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Tue, 03 Jun 2008

New Generation Consoles: and the score is ..

57 million. That, at a rough estimate, is the number of new-gen
consoles - Xbox 360, PS3 and Wii - that have been shipped worldwide to
date. Thanks to this week's flurry of financial results, we have the
first reasonably accurate breakdown of sales in ages, informing us that
the Xbox 360 has hit 19 million units, the PS3 is within shouting
distance of 13 million, and the Wii, leading the field by an impressive
margin, is sailing around the 25 million mark.


57 million. It's an impressive combined figure - but even if we assume
a neutral scenario, where this generation of hardware only reaches the
same installed base that the last generation did, we're still only a
third of the way through the sales curve of the systems. In the more
likely eventuality that this generation sells significantly better than
its predecessor, that proportion is even smaller.


It's worth taking a moment out here to consider the fact that the last
generation isn't doing so badly itself - nearly 14 million people last
year decided that they need a PlayStation 2 in their lives, giving it
healthier sales than either the Xbox 360 or the PS3. 


That's not bad for a console that celebrated its 8th birthday back at
the start of March. Even allowing for the continuing slowdown in its
sales, it seems likely that the PS2 is going to gasp past the 150
million unit milestone before it breathes its last - the first console
ever to do so, just as its predecessor, the PlayStation, was the first
to break the 100 million mark.


Such figures put our 57 million number in perspective, to a large
degree. They illustrate just how new to the market the new-gen consoles
are, and how far they have to go to emulate the sales success of their
predecessors. 


The figures also illustrate very effectively the enormous change that
the games market has undergone from the last generation to this one.
Some would argue that the biggest change has been high-definition, or
online. Some would argue that it's the rise of "casual" gaming. Those
are valid viewpoints, but I think that from a business standpoint, the
single most important change in the gaming market is fragmentation -
the diversification of the industry's output, and the accompanying
fragmentation of consumer spending.


In the last generational cycle, if you were a consumer who was keen on
videogames, you essentially had two choices - you could buy a gaming
PC, or you could invest in a PlayStation 2. With a single, incredibly
dominant console on the market, the alternatives (the Xbox and
GameCube, and handheld gaming in the form of the GBA) were essentially
niche interest devices, platforms which cultivated vocal and
enthusiastic userbases but whose broad commercial relevance was minor.


This was the pattern which had persisted for several years in the
games market. The PlayStation dominated its generation in a similar
fashion, and even in the era of famous rivalry between Nintendo and
SEGA, Nintendo's systems were the undisputed commercial champions. Over
20 years of gaming history, there have consistently been no more than
two realistic options for consumers with money to spend on videogames.


That has changed dramatically in the current generation. The PC, of
course, remains a viable and even healthy platform for many game
genres, producing million-sellers fairly regularly despite issues with
piracy and hardware expense, and the new generation of hi-def consoles,
the PS3 and 360, are locked in a proper battle for sales supremacy for
the first time in decades.


That's only the tip of the iceberg, however. The choice for consumers
is no longer simply between PC gaming and one or two high-end console
systems - instead, there's a whole fragmented universe of choice out
there, each sector exerting a pull on the finite (but growing)
collective wallet of the gaming public.


Take handheld gaming, for example. Despite the success of the GameBoy
and GBA, this was always previously a side-salad, with console or PC
gaming as the main course. The DS and PSP have changed that -
dramatically. 70 million DS consoles are in the hands of gamers, along
with close to 35 million PSPs. Even allowing for a lower software
attach rate than the home consoles enjoy, that's still a hell of a lot
of Pounds, Euro, Dollars and Yen accounted for.


Then there's the Wii - a console which arguably sits outside the
new-gen race, since its hardware specification belongs with the
previous generation of consoles. At the very least, it's indisputably a
very different beast, and it's got the most impressive sales curve of
any console in the history of the industry. 25 million today (more than
the GameCube sold in its lifetime), and 50 million projected by the end
of the year - that's way more than the N64 sold, and astonishingly, if
Nintendo hits that target it'll also pip the lifetime sales of the
legendary SNES. Again, more consumer bucks disappearing into a bucket
that isn't marked "new-gen consoles".


Of course, there's the PS2 - as I already mentioned, it's still doing
handsomely for itself. More than handsomely, in fact. Never mind the
hardware sales, check out the software - 154 million units of PS2
software sold in the last financial year, another big fragment of
"wallet-share". Hell, there are even individual games biting big chunks
out of the pie. Blizzard's World of Warcraft eats up over a billion
dollars a year of "videogame money". (That's even before you consider
how many games WoW players would potentially buy if they weren't
spending all their gaming time grinding virtual gold to pay their
repair bills from Serpentshrine Cavern raids. Or whatever.)


In many respects, this picture is positive. The fact that high-end
consoles and PCs aren't the be-all and end-all of the market any more
suggests a newfound diversity which will help to grow the demographic
reach of the whole medium. Moreover, it puts the brakes on the headlong
rush to more and more powerful systems which characterised the past
decade of progress. That rush will continue, but it no longer
constitutes the entire games business - and the existence and
commercial success of lower powered platforms, both handheld and home,
means that the barrier to entry for new developers is lowered
significantly. That's a good thing.


On the other hand, for publishers, the newly fragmented games market
does bring new opportunities - but it's largely just a massive,
thumping headache. For twenty years, they've been able to base their
business on supporting the PC, a dominant console platform - and maybe
a niche console platform if they were feeling charitable (or if a
platform holder greased the right palms).


Now, that's no longer the case. The 360 is leading the hi-def race,
but the slowly shrinking margin isn't large enough to justify doing
anything other than supporting the PS3 to an equal degree. However,
even those two consoles, for all the headlines they make and shelf
space they occupy, don't actually account for even half of the market.
The active handheld installed base is huge. The Wii is huge. The PS2 is
huge. Weird niche markets like MMOs are gradually getting around to
being huge. 


With all these huge areas crowding for space (and more importantly,
cash), will any console hit the 100 million, or 150 million, figures we
saw last generation? Possibly, yes - but not because of genuine
dominance. Nobody is going to dominate this generation like the
PlayStation and PS2 dominated the previous generations - in fact, not
even the PS3 and 360 combined will have that kind of dominance.
Fragmentation is going to be tough, expensive and difficult for
publishers - but it's also laden with opportunity. The success stories
of the coming years will be those who learn to stop worrying and love
the diversity.

(Gamesindustry.biz)

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