In college, I was briefly a console gamer who owned a PS2 and, later, a Wii.
At the time, consoles were a one-trick pony. Today, they’re advertised as home-entertainment centers. Besides gaming, you can watch movies, browse the web, record and broadcast gaming sessions, use Skype and much more on your Microsoft MSFT, -0.37% Xbox One and Sony SNE, -0.18% PS4. Consoles (I’m mainly referring to Xbox One and PS4) are evolving, so much so that soon it will be hard to find the features that set them apart from other devices, such as smartphones, tablets and PCs.
Sounds farfetched? Let’s take a look at mobile phones and their evolution from feature phones to smartphones. We can recognize the same pattern there as well: a device used primarily for making phone calls is now used for anything from gaming to education.
The mobile-gaming industry is a behemoth, generating $30.4 billion of revenue, accounting for 24% of global games market revenue for 2015. If forecasts are any indication, the market will only keep growing, reaching 34% ($52.5 billion) in 2019.
The chart above shows an interesting trend: shrinkage across all other markets (except tablet games), with consoles losing 4% of market share over four years.
It’s easy to see why this scenario may very well come to pass: New smartphones are released in ever-shorter iteration cycles, where a new flagship device comes out every few months, offering more processing power, more battery life, better performance and better features. It’s not only smartphones: Other digital-entertainment devices and peripherals, such as tablets and PC components, are following suit.
Driver: Speedboat Paradise played on TV using Chromecast and an Android Phone.
On the other hand, consoles are made with a six- to eight-year life cycle in mind, during which time they need to accumulate profit, keep consumers engaged and hopefully have enough leftover revenue to start a new cycle with hardware capable of competing with modern PCs.
Back then, achieving this was much easier, because consoles ruled the living room. No other device could compete with them, and most users played games on either a PC or a console — but rarely both.
Jon Peddie Research
Long life cycles were wonderful for manufacturers. They allowed the market to mature, which resulted in polished, optimized AAA titles and a faithful consumer base. At the very end of a successful cycle, console manufacturers had consumers ready to make the switch. On one end, there were eager developers, motivated by revenue and ready to come out with even better, sometimes exclusive, launch titles, and on the other you had hyped customers, happy to get their hands on the latest bleeding-edge console, which was more often than not on par with what modern PCs had to offer.
The Nvidia Shield, an Android-based 4K streaming/gaming device.
All this is now subject to change, as other devices are invading the living room. Smartphones, tablets and even set-top boxes are all vying for consumers’ attention. They’re also getting more powerful with every new iteration, and it’s quite possible that in a few years their visuals will be on par with present-day consoles.
Although I don’t think they can overtake the console audience, I do see them jeopardizing their profits. You see, a modern gamer is versatile and owns not just one, but multiple devices, and with ever-evolving digital entertainment, now he must pick and choose where to invest his hard-earned cash. Consoles seem to be on the losing end.
Steam Machine, a gaming computer optimized for living-room gaming.
To halt sliding market share and keep devices relevant, console manufacturers will have to follow the latest trends (like Sony is doing with VR), and increase their devices’ processing power to match modern PC titles, as well as provide additional value to their increasingly demanding user base.
Obviously, waiting eight years between console generations won’t work anymore. However, reducing the life cycle isn’t as simple as saying: “We’ll put out a new version every x years.” No longer will developers have a rock-solid guarantee that their games will be relevant in the next decade.
Consoles won’t be able to stay cheap, either. You see, when launching a new console, manufacturers used to charge less for the devices, even if it meant losing money at first. They did that because they planned to make it up from software sales during the long console life cycle. Now, because the time window before the new device is launched is going to be shorter, the volume of games being sold won’t be high enough to compensate for low console prices. A new-device launch, the associated marketing and RD will ramp up costs yet again, making it even harder for the console folk to turn a profit.
Does this all mean consoles are dying or already dead? Not at all. Consoles appeal to a wide range of gamers, casual and hardcore alike. They’re equally welcoming to those who own a PC but also want to play exclusives, as well as those with a more limited budget who want smooth game play but can’t afford a high-end PC. They require no special knowledge to use, and all the extras they come with are just an added bonus. I don’t see a single device filling those shoes in the foreseeable future. Multiple devices, though …
So is there cause for concern? Partially. On the living-room-entertainment throne, consoles still reign supreme. For how long, though? Things have changed, and there are more pretenders now than ever before. Keeping up with the competition (both direct and indirect), and still reaching the yearly sales figures will be tough.
Still, Sony and Microsoft know that and are already taking steps to position themselves accordingly. Even Nintendo might have an ace up its sleeve with the Nintendo NX, although I’m a bit skeptical. Whether this change will mean simply biting the bullet and iterating faster by producing marginally faster consoles over a longer period, or doing something radically different, remains to be seen.
Regardless of the change, one thing is certain: Consumers will always find a way to be entertained.
What device do you use to game on? Let me know in the comment section below!
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