NEW CONSOLES ARE ON THE WAY, BUT GAMING ISN'T THE SAME
c.2013 New York Times News Service
The new video game consoles from Sony and Microsoft about to hit store shelves are almost certain to be hot holiday gifts this year. The uncertainty for the games business is: What happens after Santa leaves?
Consoles have been the thumping heart of the video game industry for decades. But the new PlayStation 4 from Sony and the Xbox One from Microsoft will enter a landscape reshaped by tablets, smartphones and Facebook, all of which provide games at a lower price and in greater abundance.
There is evidence that mobile devices have chipped away at the sales of traditional game systems, and console game sales have declined for several years. So the gaming industry is keeping an eye on whether the new generation of machines from Sony and Microsoft — the leading console makers along with Nintendo — can reverse the trends for an extended period of time.
Most people in the games business are predicting a strong start for the new consoles, in large part because of pent-up demand from hard-core gamers, the most dedicated players who are less hesitant about spending hundreds of dollars on new hardware. It has been seven years since Sony released its last game console, and eight years for Microsoft, years longer than the typical life cycles for new systems.
“I think there’s going to be initial hype, some fun games, tons of money spent on marketing,” said David Gardner, a venture capitalist with London Venture Partners and a former senior executive at Electronic Arts, the games publisher. “I just don’t know, three or four years from now, whether it will feel as fun as it will this Christmas.”
The real test for the new consoles will probably start during the holidays next year, when the production lines for Sony and Microsoft start pumping out bigger supplies of the products and a more circumspect set of customers begins considering the benefits of the new hardware.
To reach the biggest possible audience with their systems, both companies want to attract people with entertainment options like video through a Netflix app. But game consoles face a lot of competition for those functions from less expensive devices, like those offered by Apple, Roku and others.
While the consoles are being pitched partly as full entertainment systems, gaming remains the central focus. Sony and Microsoft have both bumped up the processing power of their machines, enabling greater graphical fidelity in games and more realistic effects. One big difference between the two systems is that the Xbox One will cost $500 — $100 more than the PlayStation 4, which goes on sale Nov. 15 in the United States and Canada. The added price stems from Microsoft’s inclusion of Kinect, the company’s camera and sensor-based system for playing games without a controller, with every console.
The higher price of the Xbox One has raised eyebrows in some quarters of the games business, but Microsoft says it is justified by the system’s extra bells and whistles. For example, the Xbox One can automatically recognize the identity of someone who steps in front of the TV set, presenting different members of a family with lists of games and television shows customized to their preference. The Xbox One pulls in video from conventional cable boxes, providing slick programming guides and allowing viewers to channel surf using voice commands.
“We’re trying to bring a broader value proposition to gamers,” Yusuf Mehdi, corporate vice president for marketing and strategy for Xbox, said. “We’re saying, ‘We’re building a best-in-class game offering and we’ve also brought an all-in-one entertainment system.’”
One challenge the new consoles could face as they court a more mainstream audience is demonstrating that their games are a big enough improvement over what came before. It often takes years for developers to figure out how to harness all the additional horsepower under the hood of the new consoles.
The introduction of the last generation of consoles, however, coincided with the mass adoption of high-definition television sets, which enabled a huge advance in the look of games. Because HDTVs are now commonplace in homes with consoles, games on the new systems may require players accustomed to high-definition to really squint to see the difference from today’s games.
Cliff Bleszinski, a game designer who helped create the “Gears of War” series of console games, said the new systems might not pass what he called “the mom test,” overcoming the skepticism of parents who control the family purse strings.
“It’s not an exponential leap in graphical fidelity,” he said of the new consoles. “It’s incremental.”
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Global physical and digital console game sales last year were $24.9 billion, or about 39 percent of total game sales, PricewaterhouseCoopers, the consulting firm, estimates in its latest entertainment and media report. That is down from $29.4 billion in 2008, when console sales accounted for 56 percent of total game sales.
The sales drop partly reflects a natural waning in sales that occurs as one generation of consoles ages. This time the drop was especially sharp because of the collapse in sales of Nintendo’s game systems.
There has also long been suspicion that console makers deliberately make fewer consoles than they are capable of to encourage people to camp out in front of stores and other stunts that create excitement around their products, though manufacturers deny it.
“One thing you do not want to have is overstock,” said John Taylor, an analyst at Arcadia Investment Corp., a stock research firm.
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Microsoft and Sony are hoping to avoid any sort of fast fade. Both companies are confident about how the consoles will sell at first.
In an interview, Mehdi said the company was sold out of preorders for the Xbox One and expected to have a limited quantity available in stores when the console went on sale in the United States and other major markets Nov. 22.
“We’re making them as fast as we can,” Mehdi said.
Sony says there have been more than 1 million preorders of the PlayStation 4. Jack Tretton, president and chief executive of Sony’s U.S. games division, says he believes that strength will continue in the years to come. He said mobile devices had helped introduce many people to games, some of whom would come around to the kinds of immersive, big-screen games consoles are designed to provide, he predicted.
“There are people who would never envision playing games in years past who have now gotten into it because of smartphones and tablets,” Tretton said. Even if mobile games continue to eat into the overall share of the business held by consoles, the new systems could still be big hits, said John Riccitiello, the former chief executive of Electronic Arts. “There might be a big enough pie for everyone to win.”