Market research firm says either Sony or Microsoft will "struggle" with their next-gen consoles as Nintendo will be "the clear winner"

A new report suggests that either Sony or Microsoft is going to have a tough time battling it out for second place against the Nintendo Switch 2 over the coming years,  saying "There isn’t room for more than two major console systems."

According to DFC Intelligence's annual market report, broken down by VGC, Nintendo is going to be the clear winner of any future console wars, and either the PS6 or the Xbox-whatever-new-name-it-gets will "struggle mightily in a distant third place."

The video game industry boomed during the COVID-19 pandemic, probably because everyone was advised to stay indoors. So, with more time at home and TV shows and movies becoming harder to make, many of us used video games as an escape from reality.

That boom didn't last, and we've seen thousands of layoffs in the last few years, but DFC believes the industry is going to grow substantially again in 2025 and beyond. The only issue is there will only be room for two consoles. It sees Nintendo as "the clear winner," and notes "A new Sony system (PlayStation 6?) should have an advantage because of [its] loyal [player]  base and strong Sony IP."

DFC founder and CEO David Cole says: "Over the past three decades, the video game industry has grown more than 20x, and after two years of slumping hardware and software sales, it’s poised to resume growing at a healthy rate through the end of the decade. While 2025 will mark the beginning of that upward trajectory, some huge questions remain, including who will lose the next-gen console war and who will win the game software distribution battle. And with the large publishers focused on live services around evergreen franchises, opportunities for smaller studios will be plentiful."

It's important to note that consoles and games are still selling, they're just not selling as much as they were during the pandemic. The issue for companies and investors is that the growth is slowing, not that the industry isn't growing at all. DFC actually predicts that over 4 billion people will be gaming each year by 2027, nearly half the world's population.

DFC's report also notes that while "Microsoft failed with Xbox Series X/S [it] has made major acquisitions to become [the] world’s largest software publisher. Microsoft has the option of focusing on software and distribution models over hardware."

We've already seen Microsoft pivoting to this approach in recent years, most strongly with its new "this is an Xbox" campaign. By going hard on cloud gaming and Game Pass, Microsoft doesn't need to sell as many Xbox consoles to keep us all playing Xbox games.

If you're wondering why people say Microsoft has failed with the Series S and X generation of consoles, it's because it missed the mark with the launch of the Xbox One. The PS4 and Xbox One generation was when most of us started to build up our libraries of digital games. While I think Game Pass is a great deal, I'm not willing to abandon the hundreds of games I have connected to my PSN account, it would just cost too much to build that collection back up. That's a sentiment shared by a lot of people.

There's also the fact that Microsoft, despite being the largest publisher, just doesn't put out as many games as Nintendo or PlayStation. That's likely to change over the next few years once all the developers Microsoft has bought finish what they're working on, but if it can't get that output up by the time the next consoles come out, it'll be lagging behind yet again. Sony is trying to buy huge media publisher Kadokawa, so it won't let Microsoft stay the biggest for long.

While you're here, why not give Microsoft a chance and check out some of the best Xbox games you can play right now? Or side with the clear winner and look at the best Switch games, or bet on Sony and play the best PS5 games.