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November 15, 2013 12:15 pm
These numbers from researcher IHS look impressive for heavyweight gaming machines that cost upwards of $400 a piece.
Until, that is, they are compared to Apple, which sold 48m iPhones and iPads in the past quarter alone – and have become many people's preferred way to play games.
The new home consoles from Sony and Microsoft, which arrive this month on a wave of hype, face a very different gaming market to their predecessors in the mid-2000s.
Back then, the Nintendo Wii and its motion controller stole the show, and the iPhone was still hidden away in Apple’s labs.
The success of the Wii awoke the rest of the gaming industry to the importance of reaching casual gamers as well as the trained killers of Call of Duty and speed demons racing Gran Turismo.
But as smartphones and increasingly tablets occupy more of gamers’ time, analysts say that the new Xbox and PlayStation will struggle to beat their predecessors’ lifetime sales of more than 80m each.
“The Xbox One and PlayStation 4 will be the last generation of games consoles,” predicts CCS Insight.
This shift may be difficult to discern in the near term. The first buyers of the new consoles will be the big game enthusiasts, so the consoles are likely to be a sellout for the first few months at least.
These players still care about the graphics and sophistication that the latest consoles’ technical horsepower can deliver, and that mobiles still cannot match.
“Tablets and phones are set to dominate more casual, short-session gameplay, leaving the PS4 and Xbox One to clean up the demand for epic, big-screen, cinematic game play,” says Kristian Segerstrale, a former Electronic Arts executive who now invests in digital gaming with Initial Capital. “Which market will ultimately be larger is still up for grabs.”
Dan Cryan, at IHS, says that there is already some competition for “discretionary Christmas gift spending” between consoles and mobile devices as consumers ponder whether to spend their $500 on an iPad or an Xbox One.
“The price of the mainstream consoles is coming down and becoming more mass market at the same time as Apple and Google’s tablets, phones and set-top boxes become more fully-featured, coming up from the bottom,” he says. “At some point they will meet in the middle. The question is where.”
For traditional console game developers such as EA, Activision and Ubisoft, these are tense times. Each has spent many millions of dollars on titles that they hope will open gamers’ wallets when they pick up their new machines, by showing off the latest flashy graphics or sweeping gameplay.
Earlier this year, executives from Sony and Microsoft drew a clear battle line between their two new games consoles: the Xbox One was pitched as an all-in-one entertainment hub while the PlayStation 4 was – in the words of Sony chief Kazuo Hirai (pictured) – “all about the gamers”. That stance marked a reversal from the launch of the two companies’ previous consoles in the mid-2000s. Continue reading
Andrew Wilson, EA’s new chief executive, is “bullish” on their prospects. “Pre-order data show strong demand for the new consoles,” Mr Wilson said in an earnings call last month.
“Our industry is far more dynamic and diverse moving into this console transition than ever before,” he said, citing the popularity of mobile and PC gaming.
Developers’ huge upfront costs could become problematic if the new machines do not sell well. But Bobby Kotick, Activision Blizzard’s chief executive, believes that Sony and Microsoft cannot afford to let their consoles fail.
“You’ve got two laser-focused, large companies who have important future benefits that come from continued investments against the successful launch of this platform,” Mr Kotick said in his earnings call this month.
“Efficiencies could drive hardware costs down sooner in the cycle. There’s no indication from our side that you’ll see anything other than a successful next seven to eight years.”
Nonetheless, consumers were hesitating before buying Activision’s best-selling titles such as Skylanders, waiting to see what the new consoles looked like. “Console transition years are volatile and hard to predict and this year is proving no different,” said Mr Kotick.
The games companies who have thrived on tablets face no such disruption. Jens Begemann, chief executive of Wooga, maker of popular mobile titles such as Diamond Dash and Jelly Splash, says he has no plans to adapt them for the Xbox or PlayStation.
“I believe that it is the console industry that is having to adapt to the disruption mobile companies like ourselves have caused, not the other way round,” he says.
Next to the hundreds of millions of people who own mobiles, “consoles still satisfy a niche market” he adds. “People are getting so used to being able to play at any time, anywhere, that a dedicated living room experience will most likely become obsolete.”
Our industry is far more dynamic and diverse moving into this console transition than ever before
- Andrew Wilson, EA chief executive
Both Sony and Microsoft are also players in the smartphone and tablet markets themselves, of course – albeit in more minor roles compared with the likes of Apple, Google and Samsung.
Microsoft released its SmartGlass companion app for the Xbox last year, which can be used to display extra content from a game, such as tips or maps, or chat with friends on Xbox Live.
Sony says its new second-screen app will be easy for web developers to add extra features to console games, allowing for live interaction back and forth between the big and small screens. The PS4 will also allow gamers to pick up where they left off on Sony’s PlayStation Vita handheld.
The two console makers have also increased their focus on digital games with social components. The PS4’s home screen includes a Facebook-style news feed of what the owner’s friends have been playing or watching.
IHS also forecasts that 34 per cent of spending on games for the two consoles will go to digitally distributed titles by 2017, compared with only 7 per cent on their predecessors in 2008. However, $50 discs remain the norm when buying console games, compared with mobile apps that are often free to play.
“There is no doubt that this is by far the most competitive consumer electronics climate that Sony and Microsoft have launched consoles into,” IHS says.
“However, IHS believes that the shift to digital consumption coupled with lower upfront investment in console hardware design . . . will lay the foundation for stronger profitability for [Sony and Microsoft] across the next generation.”
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