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Is Switch Nintendo's first step toward big tech?

Nintendo deserves congratulations for a successful first weekend launch for its latest console gaming device, but even with mainly positive reviews the open question is whether Nintendo is ready to become a real technology company, or whether it will remain a toy company that happens to use technology.

Nintendo's gamble is that its new Nintendo Switch can recapture both its hard-core fans and also a wider array of more casual gamers with a new tablet-based device that can be connected to a TV like a home entertainment console and can also be untethered and provide all the console-quality games in a portable gaming package. But while it looks like a tablet, it has none of the productivity or non-gaming entertainment features tech shoppers have become accustomed to.

Reviews have been mixed, in part because the Switch is underpowered compared to desktop PC or TV-based gaming devices. While you can play on the bus or in bed in hand-held mode, its battery life is about 3.5 hours, much worse than older, less-sophisticated hand-held gaming devices and also worse than the average tablet PC.

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"You had to compromise on so many technical form factors to allow for dual-playing mode," says Joost van Dreunen, founder of SuperData LLC, an interactive entertainment market research company in New York, who recalls a major games publisher's initial reaction to concepts shown off more than a year ago as a device that was "neither fish nor fowl."

Initial sales have been strong, and there were lineups at stores around the world on launch day last week. Nintendo expects to sell 2 million units by the end of March, a solid debut. David Cole, founder and chief executive of the market research firm DFC Intelligence, has predicted that the Switch could sell 40 million consoles by 2020, which could launch it into second place in the console market ahead of the floundering Xbox One (which has sold an estimated 26 million units since November, 2013). Sony's PlayStation 4 is the leading current-generation console, and has sold more than 55 million units since November, 2013.

Nintendo generates good revenue selling consoles, but it stands to make its profits selling games that can be played on those consoles.

The world has changed rather dramatically since 2006's Wii launch, Nintendo's greatest console sales success (with about 100 million units sold). Mr. van Dreunen's SuperData measures only digital sales, but in its count console is the weakest-selling of three major gaming categories.

And whose games will players buy? The new Zelda game is getting rapturous reviews from reviewers, but Nintendo has a track record of not being fast enough at publishing its own in-house games to keep up console sales momentum.

Third-party game publisher support has bedevilled the company, even in the days of the megasuccessful Wii. Consider that some of the most anticipated titles of 2017 – such as Mass Effect: Andromeda, Red Dead Redemption 2 and Prey – are from third-party developers that show no signs of support for the Switch.

"We won't know too much about third-party support until E3 in June, so we think that it is too early to jump on the Nintendo bandwagon," wrote Wedbush Securities analyst Michael Pachter in a recent research note.

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After playing with the device for a week, I can offer my own subjective review that portability was a delight. It's lighter than an iPad, if bulkier, and small, the Switch's 6.2-inch screen is very small for a tablet but quite big if you compare it with previous gaming hand-helds.

But for $399 in Canada, most users might expect the tablet to be able to do more on the slick-looking Switch than play a few games. Beyond gaming software, it's not really a tablet like an Android or iOS device, it has no Web browser, no tablet-style non-game apps, not even Netflix.

I found myself wishing that Apple would buy Nintendo and provide a full-feature, full-powered tablet that also happened to play games.

"There's a case to be made where a company like Nintendo could contribute value to Apple. Arguably, what Apple doesn't have is strong IP, and what Nintendo doesn't really seem to have is a clear vision of a more futuristic device family," Mr. Van Dreunen says.

The Switch is a half-step toward acknowledging the games business is no longer a console war, Mr. van Dreunen says. "You now also have Facebook and Google and all these other companies with a clear stake in the interactive entertainment market."

Many of iOS's highest-revenue apps are games. He credits Nintendo's leap into the mobile space as a nod to this new phone-based reality, even though Super Mario Run for iPhone collected 78 million downloads of the free version of the game, it's not clear how much money the company will make from players ponying up cash for more levels.

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"They were the undisputed king of console gaming for many years … Will the company's ego get in the way of playing nice with all these other billion-dollar companies in the space? Or are they going to put their foot down and pretend they are still running their own thing by themselves without any competitors?"

Even in a fantasy world, Nintendo can't avoid recognizing that the way people play games is changing rapidly.

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About the Author
Technology reporter

Shane Dingman is The Globe and Mail's technology reporter. He covers BlackBerry, Shopify and rising Canadian tech companies in Waterloo, Ont., Toronto and beyond. More


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