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Five years from now when "next generation game systems" no longer means the Wii, the 360, or the PS3, we'll look back at the current crop of systems and realize how wrong we all were back in 2006. Bloggers, pundits, and reporters have written miles of copy about the big three home systems, but the real winner of this generation won't be any of those systems. It will be the Nintendo DS.

While the rest of the world salivates over HD graphics, it will be the easy to produce games for the DS that will be the big winner. There are a couple of reasons why this is the case.

First and foremost is simple economics. While the high-res graphics so loved by fans of the Xbox 360 and PlayStation 3 look great, they are expensive to produce. Consequently, development costs for those systems remains high. I've seen estimates that place development costs for a bespoke PS3 or 360 game in the tens of millions of dollars range. Contrast that to a DS game, whose development costs are an order of magnitude less. Pair that with a DS install base of 7 million units in the US and anothe 7 million units in Japan, compared to, for example, 5m 360s in the US and less than 1m in Japan and you have the beginnings of a business plan. What this means is increased development of games for the DS platform. And if you follow the premise that games sell systems, things look even better for the DS.

The second half of the economic argument is system price. With the lite retailing for $129, it is nearly half the price of the cheapest home system (the Wii), which is itself less than half the price of a top-end home system (the PS3). I wonder which one Mom and Dad will want to Johnny this Christmas? Anecdotally, on he bulletin board at work I've seen a number of people try (and fail) to move PS3s, but I've seen even more people searching for a DS for their son, daughter, neice or nephew. This is especially interesting because the DS isn't really even in short supply. There are a few spot shortages, apparently, but amazon has the system in stock, for example. So it seems that DS demand is particularly strong.

The third reason why the DS is going to take this race is Japan. The DS dominates the handheld market there, and it is already attracting major first-run titles. (See: Dragon Quest.) The Japanese can't kill a major platform (see: Xbox), but to take the top crown you need to at least have the support of the Japanese development community that still drives video games. And things are looking good for the DS there.

And the last reason the DS will reign supreme: Nintendo. The guys at Nintendo thought all of this up five years ago. This is their business plan. Plus, Nintendo can ride their franchises to success if they have to. Ninendo as a development house is a very important aspect that shouldn't be overlooked.

Everyone is tickled about Nintendo's innovative platforms, but the innovation is for the consumer. The attraction to developers will be the cheaper development costs. There is less risk in developing for Nintendo, because you have to spend much less, and consequently sell far fewer games, to turn a profit. And as of right now, the Nintendo platform to develop for is the DS. It has an order of magnitude more users than the Wii, and they've all been trained on the stylus.

A year from now, will I be writing something similar about the Wii? It's possible. The Wii has the same economic underpinnings as the DS, so much of what I've written here applies to the Wii as well. There are a lot of ways this could play out, but I just don't see the Wii overcoming the DS's lead time in the market advantage.

But for me, the Wii is the only dark horse in this race. MS and Sony have decided to focus on a segment of the gaming population that embraces elitism and barriers to entry. The end result of more and more complicated games and online communities that shun newbies is an ever shrinking slice of the pie. Still sizable and profitable, perhaps, but no longer the dominant players.

Perhaps this is old hat to all of you. But it seems like the untold story on the gaem blogs I read. All the news items are on the big three, but then the sales numbers are posted and the DS sells more units than anything else. I have some theories for why this is the case, but this post is already long enough.

Finally, a few disclosures so you can understand my perspctive on this. I am a Nintendo fanboy. I like what they're doing for games and wouldn't own a system but for their innovations. I own both a DS and a Wii and have no intention of ever buying a 360 or PS3. Of the last generation systems, I owned a GameCube, but was far removed from the launch window when I bought it. Prior to the GameCube, the last systems I owned were an NES and (briefly) a Sega Genesis.

Posted by on 14 December 2006 at 8:08 PM