The Future of Video Game Consoles

In 2005, the world was ready for a new console cycle. Is the world ready for new consoles now?

Microsoft and Sony presented compelling and coherent pitches for something better. (The Nintendo Wii is its own entity, and not really part of this ecosystem at all.) 

At the time, the PS3 and XBox 360 clearly offered new ways to play. It is true that for gaming they offered little that hadn't been found in PC games for almost a decade, but never before had it been brought to the masses in an easy to use, ready-to-go package.

Online play, voice chat, rudimentary social features and more, these were new to consoles, and it was easy to see the appeal. I don't recall a lot of talk about "why would I upgrade?" Instead, I recall more "when will we upgrade?" Everyone was willing and ready. 

Recently Sony and Microsoft rolled out their familiar new console launch announcement for the world of 2013 and found the response quite different to the one in 2005. 

If I had to characterize the two keynotes it would go something like this:


Microsoft pitched a family entertainment device that sometimes happens to play games.

Sony's PS4 announcement was a rambling mess that only seems compelling to gamers in hindsight, held in contrast to the Microsoft announcement. 


The general reaction of those seeing both announcements could best be described as a spectrum from:

Who the hell wants something like that?


No one knows why you should buy it, but it's the new console!


Why? What changed between 2006 and 2013? What's happened to the world where these new devices, the PS4 and XBox One seem to have fallen into the void of "meh"?


The world of today is filled with smart phones and tablets. Hundreds of thousands of games exist for them, most of them free. While they do not rival the console offerings, they are cheaper to produce, easier to get and drive a much larger market, and that market spends money (at least on iOS they do) a LOT. 

Tablets are so powerful a market force, this year they will match PC shipments.

But even the rise of mobile is not the main problem, it is simply the thing that I believe will replace the floundering console segment. 

There are several issues with the pitch for a new console that have nothing to do with mobile:


The Upgrade Assumption

Many people in the industry seem to suffer from a troubling assumption. It goes something like this: 

We have upgraded our consoles every couple of years since the Magnavox Odyssey and we will continue to do so forever.

One might apply a similar statement to nearly any concept:

We have always searched for phone numbers in the Yellow Pages, and we will continue to do so forever.

We have always had a home telephone, and we will continue to do so forever.

The entire point of technology is that nothing lasts forever. That's what technology does. New technologies sweep in and completely displace old ones, just as tablets seem to be displacing PCs right now.

Eventually, the momentum for one style of technology slows and stops, leaving unused machines in its wake, along with a dead industry. 

When my phone, tablet and PC are more powerful than a "console," do more, and are cheaper, why would I buy a console?

Good question. 

Microsoft seems to think it's so I can talk to my TV. Sony seems to think it's so developers can multi-thread. 

But it gets worse.


Failing to Make the Case for Bigger and Better

Most televisions shipped in the US today have Netflix capability built in. Many have Twitter and Facebook integration, sans box. For $99 I can have a media device that does everything an XBox One does (save watching everything I do in my living room). 

already have an XBox 360 and many games which will not play on the XBox One. 

The future, it is pretty clear to see, is about reducing hardware. It's about consolidation, increasing functionality and reducing size. About devices doing many things at once (the iPhone being the prime example).

Microsoft is moving against this trend.  Sony less so, but they do this as well. 

Of course, these businesses need to ship a box, but what does that box do? 

A box for playing games is a clear pitch as something to attach to your television. A device that does something that the TV out of the box does, is not. 

It seems likely that we are at most, a year out before Apple ships something allowing cheap, easy access to the half a million games on iOS for your television. 

While this confusion and market static may not be enough to destroy the XBox One or PS4, it is a huge boulder in their path. Worse yet is the inertia of the install base. Add on top the new, odd social features and many were left confused by the keynotes. 

The most compelling reason to move ahead for consoles is games. In fact, I posit, that's all they have to offer.

Sony pitched games, but in a rambling mess of a keynote that was confused and seemed to have no central message. 

Their handling of social was much more in line with what people want, I imagine (share game clips on Youtube with friends sounds like something which might actually be used, as opposed to "snapping" between a game, TV, a Skype call etc…) but still felt like reaching.

All the footage I saw at both keynotes could easily have been cut into the 2005 keynotes, and no one would have noticed. It all looks basically the same (since most of it was pre-rendered, non-game content).

The failure to pitch bigger and better has a long history.

Let's look at Blu Ray. 

Blu Ray won the war against HDDVD. But the winner of a battle between two losers is still a loser. Physical media sales of all kinds are dwindling, and they will not be mystically restored. The die is cast, and companies like Netflix now rule. It is only a countdown until the last CD or DVD is pressed. 

The case for bigger and better in Blu Ray was a difficult proposition. From VHS to DVD was an easy pitch by comparison ("freeze the movie anytime with no static! Jump all over without fast forwarding! Sold!"). Blu Ray came down to "it looks so much better!"

Something that is not easily pitched is not easily sold.

This is where we are with the consoles.  There is no central, compelling reason to upgrade except to "upgrade".


The Dwindling Herd

I've spoken of this before, so I won't belabor it, but the console development industry, if it had to be described in allegory would be something like this:

A skeleton strewn battlefield covered in chunks of dead companies, lorded over by four titans engaged in eternal combat, wielding new and ever more expensive weapons that inflict less and less damage.

Since 2006, we've lost dozens and dozens of development houses. The low-end and middle-men have been decimated by rising costs and a more competitive market, and I mean that in the Roman sense of the word. 

Right now, there's pretty much: Ubisoft, EA, Activision and Rockstar. 

There are others, of course, but the numbers that need to be moved to stay in business keep rising. 

The latest Tomb Raider from Crystal Dynamics shipped 3.4 million units and failed to break even. Think about that.  

Ubi, EA, Rockstar and Activision are the guys who can really afford to fork over 100 million in development for an XBox One or PS4 title. Consider the range between 60 to 100 million the "minimum in" for such a project moving forward (for perspective, X360 was in the 15 to 20 million range, and PS2 was in the 5 to 8 million range). 

It is only a matter of time before one of these four ships a "studio sinker" and goes under.

It is easy to imagine a future where the main releases: Madden, Fifa, Call of Duty, Assassins Creed and GTA are it.

Such a future does not represent an ecosystem, it is a tiny bubble with a  limited amount of air. It's only a matter of time before the remaining parties asphyxiate in their own waste.

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