Topic: Nintendo as a console maker in the cloud gaming era?

The Nikkei Asian Review, which publishes excellent business reporting on Nintendo, recently carried an interesting opinion piece raising questions about the future of the company. Here's the link: https://asia.nikkei.com/Opinion/Nintendo-s-future-is-far-from...

Despite Nintendo recording a 41% jump in profits in the fiscal year that ended in March, buoyed by Animal Crossing’s successful launch and high console sales, the writer erred on the side of caution, questioning whether the company is well-positioned enough to survive the coming era of cloud-based gaming platforms being offered by Google, Amazon and others. These are some excerpts from the article:

“Dominant ecosystems like Microsoft, Google and Amazon can leverage their platforms into games and demote Nintendo and others to the status of a pure content provider beholden to their distribution muscle.”

“Anyone thinking about Nintendo's stock price today needs to think ahead. In five years' time will Nintendo be able to leverage its superior content to maintain its own independent and profitable platforms, including devices?”

“A careful investor needs to ponder the darker possibility: that Nintendo in five years' time will have become a game developer and publisher whose pricing power has been surrendered to someone else's dominant platform.”

I’m curious what Nintendo players, rather than investors, think about this. Nintendo has always been a company that has bucked trends and, up until recent mobile games, traditionally kept its first-party content exclusive to its devices. But hardware design and innovations that bring new ways to play are equally synonymous with the brand.

While I can understand that consumers want to access their game content in a platform-neutral way, i.e. on a device or console of their choosing, I don’t see "content ecosystems" overtaking consoles anytime soon. Despite the convenience of digital sales and the potential of cloud gaming, I think players would still want to own physical, console-specific games.

Perhaps the desire to have and hold is similar to why vinyl music records and books are still a thing. Gamers are by and large "collectors" too, with merchandise playing a big part, and I think this is part of the reason why game stores are not likely to go the way of movie rental shops, even when players can stream triple-A games from a device of their choice.

With the selling power of the Switch and the success of the hybrid console model, I would say Nintendo is primed to fight on as a console maker, even if tough competition from oligopolistic platforms leads it to cede some of its prized classic IP, which would yield a commercial boost it could use to channel into innovating hardware.

What does everyone else think?

Funny since those three "dominating" companies are in the back of the pack and combined sales of all three are less than Nintendo's or Playstation's. Honestly I heard that even combined Google and Amazon have less than 5 million subscribers for their cloud services.

I don't see Cloud Gaming happening any time soon and if it does, it won't be successful. Also, I don't think Google and Amazon are going to take over the big three. They don't have any experience and after the failure of Stadia, who would truly want to play on a google streaming service any time soon? Maybe like in two generations time but not now.

“Dominant ecosystems like Microsoft, Google and Amazon can leverage their platforms into games and demote Nintendo and others to the status of a pure content provider beholden to their distribution muscle.”

Except for the Microsoft part, that statement alone is already complete and utter nonsense. Google and Amazon would wish that they have the clout and importance in the video gaming world that any of the big three have. They're eons behind in thought process, usability and game libraries. They simply don't understand the core gamer. They just see another revenue stream and want a piece of the pie, but I'm pretty confident that all they'll ever get, is the leftover crumbs.

Google Stadia is already pretty much DOA, and it's never going to take off, and it'll be closeted within the space of 2 years, much like any other extracurricular initiative that Google has undertaken over the last decade or so.

So, yeah, never going to happen, and that opinion piece is only interesting in an alternate universe "what if" kinda way, because it's WAY off base concerning the actual reality of it.

The whole eco system and the entire philosophy of Nintendo is to not only make games, but also the hardware needed to play those games, so they'll never allow themselves to be demoted to a software publisher. Nintendo games on other platforms just won't be the same, and won't give us that real Nintendo feel, which is famously known as "The Nintendo Difference". That isn't possible if you basically cut off one of the legs of the foundation of what they are and what they stand for.

Even in the darkest scenario, they'd probably rather commit business suicide and remove their IP from the world altogether, than hand them over to the likes of Google.

I don't know anyone that likes video games that wants cloud gaming. For the same reason pepole don't want to buy digital movies through their cable tv provider - because you don't truly own them, and people don't trust their cable tv provider - they barely tolerate them.

Well said @ThAnOsReXxX (edit, i fixed it. haha I keep forgetting you're triple X. funny (formatting doesn't matter, just spelling. I gotta have fun with something 😋))

@ThanosRexxx "The whole eco system and the entire philosophy of Nintendo is to not only make games, but also the hardware needed to play those games, so they'll never allow themselves to be demoted to a software publisher. Nintendo games on other platforms just won't be the same, and won't give us that real Nintendo feel, which is famously known as "The Nintendo Difference". That isn't possible if you basically cut off one of the legs of the foundation of what they are and what they stand for."

@WoomyNNYes "Dear Nintendo Life member, due to weird text formatting of the name on your part, as well as forgetting one X, the person you quoted was NOT notified"...

You should cut out one of his Ns to make up for that, @ThanosReXXX ..... Like so, @WoomyNYes

While Nintendo can continue to successfully leverage Mario, Smash Bros., Zelda, Pokémon and Animal Crossing they'll have an interested consumer base and in light of the popularity of the Game Boy series of devices, the DS series, and now the Switch, I suspect that the fans of the above IPs will have no qualms about continuing to buy dedicated Nintendo hardware for as long as it's manufactured, whether it incorporates cloud based delivery or not.

The real question I feel, is how long will Nintendo maintain its core values that have made it the games company it is?

So, two games Cloud editions got announced yesterday...

It is the end of days in my eyes, my internet where I live will never be powerful enough to play them and it's even worse than digital only games as once that server is switched off, you have paid for a game you can no longer play.

My internet is pure crap so I don't think I would be able to play them but hey, its better the nothing.

If they aren't going to release the game for real why bother with a cloud version? Basically they are saying it's only for rich people with top of the line internet connections. Also as others have said you're paying for a game you wont be able to keep. It's like buying a hamburger. Eventually it ends up in the toilet.

Control is cheaper than other typical RRP of AAA releases on the Switch so if all cloud versions are cheaper priced I could live with it.

My only complaint is I wont be able to stream music/podcasts as I play as well as I can't play them on the tube where there's no Wi-Fi.

Games industry's big enough for cloud gaming to be a viable market for one demographic of customers, whilst console gaming remains viable for another demographic of customers. Wasn't so long ago that smartphone gaming was definitely going to wipe out handheld gaming (3DS seemed to do just fine); advanced graphical capabilities on smartphones was definitely going to wipe out console gaming (lol); and every time a new console generation swings by, someone somewhere tolls the death knell for PC gaming.

Cloud gaming will most likely stick around (although whether Google's or Amazon's offerings to the space are the ones to survive seems... debatable), but I very much doubt it will push out or displace other forms. It's just further expansion of a growing and diversifying industry.

It's all down to the latency. For streaming to work you need the combination of a low latency connection and a game that can tolerate a few frames of lag without becoming unplayable.

Nintendo are, in large part, at the wrong end of both scales in selling some rather twitchy games for platforms you can use while out and about. As such, they're rather more insulated from a sudden surge in cloud gaming than most.

I understand the concern about cloud gaming, since it is inevitably going to gain significant marketshare.

The thing is, I don’t see that happening in 5 year’s time. Not that cloud gaming won’t be around, it’s around right now. But it won’t gain any significant market share for another 20 years. It’s something that’s going to happen very slowly and gradually over a very long time. And it’s never going to completely eradicate dedicated gaming platforms. So while it will certainly take marketshare, it won’t claim all of it.

Furthermore, Nintendo has insulated itself against such a threat by positioning its hardware as the one platform that offers portable play anywhere without an internet connection required. And demand for such a product is not going to dissipate with the rise of cloud gaming. So in a sense, they’re more prepared for the coming storm more than anyone else. While companies like Microsoft and Sony are developing their own cloud gaming tech, The fact is they have to because it’s their marketshare that’s going to be eaten with the rise of the cloud. But not Nintendo. At least, not so long as they continue making hybrid or portable systems, which they certainly will.

I'd argue, and I'm fairly sure I've argued before, that if anything the existence of a product like the Switch is dangerous for the future of cloud gaming. Not the other way around.

If you go back to when OnLive was trying to make waves the main appeal was being able to play 360/PS3 era games on your phone. And when your mobile competition is the DS and PSP (or even 3DS/Vita) that's a fairly attractive sell. But ten years later we have a lot of those games ported to the Switch.

Of course there's always going to be a fidelity gap, you can always say that cloud gaming will be able to offer "better visuals" even if they are subjectively shrinking. The problem for cloud gaming but is that the current push is for faster load times, improved lighting and higher display resolutions. The first one is faster NAND, that will find its way to all devices including a future Switch. Improved lighting will still be an advantage, so that's one win. However display resolutions? The problem is portables can get away with 720p, Switch 2 and even Switch 3 won't be racing to 4K

I kinda see cloud gaming as more of a niche that doesn't quite know it's market yet. It's trying to sell itself as a higher fidelity visual for people who want that but don't want to pay for higher end hardware. But the problem is that the people who want higher end visuals generally also want lower latency and are willing to put more disposable income into better hardware. Which rules them out. And on the other end more casual users really don't care about the higher fidelity visuals anyways.

tl;dr: Now and on a product like the Switch is probably the time when cloud gaming is its strongest. A decade from now that's going to be a much harder sell as a future Switch will close that gap further.

@Shadowthrone : There is a significant gap in streaming vs disc-based media. It won't bother most people, but enthusiasts notice, and there is still a demand for higher quality alternatives, and I doubt that they will ever completely go away. While streaming is certainly very popular at the moment (and almost unbelievably cheap) it's extremely costly to the service providers and I am not confident that many of them will be profitable or sustainable in the long term. Of course, time will tell. I am perhaps in the minority of those not subscribed to any form of streaming service (I have more than enough discs to last me years). The fact that so much propaganda is being produced by certain providers (cough Netflix/Disney) has made me especially grateful that I have never supported their platforms in the first place.

While convenience trumps all in terms of mass appeal, I am still quite old school in that I overwhelmingly prefer physical media as it offers overall superior quality, whether that's CDs for music (weirdly enough as the technology has been on the market for 40 years now) or Blu-ray/UHD Blu-ray for film/TV. Blu-ray yields very high quality video and (usually) lossless audio. The streaming/download equivalents typically offer only a small fraction of the quality in comparison.

Hell, I have rendered Blu-rays with very low bitrates in HD (comparable to streaming quality) and it may surprise some to know that you can fit about 12 movies at 1080p on a single 50GB disc with decent quality video (ahead of DVD anyway) and lossy audio, but the format is prized for its ability to present films as close (in some cases better) to the theatrical presentation as possible, so it's very rare that distributors will squeeze multiple movies on to a single disc when the market has since gravitated online for convenience at the expense of A/V quality.

In respect to games, ownership, convenience, and flexibility is king, and cloud gaming offers none of that (at least where I am concerned). Again, time will tell whether the market will embrace it. While I am not one to begrudge people from pursuing options that best suit their needs, I think cloud gaming is far more detrimental to the consumer than beneficial, especially if consumers inevitably become bereaved of the software that they had paid for, which can result in such a model collapsing on itself.

So two issues with this. Firstly stream latency isn't necessarily an issue that can be resolved, it's an inherent physical limitation. When you have physical distance between the server and the client there will be latency. Other forms of media get away with this by having a large buffer in content, which they can do because you the end user isn't directly interacting with it. Even if you look at a livestream you're going to be ~30s behind the actual content, video calls target ~100ms of latency, Netflix will buffer as much as it can.

With games we usually talk of ~30ms of latency as being the maximum acceptable which... is going to be tricky to make it the dominant delivery method when the absolute physical limit for fibre gives 1ms of additional latency for every 200km in a straight line. That's before you consider the cable winding through suburbs, the latency of your home WiFi, the additional processing compressing the video, the processing decompressing the video and the fact that your inputs also have to go down this network link. At a minimum you want to live in a city and have a server located in the city you live in.

Basically, if everything goes its way it may explode in Japan and maybe the UK as well as a few major population centres in the US. But I don't think it's ever going to become the dominant player globally. You'd have to have a super local and different kind of infrastructure that, frankly, does not exist yet. Google and Amazon are huge but their servers are designed for serving files not rendering games.

Secondly, to be blunt, the only strength of game streaming has always been that you could get high end visuals on a cheap device. The media as a service model is not a strength because you can do gaming as a service without streaming. So for it to be attractive the gap in fidelity has to be high enough that people will overlook the inherent limitations of it.

And to explain why that's not really where things are going consider this. Nvidia literally sells what is the hardware equivalent of a TV dongle version of the Switch for $150US. That's a thing today at a relatively low price of entry. So you can imagine what might be possible on the 10 years from now equivalent of that. So the question is... would the visual gap between that device and what might be possible from the high end 10 years from now matter to a casual user? I'd argue no.

Just read through that second wall of text @Shadowthrone so a couple of more points worth making...

1. Streaming requires no special hardware
This is true for music and movies but it isn't really true for games. You still need a controller to play games. The only titles that don't need a controller are either touchscreen based phone games, which by their very nature are played with less than optimal network performance, or very low interaction titles. And for the later interactive movies already exist on Netflix.....

2. People choose Netflix because a subscription is a "lower risk" way to consume
This is definitely a main part of the appeal of video streaming services. However this is more of a function of the subscription model rather than the fact that it's a video stream. The fair comparison here isn't between physically going to the shop and buying a movie vs paying a monthly sub, browsing Netflix and clicking play. The more accurate analogy would be the difference between the home and downloads tab in the Netflix app. The home page is game streaming, the downloads tab is an XBox Game Pass like model.

2a. But downloads aren't as fast as clicking go
Pre-emptive counter argument, and this is true. But at the same time the very infrastructure that would make streaming practical also reduces the download times. Eg a super low latency 1Gbps fibre link would be excellent for game streaming... but if you had a link like that you'd download a 100GB game in 15mins. Also if there's no risk involved you'd just pre-download any games you were into before release

3. Streaming wouldn't be tied to console cycles
Maybe so. But the way things are going consoles aren't really tied to console cycles much anymore either. If you look at what Microsoft is doing they're pushing for a subscription service that goes across PC and XBox with backwards compatibility. So this is already a thing even without streaming.

Even with the Switch, if they had a game-pass option you'd also have a library of Wii U ports at your fingertips. They already have SNES/NES classics as part of the subscription that already exists there. Presumably a post-Switch Nintendo online sub could carry over the classic games.

Nintendo's biggest strength is its IP. There is huge demand for Mario, Zelda etc. titles and always will be.
Right now internet infrastructure is nowhere near good enough to allow game streaming services become a "major" player. Certain parts of the world just cannot run this type of service yet and are a long way away from being able to. Straight away your player base is limited. But these services (Stadia, Luna) can definitely eek out a small portion of the market for themselves in the coming years and as the infrastructure improves so too will their player base.
Personally I see streaming as a great option and if Nintendo go down this route of having a fantastic lineup of 1st party games, quality indie titles and streamed versions of big AAA games, im all for it.
The biggest issue people seem to have is game ownership. I understand the stance on this but in a way this has been an issue for years now and people are forgetting it. I'm playing a Splatfest this weekend. I likely won't be able to play online matches of this game in 5 years time when Nintendo turn off the servers. Same goes for Destiny. Or Apex Legends. But nobody seems to care that they are "renting" these games. Yes you'll own Destiny in your disk or hard drive. But if the server is shut down, what's the point?