This week in Protocol Gaming, your weekly guide to the business of video games: Nintendo polarizes its fans with a new Switch model; EA's new sports games signal the wind down of free next-gen upgrades; and the video game engine market has new competitors.
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The Big Story
Nintendo plays it safe — again
Even when Nintendo drops a big surprise, it never strays too far from its play-it-safe strategy. Last week, the Japanese game maker revealed its long-awaited new Switch console, though it wasn't quite what most fans were expecting. The ensuing debate raised a lot of astute observations about the company's history of lackluster hardware updates, and why the gaming community keeps building up its expectations around Nintendo only to face an eventual letdown.
The new handheld wasn't the rumored Switch Pro the gaming community had whipped itself into a frenzy over. It features an OLED screen, but no improvements to its chipset or battery, and the response ranged from profound disappointment to "What were we all expecting?" But it's easy to see why the move makes perfect sense for Nintendo.
- Nintendo never needed a new Switch, at least not this year. The device has been the bestselling console in the U.S. for nearly three years running. With reduced manufacturing costs, Nintendo is making more money on the Switch now than ever.
- The ongoing chip shortage squeezing higher-end components meant a more powerful Switch was probably never in the cards for 2021. Microsoft and Sony can barely produce enough of their new consoles, and it's unlikely Nintendo could have paid the premium to outbid computer, smartphone and automobile manufacturers for production contracts.
Nintendo will make a killing selling a Switch with an OLED screen. Beyond the Switch Lite handheld, Nintendo has only made one minor battery improvement to the base model device in its more than four years on the market. This new Switch ensures Nintendo can continue selling hardware at a steady clip and bide its time until the chip shortage subsides and it has new, first-party software that can make use of the performance bump.
- Nintendo is still hoping to tap into a more mainstream audience that doesn't yet own a Switch. Selling that customer an improved version of the existing device is a smart way to grow the base, especially because it leans into the more casual, handheld-only crowd that has little interest in buying a device that sits permanently plugged into a TV.
- For diehard enthusiasts who will buy this as their second or even third Switch, Nintendo still wins because those used devices will likely go to friends and family members. The two- or three-Switch household strategy has played out well with the Switch Lite, and the Switch OLED model can follow the same playbook.
The Switch Pro is coming, but don't hold your breath. Nintendo is notoriously cryptic when it comes to hardware, and there is no telling what it's planning. It could be a Switch Pro in 2022 that does have an improved chip, or it could be a proper Switch sequel in 2024 that's capable of playing games that won't run on the Switch we have today. Maybe both.
- Nintendo has mastered the strategy of overstuffing a product line with an almost comical level of minor updates and refreshes, relying on shrewd supply constraints to ensure it doesn't end up with unsold inventory.
- This is the company that released more than a half-dozen various Game Boy devices, and at least nine Nintendo DS variants, as The Verge's Chaim Gartenberg pointed out last week. The new Switch will be only the fourth new model in the product line. I expect many more to come over the next five to 10 years.
- Everyone assumed a new Switch would coincide with the launch of the sequel to The Legend of Zelda: Breath of the Wild, due out next year. That might still happen if a more powerful Switch arrives around the same time. But it's also a good reminder that Nintendo's actions often reject clean, consumer-friendly narratives, and fans projecting those onto its conservative business strategy often endure disappointment.
Casting blame over mismatched expectations is a favorite pastime of the gaming community, where even small rumors or vague insider info regularly snowballs into the most-discussed topic of the week. There was reason to believe the Switch Pro was coming; a reputable Bloomberg report pegged it for release this fall, and it's likely Bloomberg's report is sound and such a device is in the works for later. There is also fun to be had poking at the gaming industry's often absurd level of NDA-guarded secrecy and trying to suss out what's unseen around the corner.
But Nintendo will always be Nintendo, for better and for worse. The company makes improvements over time, but always in the same incremental fashion and always according to the same sets of strengths and weaknesses. It has excellent, unrivaled software tied to lackluster, often gimmicky hardware that perhaps once a decade gives us something we didn't know we wanted. The Switch was one of those groundbreaking, generational successes. Enjoying Nintendo's products becomes a whole lot easier when you stop expecting the company to strike gold every few years.
A MESSAGE FROM QUALCOMM
We compare 5G to electricity. In the beginning, people might not have known what electricity was good for. Now it's an essential part of life. You always assume it's going to be there. That's how we think about 5G and its role in connecting everything to the cloud. It will transform how we communicate.
Join Protocol's David Pierce for a conversation with Smart Columbus' Jordan Davis, Sidewalk Infrastructure Partners (SIP)'s Jonathan Winer and Microsoft's Jeremy Goldberg on what it takes to build smart cities right. July 13 @ 11 a.m. PT / 2 p.m. ET Learn more
- "Google engineered an open platform in the core of the Android OS, but later devised tying contracts, software anti-patterns, and a cartel relationship with OEMs to lock Android down and block real competition. It's tragic that the 'Don't Be Evil' company let it come to this."―Epic CEO Tim Sweeney took a swipe at Google last week following news that 36 states and the District of Columbia had filed an antitrust lawsuit against the search giant and its business practices in the mobile market.
- "No neck snap is necessary." ―Dinga Bakaba, a game director at Arkane Studios, reassured a concerned fan of the upcoming Deathloop that it is not necessary to break anyone's neck to progress in the game. (The fan said past real-world trauma made the snapping sound featured in Deathloop's new gameplay trailer difficult to stomach.) It was a welcomed bit of clarification, although a macabre one.
- Amazon open-sources its internal game engine. The software platform, called Lumberyard, is shifting to an open-source model under a new name, Open 3D Engine. The software, to be managed by a new group under the Linux Foundation, will operate on a royalty-free model, positioning it as an enticing competitor to Epic's Unreal Engine and Unity, VentureBeat reported.
- Codemasters execs depart early from EA. The sports racing developer, which EA acquired for $1.2 billion last year, is losing CEO Frank Sagnier and CFO Rashid Varachia at the end of the month, ahead of the duo's scheduled departure. EA says the reason is the speed of Codemasters's integration under the EA Sports umbrella, Gamesindustry.biz reported.
- EA rebrands DICE LA as Ripple Effect Studios. The new developer, a longtime support studio for Sweden-based Battlefield maker DICE, is getting a new identity and a new unannounced project after it was put under the oversight of Respawn founder Vince Zampella.
- A sealed copy of Super Mario 64 breaks a record. The Nintendo classic, sealed in its original box and with an almost-perfect quality grade, sold for more than $1.5 million at Heritage Auctions this past weekend, The Verge reported. It broke the record for most expensive video game ever sold, following the sale of a sealed copy of The Legend of Zelda for $870,000 just days ago.
- A new game engine maker enters the market. Our Machinery, a Seattle-based software maker, last week released its new game engine and development platform, called The Machinery. The software, developed by just 10 people, is available now as part of a subscription model, VentureBeat reported.
- Ubisoft's workplace scandals make the list as corporate risk. The French publisher has been embroiled by a series of high-level misconduct allegations since last year, resulting in numerous executive departures and an overhaul of its harassment and sexism training. The conduct of Ubisoft employees is now listed as a risk to the company and its existing talent, in a new document detailed in Axios last week.
- Activision takes aim at a viral shooter cheat. A new piece of hardware offering easy-to-use cheating tools on both console and PC got the attention of Call of Duty publisher Activision, after the shooter series was used to advertise the cheating system. Activision used a copyright strike to remove the YouTube ad, Kotaku reported, and the cheat seller is now advertising its services without use of Call of Duty footage.
- Cyberpunk 2077 rebounds on PlayStation. The troubled role-playing game returned to Sony's digital store late last month, where it quickly became the most downloaded title of the month in the U.S. and Canada in just over a week. That's despite the message Sony slapped on the game's listing warning of poor performance on base PS4 consoles.
Look Out For
The end of free next-gen upgrades may be on the horizon
EA on Monday announced its plans to restrict next-generation upgrades for FIFA 22 and Madden NFL 22 to those who purchase the $99.99 special editions. EA has had a selective upgrade system in place it calls Dual Entitlement, but its most popular sports games won't qualify when the new installments launch in August (Madden) and October (FIFA).
It's becoming increasingly clear the biggest players in the industry are beginning to sour on free next-gen upgrades, even though it's still difficult to even purchase a PlayStation 5 or Xbox Series X/S. Sony earlier this month said Ghost of Tsushima's official PS5 upgrade would be bundled with its expansion for $30, while owners of PS Plus versions of cross-gen games are also finding themselves locked out of free upgrades. It's not hard to imagine many more developers taking firmer stances on this in the future.
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