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Soundwave said:

Switch changes the rules by going upmarket and creating a higher end console style experience for portable play that can also be played on TV ... that counteracts smartphones/tablets eating up huge portions of the traditional portable market. If Nintendo had made a conventional DS-3 style portable and tried to sell it with "cute wittle little bite sized games that are $40" ... they would be in a world of trouble right now.

It's a no-man's land that's a death zone because $40 is fucking expensive these days for a "bite size" gaming when smartphones do it for free, and no "it haz buttons tho!" isn't good enough of a reasoning. Switch goes further by providing a high scale experience that can even handle some ports of modern console games like DOOM, Wolfenstein, Final Fantasy XV, NBA 2K, FIFA, along with Nintendo's high end IPs that previously were reserved for home console -- Zelda open-world, Splatoon, Mario open-world, etc. 

Nintendo must keep Switch relevant by providing it with experiences that are to the layman some thing close to what they would expect from a modern-ish home console. Doesn't have to be right on, but within 1 generation leap of what is modern. That's the key IMO. 

If Nintendo made a sequel to the 3DS it would sell just as much if not more than the 3DS. Why? For starters the price would be insanely competitive. Nintendo sells the Switch at $300 and the 2DS XL at $150. I'm pretty sure PS2-Quality graphics are possible at a price point of a $150 portable these days (2DS XL is overpriced, to make 3DS XL prices look fair). Secondly, the 3DS had a rough start with a high price point, and a small library. Nintendo would have pulled a Switch and dumped an epic library on the masses early in the life cycle. This would have made a huge difference in sales numbers between the 3DS and our hypothetical sequel. Finally, and this is the most important thing... Nintendo's handheld offerings absolutely blow smartphones out of the water. We are comparing free to play shovelware, to full fledged games.

Yes, smartphones took a bite out of the handheld market, but they only really took the casuals that were playing Tetris, Nintendogs, and Brain Age. What remains of 3DS and Vita Sales is the core of the handheld gaming market, and those core gamers won't settle for the crap that is played on smartphones. That core of gamers will be a thousand times harder to capture than the casuals. Smartphones have no hope of taking that core, until smartphones offer experiences that are just as good as traditional handheld offerings. But that won't happen, because the entire Smartphone gaming market relies on baiting people in with free games, and then ruining those games with pay to win, microtransaction shenanigens.