Begun the console wars (round 5) have!
The new generation of gaming consoles are coming out and offer differing ideas for how computer gaming will evolve in the future. In this blog we look at what these console releases say about the future of gaming and what it means for consumers and the wider gaming ecosystem.
Firstly, we need to highlight that gaming matters. Computer games are the most valuable entertainment medium by far, well exceeding revenues generated by music, films, or TV. If a film grosses over $1bn it is a big deal, but this is pretty normal for lots of games. The UK has a hugely skilled and valuable game development sector that employs a large number of people, as well as creating new work for skilled writers, actors and musicians. It is something we are world class at, so when a new console generation lands, it really does matter.
The PlayStation 5 and Xbox Series S and X are these new consoles and offer a major step up over the current generation. On the face of it they are not that different from what came before, but they have vast improvements in system architecture, 4K video and much faster SSD disc drives. They both have cheaper versions without disc drives (more on that later), but where it gets interesting is how they differentiate in their approach to game distribution and connect with other services.
Microsoft are pushing connectivity and interoperability with other services and have spent a lot of time promoting Game Pass, a subscription model that effectively creates gaming-as-a-service. Other game streaming services (for example Google Stadia and PS Now) are available, but Game Pass offers access to top tier games and is a key part of the overall servitisation of gaming that Microsoft believes in. Being a Microsoft product, expect more interoperability with that company’s services and it looks like an intriguing proposition.
Sony on the other hand are pushing their console as a generational shift and that games will be all about new features and experiences. Yes there will be PS Now on offer, but Sony want to break with the previous generation and encourage people to see that new games will work differently with the new hardware and PS5 games will only be playable on PS5.
If consumers adopt the Microsoft approach en-masse, there may be big shifts in the way games are made and revenues shared. Developers have already grappled with new revenue sharing models presented to them by mobile gaming, but console gaming has always been more transactional and expensive to develop for. It will be interesting to see how Microsoft works with developers and if it will make other acquisitions like it did with Bethesda ($7.5 bn!), the studio responsible for some hugely popular titles such as Doom, Elder Scrolls and Fallout.
PlayStation however is still focused on the one-off purchase model and has been honest that developers will need to spend more for their games to make the most out of their console. This has already pushed the price of games up for consumers and PlayStation is very open that PS5 games will be designed for PS5 and see a real break from the past.
Going back to the hardware it is notable it has taken until 2020 to see the first disc-less consoles on a new generation. Both Microsoft and Sony are offering cheaper versions without disc drives that only allow digital downloads of games, which has big ramifications for the future. Consumers are now being incentivised to forsake physical media and embrace a digital first world where access to content is exclusively via Sony and Microsoft online platforms (a model PC gamers know very well with Steam). Like the competing models discussed above this is a big deal as physical copies of games has stood up well to the test of time, and the success of these digital only versions could accelerate the decline of physical media (though admittedly people have been saying that for years).
While it will be improper for us to choose a winner (both are members after all), they have already been selling sell fantastically. The new Xbox and PlayStation sold out well ahead of release date, so it looks like the short-term sales winner will be whoever can ramp up production capacity and get units out to expectant customers.
Overall this new generation is something to celebrate. The gaming ecosystem has just got a lot better and this is good news for gamers, developers, and hardware companies. Combine these new consoles with the very distinctive Nintendo Switch and the newest generation of ridiculously high-performance PC graphic cards, it is a great time to be playing, making, and selling games.