelda: Breath of the Wild’ game, which remains in the top five best-selling games list, four years after its initial release along with the original Switch. Other games like ‘Mario Odyssey’ and ‘Animal Crossing: New Horizons’ are still incredibly popular long after their initial release dates.

The love for the original device and the games that came along with it will surely reignite the excitement once again for a new edition of this device and the new games that will be launched alongside, which hopefully will be announced in the coming months. Nintendo sold over 17.79 million units in its launch year. Four years later, a lot of those users may be looking for an upgrade, as well as the continuously growing fan base. The Nintendo Switch has now sold over 84 million units globally, including the Switch Lite introduced in 2019. With the booming success of this device since its introduction, the Nintendo Switch OLED model may not reach the heights of the original device but will certainly add to the success story of this hybrid device.

Microsoft Bets Big on Cloud Gaming

The recently-concluded edition of the annual Electronics Entertainment Expo (E3), where the video game industry gets together and showcases the latest and greatest upcoming game titles, had many key announcements. Microsoft’s Xbox Cloud Gaming announcements demonstrated its ambitions to build out its cloud gaming offerings and services. Another console giant, Nintendo, announced two new cloud-based games for the Nintendo Switch. Nvidia’s GeForce Now, Google’s Stadia and Amazon’s Luna announced more additions to their libraries. However, all these announcements were dwarfed by Microsoft’s lofty goals for cloud gaming.

Current cloud gaming efforts

There are already multiple cloud gaming experiences available, each catering to slightly different consumer groups. Nvidia’s GeForce Now enables PC players to stream their PC games on different iOS and Android devices. Then there are exclusive cloud-based platforms such as Google Stadia and Amazon Luna which enable you to play games on your browser, streaming stick, and certain Android and now even iOS devices (for Stadia). Lastly, console makers such as Sony, Nintendo and Xbox have their own cloud-based offerings. PlayStation Now is the most traditional approach, allowing subscribers to stream older PS2, PS3 and PS4 games on demand on their latest consoles and Windows PCs. Nintendo has a cloud streaming service for the Nintendo Switch, called Nintendo Cloud Streaming, which enables players to run full games on their Switch that they are able to purchase from the eShop. It is the most nascent cloud offering, having only four titles so far. Microsoft’s cloud gaming service Xbox Cloud Gaming comes as an added benefit with its monthly Xbox Game Pass Ultimate subscription. Formerly known as Project xCloud, this cloud gaming service enables streaming of over 260 titles to various devices. There are various other cloud gaming providers as well.

Shadow (which just got acquired by Jezby Cloud) offers a cloud computing service that enables subscribers to have access to a high-end computer in the cloud that they can use for gaming or other processor demanding applications. Other players like Blacknut and Boosteroid specialize purely in video games streamed from the cloud. The market itself has slowly been consolidating. Hatch, which specialized in mobile cloud gaming, shuttered its offices in 2020 despite having early promising deals with carriers such as AT&T. Jump on This, another smaller cloud gaming provider specializing in indie-games, also ceased operations in 2020.

Cloud gaming competition 2021

Microsoft’s E3 announcements and follow-ups

Microsoft spoke at length about its vision for cloud gaming, and it didn’t stop at selling consoles. Xbox Game Pass Ultimate (which retails for $15 per month and is essentially an all-you-can-eat buffet of games) enables subscribers to stream video games through web browsers now, which gives Microsoft much farther reach as it can be used on iOS devices such as iPhones, iPads and Macs through browser support for Safari and Chrome. Xbox Game Pass Ultimate will also launch in Australia, Brazil, Mexico and Japan later this year.

Microsoft is further expanding its reach to more actual screens, as it plans to integrate directly into internet-connected TVs by working with TV manufacturers. It is also working on its own streaming device to enable cloud gaming on any display. Lastly, Microsoft is upgrading its data server racks to Xbox Series X servers to improve the streaming experience.

The server update went live just a week after the E3 announcements. Now, over 260 games can be played with the new Series X server blades enabling faster loading times, higher refresh rates and more graphics-related options. Not to be outdone, Microsoft has also hired Google Stadia design director Kim Swift to be a part of Xbox Game Studio Publishing to help build partnerships with independent studios for new cloud games.

Xbox Game Pass Ultimate

The Implications

These are by far the biggest announcements Microsoft has made on cloud gaming. With an aim to reach 3 billion players, the company is first integrating cloud gaming more into its core competency, i.e. consoles. Many products such as Google Stadia and Amazon Luna are using cloud gaming as a standalone model as they see this as the future of gaming. However, there are still issues of latency and connectivity that make cloud gaming cumbersome at times.

What Microsoft is doing is building the foundation for a future where cloud gaming will be the center of its strategy. For now, it is utilizing the technology and features of cloud gaming to bolster its console play. For example, it allows consumers to first try out a game via the cloud before purchasing and downloading the full version for the console. Cloud gaming will certainly continue to grow and improve on performance.

2021 may be a breakout year for cloud gaming, especially with current component shortages limiting the supply of consoles and other tech gadgets. 5G can be another driver for cloud gaming despite previous false starts. Stadia has previously partnered with Verizon 5G Home to offer Stadia Premier Edition, including a Stadia controller for free for three months, in 2020. In June 2021, AT&T began offering Stadia Pro for six months to new 5G unlimited wireless subscribers. The hardest part of these subscription offerings is providing a demonstrable value-add for consumers to continue paying for the subscription once the free period ends. 2021 looks to be the most promising time for these cloud efforts to become sticky and show growth.

Game Console Market Set for a Leap in 2020

A game console is a high-tech gadget primarily designed for consumers to play computer games at home in contrast to home PCs or arcade machines. Sony’s PlayStation 4, Microsoft’s Xbox One and Nintendo’s Switch are recent notable examples of the current 8th generation consoles. They utilize high technologies, including Blu-ray, motion sensing, VR, 4K and HD quality video, and online functions. With the next generation of consoles set for release in 2020, it is time to pay attention to this market as technological advancements will also lead to a spike in sales.

Nintendo’s Successful Turnaround – Not Enough to Boost the Market

Nintendo Switch was a big hit when it launched in 2017. It was a significant contributor to growth in the game console market, having sold about 15 million and 17 million consoles during 2017 and 2018, respectively. Despite its outstanding performance, however, the overall game console market has been sluggish in recent years. The key reason is that two most popular consoles, the PlayStation 4 and the Xbox One, have recently entered the last leg of the product life cycle, i.e., seven years. Further, some youngsters are more familiar with smartphones and tablets to play F2P (Free to Play) games. Therefore, a part of the reason for the sluggishness in demand for game consoles is also the technological advances in smartphones and tablets.

Game Console Market to Enter The Next Growth Cycle from 2020

However, Counterpoint Research expects that the game console market will rebound in 2020 and grow even more in 2021. This will be mainly due to the launch of the new generation products from Sony and Microsoft. Every time these two companies launch a new generation console, there is a massive spike in sales. Reportedly, Sony and Microsoft are preparing for a generational transition, scheduled for late next year. Moreover, we are not seeing any significant shift in demand among core gamers as most of them are not that satisfied with the specifications and features of smartphones and tablets to experience grand 3D video games.

Exhibit 1: Top Three Game Console Players – Sales Forecast (in million units)

Top Three Game Console Players - Sales Forecast (in million units)

       * Includes Sony PlayStation®4/PlayStation®5, Microsoft Xbox One/Xbox Two and Nintendo 3DS/Switch/Switch Lite

Sony and Microsoft – Launch of the Next-Generation Products in 2020

The battle of the consoles is now on among Microsoft, Sony, and Nintendo. Although some second-tier players such as Sega, NVIDIA, Valve, Logitech, and local Chinese players have made efforts to get a foothold in the market, their presence has been weak, and they have failed to gain significant market shares. While the top three players have been competing offering differentiated products with multi-utility features for exceptional experiences, the achievement of Nintendo Switch has driven Nintendo to new heights. After a record-breaking comeback, we expect Nintendo to maintain its market position for a while after it releases the Nintendo Switch Lite later this month. Sony and Microsoft have ruled the game console market for a long time. Their strategies are to focus on hardcore gamers that are willing to spend a premium amount on high-performance game consoles. Along with strategic pricing and marketing, both companies will seek to regain their dominance in the game console market with new generation products to be released in 2020.

Exhibit 2: Nintendo Switch Lite to be launched Sep. 20, 2019

Nintendo Switch Lite to be launched Sep. 20, 2019Tech Giants Joining the Gaming Industry

Outside the pure game console market, it is noteworthy that major tech giants are entering the gaming industry with different platforms. Facebook-owned Oculus released an all-in-one VR headset, Oculus Quest, last May and its expected sales volume for this year is close to one million units. Apple will launch a new video game subscription service, Apple Arcade, for US$4.99/month on September 19th. Later this year, Google will also launch a high-performance cloud gaming service, Google Stadia. These services will enable gamers to play high-end games on the internet, without the need for expensive hardware. However, we believe that this concept of cloud gaming and VR gaming do not pose a threat to the game console market in the near future as the target customers will be different. In addition, VR/AR headsets will actually be a growth driver, as they will ultimately combine with game consoles.

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