Are Consoles Headed for Extinction?

[Spindel]

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Consoles as we know them could be on the way out in the long-term, as the industry looks to a more service oriented business model. DFC's David Cole sheds some light on the topic.

Posted by James Brightman on Friday, May 30, 2008


In DFC Intelligence's most recent report on the growth of the video game industry and the console wars, the firm makes an interesting point about the console side of this expanding business:
"The biggest story over the next few years may be the declining overall importance of the console systems. Last year Sony's biggest selling game system was the portable PSP. Meanwhile, the Nintendo DS blew out all records for game system hardware unit sales (portable or console) in a single year. From a pure revenue perspective, the biggest system for software sales in 2007 was the PC, if you include revenue generated from online services."

"One area of concern is that the console hardware business is very difficult... It is a really tough business to have to reinvent every five years."

With that in mind, we wondered what this really means for the future console landscape. Are consoles ultimately doomed for extinction in the long run, or will there actually be a standard as Denis Dyack believes? We tracked down DFC President David Cole to have him answer our questions and expand on the initial DFC report. Here's what he had to say:

I think that doomed for extinction is definitely too harsh a term. However, declining in overall importance is a different matter. Also this is the type of thing that takes years to happen...as we said, we are still expecting the next gen of console systems to follow the traditional model.
But it is an issue as the game industry goes to more of a service oriented business and consumers access products on multiple devices. Ten years ago only a handful of kids played games on PCs; they almost all played on console systems. Today's kids play games on multiple systems including consoles, PCs and portable systems. When they become adults they will probably continue to do the same. That means consoles co-exist with other platforms.
However, it is important to remember the console manufacturers play a very important role in spending billions of dollars to not only develop, but also market a stable platform for software developers and third-party publishers. The industry would really struggle without their investment. One area of concern is that the console hardware business is very difficult... look at how many years Nintendo was down, look at how much money Microsoft has lost, look at Sony's losses over the past two years. It is a really tough business to have to reinvent every five years. Of course, if you are successful the payoff is huge – witness Nintendo's growth in the past two years.
The problem with the idea of a standard (an idea that has been around for years) is who is there to get the reward for taking the risk? If there are no companies willing to invest billions in order to receive a payoff it starts to look like a free for all. Sony would like their platform to be the standard... ditto Microsoft.
I think the high reward for being a successful console manufacturer, versus the benefits to the industry as a whole from the investments the Microsofts, Sonys and Nintendos of the world put into building a platform means the extinction of the console may be further off than many seem to believe. Of course, as other platforms grow that doesn't mean the consoles won't have less and less share. It is kind of like what happened to the movie box office when TV came along. In the U.S. box office attendance peaked way back in 1946 but people still go to the movies.

Very interesting read, but as usual with this type of speculation; only time will tell.

[boffo]

If it happens it won't be for a long time. Overall console sales seem to be going up with each passing generation so now is kind of a stupid time to even be speculating on the possibility. Once sales start to sag for a whole generation then would be the time to start considering it.

[E6600]

Service model?
Don't like the sound of it.

Maybe it is time for Apple to add Games to the Apple TV menu

[Ark]

it'll happen, just not in this near future...

[tr1p1ea]

"... if you include revenue generated from online services." MMO Profit Spin confirmed.