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Gaming risks a repeat of 1983 crash - Report

Gaming risks a repeat of 1983 crash - Report

Thu 03 Oct 2013 3:48pm GMT / 11:48am EDT / 8:48am PDT
BusinessHardware

Superdata warns that console market may be saturated, gamers resistant to buying next-gen systems

SuperData Research, Inc.

SuperData Research is a NY-based research consultancy that specializes in interactive entertainment,...

The marketing push for next month's Xbox One and PlayStation 4 launches is beginning to ramp up, but not everyone is sold on the new consoles just yet. In a new report prepared by Superdata and released by Digital River, the research firm warned that the market for consoles is already crowded, with 79 percent of gamers already owning a console, and that group having an average of 2.6 consoles each. The report was based in part on a March survey of 1,105 respondents.

"Industry veterans will remember the crash of 1983, when the games market was saturated with hardware devices," the report states. "Today, the industry runs a similar risk, as [with] a higher-than-ever console installed base, consumers may be resistant to adding more hardware to their living rooms."

While the report acknowledges there are more gamers now than ever before, it suggests their habits are changing. Specifically, Superdata found gamers increasingly gravitating toward versatile, multi-purpose platforms like PCs and mobile devices. As a result, an increase in the number of gamers won't necessarily translate into an increase in demand for consoles.

In 2008, consoles led the industry, with 42 percent of gamers playing primarily on a console platform, compared to 37 percent who favored PCs and 5 percent who gamed mostly on mobiles. The numbers have shifted significantly in the intervening years, with 51 percent of gamers now playing primarily on PCs, and just 30 percent on consoles. Meanwhile, mobile has increased its share of the market and now represents the primarily platform for 13 percent of players.

The report also highlighted the increasing shift toward digital consumption of games in the US. America's unboxed gaming spend jumped from $1 per capita in 2000 to $14 in 2012 (with adjustment for inflation). That accounts for most of the industry's growth over that time frame, during which overall US per capita gaming spending increased from $33 to $50.

26 Comments

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
Popular Comment
Just because you already own a console, doesn't mean you don't have an interest in the next generation of consoles. The Crash of 1983 came about because of the flood of various sub-par consoles and games all within the same generation.

If you want to use such poor logic as current ownership results in poor uptake in the future then the mobile phone industry should be crashing any day now.

And finally, what exactly is the point of comparing digital purchases to boxed retail? Do these people still think the only way to purchase a game on a console is at retail?

Posted:9 months ago

#1

Steve Goldman
Journalist.

81 92 1.1
Total nonsense

Posted:9 months ago

#2
Popular Comment
"Industry veterans will remember the crash of 1983, when the games market was saturated with hardware devices," the report states. "Today, the industry runs a similar risk, as [with] a higher-than-ever console installed base, consumers may be resistant to adding more hardware to their living rooms."
huh? actually no... it was the flood of shovelware that was pouring out into and onto the shelves that caused the crash. There was no saturation of consoles in 1983. There were the few major players in the console arena, and a bunch of lesser little known wanna bes which occupied only a sliver of market share. Lets also remember in 1980s, there was still a HUGE amount of market share and space still to capture and move into with regards to the consoles units themselves, as we saw over the next coming decades. In 1983, we wanted more options hardware wise, and when the consoles didnt seem to fulfill our tech wishes, that another reason computers such as atari400/800, commodore64, and apples came into our lives. Hardware was NOT the problem back then.

anyway Im not saying the industry may never see a crash again, but it wont be via hardware, it will be shovelware once again.

Edited 1 times. Last edit by Todd Weidner on 3rd October 2013 6:44pm

Posted:9 months ago

#3

Andrew Goodchild
Studying development

1,227 388 0.3
Wait, arn't people who already have a console MORE likely to buy a new console at launch price than someone who didn't play console games? Does anyone claim that more people they knew who bought a launch 360, for example, didn't own an Xbox or PS2 already, than those that did?

Posted:9 months ago

#4

André Gomes de Oliveira
C++ Programmer

8 5 0.6
I doubt it. As it was mentioned above the situation now is not at all similar to 1983.

We've got the "big 3" competing for dominance in the living room and they are offering a very small amount of devices (2 from each). I think the core console audience will make the jump to the next-gen pretty quickly (I'm assuming in 2 or 3 years) and 7th gen consoles will be cheap enough to attract some new people into the market (The PS3 is finally gaining traction among my co-wortkers)

People have cried wolf enough already.

Posted:9 months ago

#5

Christian Keichel
Journalist

571 782 1.4
I think the comparsion with 1983 has it's flaws, because the problem back then was, as others said the software side (more specific, the bankrupcy of several software publishers, that resulted in retailers sitting on a large portion of not sold games, they couldn't return to the manufacturer, which was common practice in the early console age, games they sold at discounted prices totally ruining the market).
But on the other side, I also find it short sighted to argue people will buy the next wave on consoles, because they did so in the past. Clearly this time the situation is different from before.
The PS3 and the 360 have a huge installed user base and are here to stay for a much longer time. This means on the 3rd party side games for the new generation will mostly be graphically upgraded versions of games, people can also play on their existing machines and I am not sure if people will $400-$500 and most probably a higher price for the games, just for a graphical upgrade.
But even if they do, it looks like the Ubisofts EAs and Capcoms of this world will have to support more platforms, while being unable to sell more games, this will lead to smaller profits, something extremly dangerous in a situation where many publishers having problems being proftitable at all.
For online gaming, the existing platforms may even be the better choice over the next years, because it will take a long time for the PS4/XBox One to reach the user base of the existing generation and because none of the manufacturers is planning cross generation play, these games will have more players on the current consoles.

Posted:9 months ago

#6

Shane Sweeney
Academic

349 250 0.7
Popular Comment
The crash happened because an eco-system of third party companies endlessly copied last season's hits producing a glut in the market of copy cat games. New games were $50 and the copies were sold for $5 producing a race to the bottom in pricing models.
The copies ultimately were of lesser quality, and consumers mostly just gave up on gaming.

This is more like today's mobile industry then it is the AAA space. With games now at 99c and copying ideas the status quo, it's easy to imagine that average consumers who do prop up the mobile industry will get sick of the same catapult clones, fruit puzzle clones and gardening sim clones.

Posted:9 months ago

#7

Brian Lewis
Operations Manager

124 68 0.5
Part of the concern over todays market is that the established console base has multiple dedicated products, and is not necessarily in the market for another. This ties in with the comments that users are preferring multi purpose devices. With this in mind, it is not unforseeable that the inital release of the PS4 and XBox One will see a surge from the hardcore users, but will not have a strong initial buy in from the more casual base. This larger demographic would wait, and either get one of the next generation consoles to replace an existing console or if driven by changes in content that justify the expenditure. During this process, the content creators will prefer to target the larger audience, on the older devices.

It is not unreasonable to think that the next generation of consoles might not be a bang, but instead be a wimper. When you combine that with the financial difficulties that many developers/publishers are having in the current market... you may see a market downturn. I agree that 'crash' may be a bit overly dramatic, but there is a possibilty of a downturn (and consolidation) due to a weaker responce to the new consoles.

Posted:9 months ago

#8
Wow - we made this prediction in posts about Gen-8 back in November 2012 here at GI.biz!! Around the time all the fanboys were fighting Nintendo Wii-U's corner!

I understand that the editorial team at GI.biz is way to busy to read every post, but from the arguments being used now someone seems to have 'borrowed' from the same posts! However recently we have decided to link the possible collapse in the market to what was seen with the CDi platforms in the 90's more than the 1983/4 collapse.

In the modern market the depletion of the key executive pool, the collapse of the Wii-U, and the problems with defining a DLC and subscription model future for the consumer game scene, could make inevitable a rehash of the 1983/4 collapse for the industry admits the development studio implosion.

The biggest issue of the 1993 collapse for those that lived through it was the double burn of developer/publishers and hardware manufacturers - MS and Sony are incredible vulnerable if their money men have got the positioning wrong with their Gen-8 hardware - and the lack of strong games across the platforms, while the older platforms still offer strong games (GTA5 etc.,) for a core audience to sit on their hands for Gen-8 till later on - making all worried for the future.

Add to this the latest insurgency in the back arts of VR and the latest PC, and the MS gamble on the XBone seems like a dangerous move!

Posted:9 months ago

#9

Paul Jace
Merchandiser

868 1,273 1.5
The only gaming crash the next gen consoles will cause are those in various racing games. Let's hope atleast one of them is a new Burnout reminiscent of Burnout 3.

Posted:9 months ago

#10

James Prendergast
Research Chemist

730 411 0.6
I agree with Jim Webb

If you want to use such poor logic as current ownership results in poor uptake in the future then the mobile phone industry should be crashing any day now.

I also love the poor logic in taking one ratio of one amount of users and comparing it to additional users and therefore the new ratio. By this logic, even though there are the same (possibly more) people using the main consoles now, the total market for gaming has increased several fold over the increased adoption of smart phones and tablets... and somehow the reduced ratio which barely included these other market segments (which I think is also wrongly included in the ratio of game experiences as they are very different beasts!) in 2008 is a sign of something? But not the market growing? Huh...

[edit]
Also, what about the rest of the percentage points? What isn't a console, PC or mobile device? Hoop and stick?

Edited 1 times. Last edit by James Prendergast on 4th October 2013 9:29am

Posted:9 months ago

#11

Bruce Everiss
Marketing Consultant

1,692 594 0.4
It is amazing how many people in this industry have their heads in the sand and ignore all the facts that disagree with their world view.

The article doesn't say which population was sampled, but presumably it is the USA. Much of the world doesn't have consoles or has very few. So the global picture is even rosier for non console gaming.

The main problem with consoles is that they persist with the ancient and obsolete idea of distributing digital IP on physical media. This is just plain silly in many ways.

Posted:9 months ago

#12

Adam Campbell
Associate Producer

1,136 914 0.8
I'm not an analyst by title but I'm not predicting a crash any time soon.

Posted:9 months ago

#13

Alfonso Sexto
Lead Tester

767 574 0.7
Popular Comment
@Bruce

"The main problem with consoles is that they persist with the ancient and obsolete idea of distributing digital IP on physical media"

I think you missed the massive amount of tittles distributed also in a digital form for PS3 and 360. It's unfair to say that when the digital option is also present.
There is also still a big marked for physical format and I'm sure you know it. The fact that you may not like it is a different thing.

Posted:9 months ago

#14

Christian Keichel
Journalist

571 782 1.4
The article doesn't say which population was sampled, but presumably it is the USA. Much of the world doesn't have consoles or has very few. So the global picture is even rosier for non console gaming.
Consoles aren't an american phenomenon, the majority of all Wiis and Nintendo DS were sold outside the US:
The same applies for Sony, they reported 30 million PS3 units in europe in 2012, add to these the 12 million in Japan and you will see, that the majority of consoles was sold outside the US. The only console, that sold more units in the US, then in the rest of the world is the XBox360.
Sure, there are plenty of regions in the world, where consoles aren't as widespread as in the US, Europe or Japan, but as the new consoles come at a hefty price, they aren't suited for all markets.

Sources:
http://www.gamesindustry.biz/articles/2012-12-19-playstation-3-hits-30m-sales-in-europe
http://www.nintendo.co.jp/ir/library/historical_data/pdf/consolidated_sales_e1306.pdf

Edited 2 times. Last edit by Christian Keichel on 4th October 2013 10:30am

Posted:9 months ago

#15

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
Popular Comment
It is amazing how many people in this industry have their heads in the sand and ignore all the facts that disagree with their world view.

The main problem with consoles is that they persist with the ancient and obsolete idea of distributing digital IP on physical media.
Really?

Posted:9 months ago

#16

Rick Lopez
Illustrator, Graphic Designer

1,269 941 0.7
I like having options. People say Digital is the future and what not... and everyone seems hell bent on getting rid of retail. I dont see games becoming smaller in file size. I do have a problem with storage. My PS3 is almost full and harddrives dont come cheap, nore are they reliable. Ive lost 4 already. I am not downloading KillZone: Shadow fall anytime soon. Its a friggen 50GB. I will take physical disk media, thank you.

Posted:9 months ago

#17

Tom Keresztes
Programmer

632 239 0.4
Its a friggen 50GB. I will take physical disk media, thank you.
Most companies, where digital is the primary format (developer tools, for example) allows you to download immediately and optionally get it on the physical media (DVD). Whats wrong with downloading and then burning it to a disc/copying to an usb drive? Oh, those pesky DRMS...

Posted:9 months ago

#18

matthew bennion
Web Development

27 25 0.9
Given the number of consoles being released I don't see why it couldn't happen: PS4, XBOne, WiiU, Ouya, Steambox, GameStick, etc, etc

Posted:9 months ago

#19

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
Given the number of consoles being released I don't see why it couldn't happen: PS4, XBOne, WiiU, Ouya, Steambox, GameStick, etc, etc
There are 2 major factors to consider then and now.

1. Size of market. The market is much larger today which allows for more products to to be supported by the market.

2. Brand recognition. Today's market is well aware of and is quite loyal to the big 3. During the crash of 1983, only Atari had much of any brand awareness and loyalty.

This tells us that we likely are not headed toward another industry wide crash though some of the smaller, unknown micro-consoles could have a 'micro-crash'.

Posted:9 months ago

#20

Joshua Hagood
Moderation Project Manager

5 2 0.4
I guess GI is publishing this as a raw news story, but this is BS.

Super Data knows nothing about games. Having a current console does not keep you from upgrading to next Gen. PCs are still gaming even though they make it sound like they aren't, and a healthy PC market helps consoles, and vice versa. Mobile Games will never replace real games, it's been proven on the market.

This is all the Wii and Xbox's (/Call of Duty's) fault. It made a bunch of temporary gamers out of people that wouldn't be otherwise. Now, when they're not picking up the next gen, uninformed idiots cry the entire industry is doomed.

Posted:9 months ago

#21

Klaus Preisinger
Freelance Writing

1,034 912 0.9
The crash of 83 was the crash of a novelty product that went out of fashion as fast as it became popular.

Need proof? In 1980, Space Invaders claimed the title of first game selling one million cartridges. In 1982 Pitfall sold two million and PacMan claimed to have sold seven. That was fast and uncontrolled growth. It was a trend among people neither technology nor games could sustain.

Today you have a grown culture of players. You might not have 200% increase YoY every year, but you also do not have everybody losing interest in gaming as a whole at the same time. Will console type games be played in the future? Absolutely. Is there a guarantee for three console manufacturers and PC going after the same market? Probably not. Even right now, you could make the argument, Sony and MS were just two flavors of the same PC thing. Like two stores in the same mall who sell the same third party produced products. The famous Starbuck's across the street from another Starbuck's.

You could argue all day whether or not that was an inefficiency markets tend to punish.

Posted:9 months ago

#22

Greg Wilcox
Creator, Destroy All Fanboys!

2,132 1,039 0.5
@Tom Keresztes: Are you kidding? I take it you've never worked in game or electronics retail. Even if there was NO DRM, most average consumers would NOT be interested (or capable) in burning a disc and going through all those steps to simply play a game that can (and SHOULD) be able to crack open and pop into the console of their choice. Seriously, one reason consoles aren't dead is they great for consumers and families who aren't tech savvy or have the means and money to burn (ha ha) on what they'll need to do all that.

Hell, during the VCR era, people use to run side businesses setting clocks on those things and configuring TV remotes because some users were too lazy to read the blasted manual or even try to figure things out on their own...

Posted:9 months ago

#23

Gareth Eckley
Commercial Analyst

88 67 0.8
From simple observation, the thing that concerns me more is the flight of investment capital away from gaming. There are an awful lot of studios who are making very little money, who are being fiscally propped up by people who thought they were investing in the next Zynga.

Since gaming is now an established revenue stream, I don't see the market crashing like in the early 80s, but I expect to see a lot of studios close in the next 2 years.

Posted:9 months ago

#24

David Serrano
Freelancer

298 270 0.9
In January, NPD published a report which found:
While almost half [48 percent] of U.S. individuals age 9 and older play video games on what would be considered a core gaming device, only 14 percent play core games (defined as Action, Adventure, Fighting, Flight, Massively Multi-Player, Racing, Real Time Strategy, Role-Playing, Shooter, or Sport games) on any of those devices and play for five or more hours per week.
Of the 14 percent of respondents who NPD qualified as core gamers:
42 percent will definitely not or probably not purchase the XBO or PS 4 at the time of release.
29 percent may or may not purchase the XBO or PS 4 at the time of release.
29 percent will definitely or probably purchase the XBO or PS 4 at the time of release.
NPD also found:
There are three groups that are more inclined to make a purchase of next generation consoles at the time of release relative to their counterparts:
Those in the 25-44 age range.
Core gamers who currently play games on a console.
Those who play 15 or more hours per week.
So the console market may not be headed towards a crash, but the NPD and Superdata reports do indicate the market is probably headed toward a large reduction in the size of the installed base, the percentage of owners who will use the consoles as their primary gaming device and the average age of those owners. And this probably translates into a large percentage of 360 and PS3 owners over the age of 30, who are not multiplayer or sports game fans and don't own PC's powerful enough to run current or next gen. games leaving the core market until the overall development focus changes and or, the price of the consoles drop into the $200 to $300 range.

Edited 1 times. Last edit by David Serrano on 5th October 2013 8:39pm

Posted:9 months ago

#25

Tosin Balogun
Studying International Business

23 21 0.9
Hello Sir, why do you think the conventional method of distributing content on physical media is obselete?

Posted:9 months ago

#26

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