Should Xbox and PlayStation make a handheld console? | Opinion

As the ninth generation enters mid-life, the rumour mill has started again on what new console hardware will look like. If there is one thing the video game industry does very well, that is jumping on trends, especially if plenty of money could be made. This time it’s all about gaming mobility. Reports have come out that both Microsoft and Sony are courting console handhelds as the next best thing. The logic being that the Nintendo’s Switch is one of its best-selling consoles of all time, Valve has seen success with Steam Deck and Sony has seen its mobile streaming peripheral, the PlayStation Portal, fly off shelves. So why not have a dedicated PS5 console handheld or a dedicated Xbox handheld? It makes perfect sense to the c-suits, who bury themselves in spreadsheets.

In an interview with Polygon, Phil Spencer stated: "I like the fact that Valve, Lenovo, and Asus went out and innovated in a new form factor." And then added: "I will say that when I'm playing on those devices, it almost feels more like a console than a PC - nine times out of 10… I want to be able to log in with a controller. I've got my list of things we should go do." Not to be outdone, Bloomberg reported that Sony is also working on a new handheld, according to a source.

If console handhelds are the stop gap to the tenth-generation console (or even a possible contender to be the tenth generation) here lies both opportunities and challenges in almost equal measure.

The Opportunities:

a) Consumer behaviour. Back in 2017 when the Switch released Nintendo declared a greater number of gamers preferred to play on it as a dedicated undocked device. It is probably safe to say that over time those who preferred to play on the system as a dedicated docked device probably did not increase in percentage terms, in fact, if anything it may have decreased. As a result, the market for a handheld console is potentially strong. This is something that will appeal greatly with Microsoft Gaming's leader Phil Spencer who is focused on the mantra of 'gaming everywhere and on every device'. Spencer’s ultimate dream is to be hardware agnostic and to transform the Xbox brand into a service. A console handheld that can play Xbox games would be another vehicle by which the Xbox ecosystem can find a home. For Sony a dedicated handheld console would be an extension of the PlayStation Portal.

The only caveat to this market research is that the Nintendo Switch has been designed for the Nintendo gamer and specifically to play Nintendo games. Although gamers are sometimes lumped into one homogeneous lot, there are significant differences in what gamers are looking for from a Nintendo device and from a PlayStation or Xbox device.

b) Cloud offers a ready-made solution. Microsoft launched Xbox Cloud gaming for its Game Pass subscription service and has now added cloud solutions for 50 of its 'owned' games, with more games expected to join the service. Sony, which once led the revolution in cloud gaming when it bought Gaikai, is playing catch up to Microsoft with its own newly announced cloud streaming for the PlayStation Portal peripheral. The PS Portal will be able to access content off the cloud untethered from the PS5. This means we are already one step towards a dedicated console handheld for the PS5 system. The cloud solves the problem of having to create dedicated software in a new form factor like a mini disc, SD card or cartridge. This will liberate the handheld from the software limitations that once plagued previous handheld devices.

c) Synergy with mobile gaming. Nothing would make Microsoft happier than finding a way to utilize its investment in Activision Blizzard’s console business with its newly acquired mobile division, King. If either console or mobile games can be monetised with synergies of each other (think Warzone and Call of Duty Mobile), a handheld console would offer an ideal solution. Another benefit could be offering a stepping stone, of sorts, where Microsoft can upgrade its mobile users to the more traditional console platform. This strategy could be important as another consumer report has found that mobile gaming has surpassed the Switch as the entry point for new (often younger) gamers. The possibility to boost revenue by amalgamating mobile and console gaming experiences could be significant, especially with younger and more casual gamers who are familiar with gaming monetisation via microtransactions. To date there seems to be two markets between console and mobile gaming, but this is not a case of twain-shall-never-meet. I suspect the difference is because gamers have been looking for different gaming experiences between their console and phones/tablets, but that distinction is become muddier as app games become more sophisticated.

The strong sell through of the PS Portal is testament to the fact that gamers are enthusiastic about playing their 'owned' games outside of the main console

d) Boost games as a service and subscription gaming. Sony has been investing heavily in games-as-a-service (GaaS) and Microsoft has committed to all things Game Pass. Both services could benefit somewhat from a handheld console. GaaS titles are social in nature, so taking your console anywhere where your friends are is very appealing. There have been many a time when my young son would take his Switch to his friend’s house and play Minecraft, Rocket League or Fortnite. Although Sony has recently reduced the number of GaaS projects in intends to release, the Gamesindustry.biz headline 'Report: 95% of studios are working on or aim to release a live service game' highlights a ramping up of investment into GaaS. Apart from GaaS, the subscription services can find a home on console handhelds. For example, Phil Spencer’s dream of making GamePass a video-game Netflix, a service that is somewhat omnipresent like video-on-demand, would be an ideal fit on a system that is free from the confines of the living room. Its biggest challenge will be latency and finding a strong wifi signal, a problem that is fortunately becoming less relevant with every year.

e) Can tap into an established library of games. When this very topic was put to video game analyst, Michael Pachter from Wedbush Equity Research in the videocast SIFTD Games “Is the Xbox handheld a good idea?”, Pachter threw cold water on the idea of a successful dedicated handheld console because history has not been kind on the format, especially from Sony. Citing the failure of the PSP and the PS Vita as examples of how good technology failed to find a market, the prospects of history repeating itself feels high, as Sony has struggled to fully support its handhelds with software alongside investing in its (more lucrative) console platforms.

I would surmise that this will not be the case with a handheld console that can already access a gamer’s extensive library. The only limitation being is that the existing library will have to be digital (more on that later). We have seen that accessibility of a library of games has generated instant success (albeit with the day one buyer) with the Steam Deck. The strong sell through of the PS Portal is also testament that gamers are enthusiastic about playing their 'owned' games on systems other than their main console, depending that the handheld is affordable. When you factor in access to additional games available on the PS Plus subscription or Game Pass, creates another incentive why a console handheld is a compelling proposition.

A fragmented hardware market between handhelds and mainstream consoles could force the industry to make hard choices

The Challenges:

i) Graphic compromises and price. Putting aside some of the technical challenges like controller drifting, screen damage and weight, Gamesindustry.biz sister website, Eurogamer, published an article last year with the headline Can Steam Deck handle a range of PC's most challenging games? The answer for most was yes, but with significant limitations. Quite often a compromise on graphics or frames per second is needed to run the latest PC games on the Steam Deck. One could argue that these compromises are a necessity given you can hold a powerful gaming device in your hand. For the passionate Steam Deck user, who may have bought Steam Deck to complement their existing gaming PC, this is likely acceptable. But if a dedicated console handheld comes at a price north of $500 – in other words, a higher price tag than their more tethered counterparts - then more mainstream consumers may expect a device that at least matches that of the other models in terms of performance. If these machines need to make compromises compared to their living-room sister machines (which seems inevitable), then value for money will become forefront of handheld buyer’s mind. If too many compromises are forthcoming, then buyers’ regret may soon kick in especially if the new handheld is competing directly with older and cheaper consoles that can do the job (of playing games) better. For example, there was consumer backlash when Mortal Kombat 1 released on the Switch with a sub-par experience. However, in this case, the Switch is at least a cheaper alternative to the Xbox Series and the Playstation platforms.

ii) A fragmented hardware market between handhelds and mainstream consoles could force the industry to make hard choices . One of the criticisms levelled at the Xbox Series S is that the console is not as powerful as its bigger brother, the Xbox Series X. and that has led to comprimises. As a consequence of the two models, we have defragmented Xbox Series ecosystem, burgeoning Microsoft with a problem on how best to satisfy the markets for both consoles. It is an issue that is also affecting third-party publishers. Another Eurogamer headline from September 2024 summed it best: Dead Rising Deluxe Remastered: Series S suffers, with PS5 and Series X faring better. If, for example, Sony’s new console handheld sells in high numbers, this could somewhat force the hand of the publisher to earmark more games to be made with the handheld in mind at the expense of pushing power and graphical excellence for the PS5 Pro. Given the selling point of the PS5 Pro is all about that extra power, a dedicated handheld console could potentially hold back the advancement in game technology if consumers end up buying more handhelds than the Pro. After all, companies follow the money and if the money says 'we want more handhelds and less Pros' - it will not be a stretch in the imagination to think games will be made to cater for the handheld specifications.

Developers are getting smarter at creating assets that can work on a spectrum of console devices, but if they need to create games for lower-end hardware, it will inevitably impact what they may be willing to do in terms of size of game worlds, enemies on screen, and other such benefits of more powerful devices. PlayStation and Xbox are known today for their high-end capabilities, and a popular handheld alternative might negatively impact that perception.

iii) Gamers could be forced to buy digital. In an ideal world publishers would love to sell all their games on the digital format. The companies would earn higher revenues with every game sold while simultaneously driving down the cost of goods. It would not be unimaginable to think that these future console handhelds from Sony and Microsoft will scrap any physical media player, whether via a cartridge or micro SD, in favour for digital software. The idea is to force consumers to purchase games from the PSN or Xbox Live stores. These stores are walled gardens where the option to shop around for better prices are practically non-existent unless one where to buy from the 'grey' market of key-sellers. The win for Sony and Microsoft (and third-party publishers) would be significant. It will be physical retail that will suffer the most. This would be a great shame because the physical market still plays a fundamental role in the games industry. According to tracked Games Sales Data (Video Games Europe / Sparkers) one third of UK spending on PlayStation and Xbox (full priced) games (which released on both the digital or physical format), during 2023, were for the physical format. During the holiday period of Q4 that figure surpassed 40% thanks to gifting. That one-third physical spending would have no option but to buy digital. All game purchases would have to become digital and from limited store options.

I suspect that a good portion of the physical spending is done by people who continue to prefer the physical format, who do not wish to buy digitally or, more importantly, for younger or less affluent gamers, who cannot buy digitally. Even Nintendo, with the imminent release of the Switch 2, is aware of risks of embracing an all-digital world as a large proportion of sales remain physical on this format.

By all accounts the Switch 2 will continue with supporting physical media. This would mean a handheld console that is more Steam Deck (all digital software) then Switch (physical and digital software) is a bold move especially given the number of physical PS5 and Xbox console games already in circulation. Throw in thenews that the disc drive peripheral for the discless PS5 Pro has almost sold out everywhere, a digital-only handheld solution may not appeal to all forms of PlayStation and Xbox users.

To conclude, the appeal of handheld gaming machines by publishers and manufacturers is understandable. The runaway success of the Switch, the Steam Deck and the PS Portal all point in the same direction. It indicates that gamers want to play with greater freedom. The appeal of taking your games with you wherever you go is clearly there.

It solves so many problems about physicality and it opens more doors to cloud streaming and video game subscriptions services. It is an opportunity just waiting for Sony and Microsoft to hop on. The problem is that the market indicators for these devices came from a machine that has a physical format solution (and one marketed to families and younger gamers who desire portability) and a machine built for Steam owners who arguably use it as a secondary device, but more importantly who already own an intensive digital library. These are all handheld devices that were all made to answer a specific gap in the market. Does that gap exist for a dedicated handheld in the PlayStation and Xbox ecosystem? At this moment in time, we do not know much about what Sony and Microsoft have planned. Ultimately the goal could be to develop devices that replicate the same service delivery as the Steam Deck, namely complementary devices to existing console platforms. It is a strategy worth pursuing, but the market for such a device has not been fully tested and the opportunity may be smaller on console than it is on PC.

To conclude there a lot of variables when it comes to the commercial success of handheld consoles. Technology has solved a lot of the issues that once plagued older systems, especially when it comes to software. I think the ultimate variable will come down to price and what gamers want from these systems. Consumer behaviour changes all the time. Maybe it is time for a PS5 or Xbox Series handheld?

Sam Naji is founder of video game analytics and consultancy firm SJN Insight