It's not just an issue of development times. Diminishing returns is real. PS4 level visuals were already approaching a certain level of photorealism/reality. 

People just thought you could continue to scale up and up and up nonstop and there wasn't ever going to be a budget reality coming into play. 

That was always stupid. There is a development cost to that, just like movies with CGI can cost hundreds of millions of dollars. You think Hollywood likes to pay their CGI people? Most certainly not. There are strikes right now because they're trying to weasel out of paying their creatives anything. It's because the closer to photorealism that you want, the more that is going to cost you because the people working on those movies (or games) will not work for free and you will need a lot more of them. 

You're not getting a game with visuals of even the first Avatar movie without that costing a fortune. 

This was all inevitable. $200-$300 million dollar budgets for a video game ... unless you are GTA6 is totally insane. How do you even recover if you make a game with a budget that high and it fails to meet sales targets? You're totally fucked. None of these Japanese studios like even Capcom or Square-Enix are going to be able to afford to make high end games if the budgets for them keep going up and up and up. 

Square-Enix is probably coming up against that cold hard reality right now actually. I don't think FF16 is going to sell what they hoped and isn't really breaking out in the West (so much for the "who needs the Japanese audience!" gamble) and that game probably cost them a lot even though it doesn't look miles better than FF7 Remake. All of the sudden a Switch 2 probably looks pretty decent to them, if they ever want the FF series to reach the sales highs it used to have, they're going to need it and the 25+ million it could sell in Japan on top of the 75+ million elsewhere. 

I think Nintendo is aware of what they need to do. It just depends on how they’ll approach the successor. It’ll be interesting to see how Furukawa, Koizumi, and Takahashi handle things now that they don’t have to rely on Kimishima or Iwata.

As for third parties on the switch successor, that’s my worry. Even with the Switch’s incredible (and stable) success and the rumors of a stronger successor, I can’t help but worry about third parties approaching the successor. They’re as likely to dip their toes as they are going knee deep on the successor.

Take Capcom, for example. I can see them pull of BS off instead of releasing Street Fighter VI (or it’s ultra version), they’ll release ANOTHER version of Street Fighter II. Or Bandai Namco. Got some anime games and some ports of 7th Gen titles, but not much from recent entries from franchises like SoulCalibur or Tales of. 

It sucks to think that way, but I just won’t be surprised if Nintendo would have to basically carry the Switch successor on its shoulders for the first two or three years. That is until third parties decide to get their asses and actually support the console that gives them less excuses to not port more recent games. I know I’ve said this many times, but it creeps into the back of my mind. It’s incredible that they’ve sold over 130 million Switches and are dominating Japan, yet the amount of late 8th gen and original games are not as plentiful from third parties even now.

Street Fighter VI on Switch 2 will happen. The lead designer of the game says he wants it on Switch and they are free from Sony exclusivity deals (probably the only reason SFV isn't on Switch 1).

There's really not actually that many big ticket 3rd party IP that are not on Nintendo platforms. The main ones are

Call of Duty (which is confirmed for the Switch in the future)

Grand Theft Auto

Madden NFL

Mainline Final Fantasy games (+7 remakes)
Mainline Resident Evil console games (well they are on Switch but via streaming)

COD, Street Fighter, Madden NFL, and mainline Final Fantasy and Resident Evil are gonna happen on Switch 2 I think. 

Grand Theft Auto VI is the big question mark, but the Switch is the first Nintendo console to get a GTA game since DS and they put Red Dead on the Switch too, it seems like maybe relations are warming there but who knows.

It's not like Nintendo must have GTA. It would be a nice to have, but it's not the end of the world.

Hopefully you guys are right, I'm skeptical.

Final Fantasy mainline is the main "get" I want on Switch 2.

It's about time that series comes home, and it's not growing as a franchise and they've destroyed what used to be a 2-3 million seller in Japan to something that now sells below Pikmin 4. Rising dev cost + declining sales ain't a good combo.

If you're Square-Enix you really need to think long and hard about Final Fantasy 17, do you really, really, reaaaaalllly need to squeeze every ounce of power from a PS5, or does it make a lot more sense to make something that maybe looks about as good as FF16 (which already will cost you a huge budget to make) and make it scalable so a Switch 2 version works well enough and start regrowing your audience on Nintendo platforms (especially in Japan where Final Fantasy used to be a top 3 franchise).

You should be able to make a game that is 4K/30 or 1440p/60 on a PS5, but runs reasonably at say 720p native/30 fps (using DLSS to go up to 1440p or 4K) on a Switch 2 that still looks very nice. That is a massive pixel disparity, the PS5 is being forced to push 8x or more as many pixels. If there's even any extra juice left on that PS5, turn on a few ray tracing reflections, and voila, you've maxed out the system totally. 

I guess Madden NFL would be nice for US gamers, I think that will happen too, though I'd prefer NHL. Maybe both happen. 

Yea I think having any of the modern Final Fantasy games come to Switch 2 will turn heads. Sure, having the original VII, VIII, IX, X and X-2, and XII on a Nintendo platform for the first time is surreal, but not really impossible due to being remasters of really old games. If you tell me that FFVII Remake is coming to Switch 2 and it performs better than the PS4 version due to being newer tech, then I can see more people really show interest if they aren’t interested already. 

At this point, Square Enix has to figure out what they want out of the Final Fantasy series. Are they ok with “solid, but not exceptional” sales of expensive mainline entries? Or should they be looking beyond Sony’s exclusivity deals with them? I’m not sure if the West is making up enough of the significant decline in Japan. If you’re big mainline game in FFXVI is merely showing solid sales while TOTK is continuing the great resurgence of the Zelda franchise, a franchise long compared to Final Fantasy despite their differences in genre, then somethings wrong. Not to mention, as you said, Pikmin 4, a relatively niche real time strategy game, is outselling XVI in Japan convincingly week by week.

I mean really if you want to break it down, it's pretty easy to "max out" a PS5 if you really push the resolution.

A 4K native game on PS5 at 60 fps, versus a port of that same game on Switch 2 at 720p docked native (DLSS up to 1440p or 4K) at 30 fps is a whopping *16 times* heavier pixel load for a PS5 to have to render per second.

Is a PS5 going to be 16x more powerful than a Switch 2? No chance, not even close. The gap between a PS4 and Switch 1 is maybe 4-5x.

So if you're say a Japanese studio that really can't afford to make a GTA6 budget game (which is all of them) ... it makes a lot more sense to be a little scalable in your game design and get a Switch 2 version that you can release, crank a PS5 to 4K/60 (but I doubt PS5 can even manage that for a lot of games) and you will max out that system. Then you can take that same game and make a 540p/720p Switch 2 version from it, use DLSS to upscale those resolutions up to something that looks a lot better (1080p undocked, 1440p-4K docked). 

It doesn't have to be a case of "well if you make a shitty version for your Nintendo console, it's holding back a home console Playstation hard". That dynamic is also changing because 4K + 60 fps alone basically cripples a PS5 as is. 4K/60 just kills a PS5, it can't run a lot of the PS4 games at 4K/60, forget even a "PS4.5" kind of game like what Spider-Man 2 appears to be. 

Problem with your view about DLSS being game changing is it is a tool. A tool is only as good as the craftsman wielding it. DLSS doesn't just work. Square would have to actually put effort into the port.

It does kind of "just work" though, lol. Especially if you give it a reasonable amount of pixels to work with (540p or above). That's the whole point of it, it does the work so you don't have to. 

Developers may have to tweak a bit harder for the undocked mode but you have more leeway on a smaller 8 inch screen. 

I don't think either FF7 Remake or FF16 sold as well as Square-Enix wanted to be honest. If they ever want a FF game to sell 10 million WW ever again, they're going to need the Switch 2 and they need to get the franchise growing back to what it was in Japan in particular. You can't go from 2.5-3 million sales/entry down to 500k and for that to be OK while your development costs are going way up. That's just dumb. They need to start getting an extra 1.5-2 million sales from Switch at least and build up from there by cultivating the audience. 

It doesn't just work though.  Some PC games have it working amazing and others look like crap.  If it just worked all PC games would support it.  Most games don't.  

I also think 540p is bare minimum.  And it still doesn't factor in assets that need to be high quality which requires storage and memory speeds.  Scaling low quality assets are going to look awful.