The last gaming console war begins

Have you bought your last gaming console? Changing trends in the gaming industry suggest the replacements for the venerable PS3 and Xbox 360, respectively, may be the last of their kind.

As expected, both the Sony Playstation 4 and Microsoft Xbox One feature beefed up insides that serve up more realistic graphics, sharper sound and faster gameplay. They’re also much more online-centric, with significantly expanded features designed to make it easier to stream content, surf the web and share the experience via social media. As expected, they’ll both be in high demand by tech-forward gamers this holiday season. Sony has already sold 1 million PS4s since they hit store shelves last week, and Microsoft is expected to move Xbox Ones at a similar pace after they go on sale Friday.

Slowing hardware growth

It’s beyond the holiday season where things get murky. While each vendor says it shipped 80 million units of its previous-generation console, respectively – compared to 24 million for the original Xbox and 155 million for the PS2 – future sales projections suggest the console category’s fast-growth days are over. Research firm IHS predicts the PS4 will sell 49 million devices by the end of 2017, and Microsoft will move 38 million Xbox Ones in the same period. Sony’s projected sell rate represents an annualized increase of 5 per cent, while Microsoft’s would be down 7 per cent compared to the Xbox 360.

It gets worse when software is factored in. When the San Francisco-based Game Developers Conference asked 2,500 developers earlier this year about their future plans, the results confirmed a strong trend toward mobile development, with 38 per cent reporting their last game project was for mobile devices. Over half – 55 per cent – of developers had shifted their attention to mobile for their last game project, and 58 per cent were planning to develop their next game for a mobile device.

The numbers go downhill from there for traditional consoles: Only 13 per cent of respondents said they coded for the PS3, and only 12.4 per cent said they planned to build their next game for Sony’s now-replaced console. The Xbox did slightly better, with 13.2 per cent of programmers currently developing for it and 14 per cent planning to. Only 11 per cent of GDC respondents said they planned to develop for either vendor’s next-generation console.

Shifting to mobile and casual

In a talk at the London Games Conference earlier this month Wedbush Securities analyst Michael Pachter said the major players are essentially selling to the converted, and shouldn’t expect the existing market to expand much beyond its current size

“I don’t think the console market will get any bigger,” he told attendees. “The console installed base has peaked. Consoles may not be relevant in 10 years. We have expanded the market beyond the hardcore console owner.”

Wedbush said emerging streaming and mobile platforms are already muscling in on the consoles’ once-dominant position in the gaming market.

“We now have ten times the audience over the Internet, six times the audience over mobile,” he said. “And I think one day you’ll get to play any game, anywhere on any device.”

NPD Group figures show the number of gamers in the U.S. rose to 209.9 million this year from 205.9 million in 2012 – but most of the new gamers used mobile devices, not consoles.

While this tectonic shift in how we play, and on what, means the game console as we know it will likely vanish when today’s spanking new Playstation 4s and Xbox Ones reach end-of-life, don’t expect Sony and Microsoft to walk away from their still-lucrative franchises. Expect Playstation 5 and Xbox Two to morph even further away from their gaming-centric roots to maintain their hard-won toehold on the tech-heavy living room.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca