Gamer Changers?

Gamer Changers?

Do the Xbox One and PS4 really matter?

With Sony launching its PlayStation 4 today and Microsoft's Xbox One just a week away, I've begun my UPS vigil by the front window. But with images of late night game playing dancing in my pre-holiday head, I'm starting to wonder whether these new consoles will really push the needle forward in a meaningful way. It's quite possible, in fact, that the Xbox One and PS4 are simply ushering in the end of the video game console era.

From a numbers perspective, video game consoles don't even make sense anymore. In fact, they haven't for a long, long time. It's not just that they face increased competition from other, more popular forms of game-playing—including web games and smart phone and tablet games—but that our increasingly limited attention spans are being assaulted by entertainment options of all kinds, from all quarters.

Consider, for example, the sales figures for Sony's three previous generations of PlayStation consoles:

PlayStation: 102.5 million units
PlayStation 2: 155 million units
PlayStation 3: 80 million units

The original PlayStation was the first video game console to reach 100 million units sold. Then the PS2 became the console that hit 100 million units sold most quickly (in 5 years, 9 months). The PS3 will never hit that milestone because the market simply contracted. Is it still contracting now? Yes, I think so.

During this time, of course, Microsoft launched the Xbox, and one might attribute the success of PlayStation, and the fear that these consoles could become PC replacements, in playing a big role in convincing Microsoft to jump into this market. But while the Xbox 360 obviously outsold the original Xbox, this product line has also bumped into the realities of the market. We'll never see an Xbox with 100 million sales.

Xbox: 24 million units
Xbox 360: 80 million units

Nintendo, which won the previous generation with over 100 million Wii consoles sold, has seen only 4 million units of its current-generation Wii UI sold. This is a warning sign for both Microsoft and Sony, though to be fair, these companies are already looking beyond gaming—and to more general entertainment—an area in which Nintendo lags. Indeed, Nintendo's longer-lived consoles show a pretty steady decline with the exception of the curiously popular Wii:

NES: 62 million units
Super NES: 49 million units
Nintendo 64: 33 million units
GameCube: 22 million units

OK, so a straight video game play isn't going to make much sense. And we know from Microsoft's own data that over the course of the lifetime of the Xbox 360, usage switched firmly and permanently, from being games-focused to being entertainment focused. Today, more people use the Xbox 360 to use Netflix and other entertainment apps than they do to play games. Microsoft, especially, but also Sony, clearly get this.

With this in mind, the next-generation consoles—the Xbox One and PS4—must be viewed primarily as general entertainment devices. But here, too, the logic of these devices is lacking. Microsoft and Sony are entering a market in which competing devices cost under $100. But Microsoft prices Xbox One at an insane $500 and Sony's PS4 costs $400 (or more, if you buy the accessories that bring it up to speed with the Xbox One).

In this market for living room-based entertainment, you could spend as little as $35 on a limited but functional Chromecast device which works in tandem with the Android-based smart phones and tablets that most people already own and use. Or you could spend a little more ($50 to $100) and buy superior, standalone devices like the Roku 3 and Apple TV.

But there's more. Another issue with the curiously old-fashioned Xbox One and the PS4 is the same one faced by desktop PCs 10 years ago: They force you to go to a special room in a certain place to use them. And as with the move to laptops and, more recently, to smart phones and tablets, the freeing nature of anywhere/anytime gaming and entertainment on mobile devices is what makes these consoles seem so ... ridiculous, almost. Paying $99 or less for a Roku or Apple TV makes sense for the occasional users that represent the mainstream. $400 or more does not.

Yes, I know. Hard core gamers would never waste their time on a mobile device. But hard core gamers are a tiny audience compared to the 300+ million PCs, hundreds of millions of tablets, and the 1.5 billion smart phones that will be sold this year. And while their ranks will be split between Xboxes, PlayStations and PCs, further diluting the potential market for each device, the mainstream has simply moved on.

For these reason, I have a few expectations for these two new devices.

Shorter lifecycle. Microsoft has said it expects the Xbox One to last a decade, compared to the four year lifecycle for the Xbox and the 8 year lifecycle for the Xbox 360. That will not happen, and that assertion flies in the face of how much faster technology is evolving as we move forward.

Much lower sales. I think the sales volume changes between the PS2 and PS3 serve as a rough guide for how well these new consoles will sell. That is, I would be surprised if either the Xbox One or PS4 sold more than 50 million units.

The last of their kind. I don't think we'll see "black box" consoles like these ever again. Instead, the next consoles will be componentized and mostly cloud-based, which will lessen the need for costly hardware R&D and make it possible to update them in meaningful ways.

Spin-off devices. As I exclusively reported previously, Microsoft originally planned to ship a second Xbox One unit focused solely on entertainment, but temporarily killed this effort earlier this year. That device is still coming, will be much less expensive, and will dramatically outsell the Xbox One. Which of course is why they held off.

Don't get me wrong: I also expect to be an active and vocal supporter of the Xbox One, though I'll compare it fairly to the PS4 and be paying particular attention to each console's entertainment prowess (or lack thereof). And I still believe that the living room is a largely untapped market, though our content consumption habit changes may be working to alter that dynamic. But I just can't help but think we seeing the end of an era here.

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