Sections

DFC: Will Sony, Microsoft remain relevant in games by 2019?

Research firm sees PC and mobile grabbing larger and larger share of the expected $100 billion pie

DFC Intelligence is once again preparing to release its latest forecasts covering the global games industry, and while the research firm is reiterating its $100 billion software revenues mark for year 2019, how the totals ultimately reach that mark may be slightly different than DFC previously estimated.

In a sneak peak provided to GamesIndustry.biz, DFC revealed that console forecasts are being lowered for Xbox One overall and for PlayStation 4 in North America. And while total console sales are expected to rise in China (not surprising given that the ban there was lifted), it's becoming clear that more and more of the revenue pie is coming from the booming mobile and PC segments.

DFC analyst David Cole expressed some concern about just how much relevance Sony and Microsoft will retain in the changing games landscape.

"This is the first generation of systems that really requires tech support and are in many ways behind what Steam has done for PC games and Apple has done for mobile devices"

"We have slightly lowered our forecasts for the Xbox One and Wii U. We see the PlayStation 4 remaining as the best-selling system with North America really being the only competitive market. Previously we thought the Xbox One could potentially outsell the Xbox 360 but now we don't think that will be the case. The real issue is by 2019 whether Sony and Microsoft will still be relevant in the game space. That is a major question mark," he noted.

"They really set unrealistic expectations for their systems and the issue is even as the gamer market grows they are really not growing their base in proportion. The PlayStation 2 was the best-selling console system ever and we don't see the PlayStation 4 beating it, even as the market has grown substantially. In other words, instead of expanding the market they have focused on a core base of users that could be ripe for the picking."

Cole added that aside from doubling down on the core audience, consoles may just be too complicated nowadays - an ironic step backwards from the days of the NES.

"We think the biggest issue is that the current generation of consoles have taken a step back in terms of usability. The beauty of game systems in the past was anyone could plug the systems in and be playing a game in seconds. This is the first generation of systems that really requires tech support and are in many ways behind what Steam has done for PC games and Apple has done for mobile devices," Cole said. "My kids have no problem playing their PC or mobile games but if I am out of town they have trouble getting on to the console systems. That is a BIG issue."

Cole believes that with the rise of other microconsoles that can play high-end games, Sony and Microsoft may no longer have a specific advantage.

"The competition to deliver high-end games to the television set is going to become intense and it is unclear whether Sony and Microsoft are prepared to compete in that space," he said. "You look at something like the Nvidia Shield and realize that is just one of a whole category of potential products that can go after this space. Right now Sony and Microsoft have the benefit of being the only platforms that can play high-end games on a TV but that will be changing."

He continued, "There are also the unrealistic expectations both companies set for their investors. Prior to the new generation launch there was speculation among some manufacturers and analysts that the market for this new generation could be as large as one billion units worldwide. We always thought success would be 250 million units combined for a given generation but now we don't see this generation doing that many. The PlayStation 4 could get over 100 million but the Xbox One will probably not reach that level. So clearly expectations were not set in line with reality."

DFC is forecasting that the market will be about 85 percent digital by 2019, and this will be largely driven by the growth in the PC and mobile space. Retail will still have a presence on consoles, particularly in North America and Europe, but digital is very quickly taking over.

1

Cole still sees Steam as the dominant force on PCs but there are plenty of revenue sources on PC that are helping to accelerate growth. "PC gaming is almost all digital and really it comes from many different places. Steam is dominant in what we think of as the traditional PC games sold on discs all over the place 15 years ago. Steam really just made the download experience somewhat seamless. Electronic Arts has made great strides with its Origin service but really we don't see anything on the horizon looking to give Steam a major challenge," Cole remarked.

"However, beyond Steam there is an entire diverse community of PC game products. Of course, Asia has its own infrastructure and Tencent is the largest game company in the PC game space. There are entire sub-segments of PC games that build audiences organically...not only the big names such as Minecraft, League of Legends or World of Tanks, but products like Animal Jam that target a whole new audience."

"When it comes to selling game software we think [VR] will be a rounding error in the near future"

While virtual reality is a big buzzword right now and the excitement around the technology was palpable during GDC this year, DFC remains unconvinced of its impact. "VR is likely to have a negligible impact on our forecasts. For one it is unclear whether games will be the primary application for VR. We do think VR has the potential to drive hardware sales and we will be releasing specific forecasts on that. However, when it comes to selling game software we think it will be a rounding error in the near future," Cole said.

As for mobile, DFC is raising its total forecast (in part due to even more expected growth in China) but the firm does see some headwinds with far too many games flooding the market. The category is regularly dominated by a handful of titles that far outperform everything else.

"The games business has always been about a few big products and everything else. The mobile space is not any different but the issue is compounded by lower barriers to entry," Cole said. "With console games it was about tracking hundreds of games. With PC it was thousands of games. On iOS alone in Q4 2014 we tracked nearly 100,000 game publishers (not just games). And of course, unlike with console and PC, it is really hard to get people to pay for games upfront. You have to give it away for free and the problem with 99.99 percent of games is the free version is all you need. It is a major problem for the industry as now you have AAA premium content and free content with very little middle ground. Our forecasts for mobile tend to be conservative because of that exact issue which we see will be hard to change."

Related stories

The SNES Mini is wonderful and just what the market needs

A 70/$80 games console is an ideal family product, irrespective of 1990s nostalgia

By Christopher Dring

PlayStation once again plays down Vita 2 possibilities

The company sees 'limited potential' for handheld game, despite Switch success

By Christopher Dring

Latest comments (16)

Craig Page El Presidente, Awesome Enterprises2 years ago
He might be onto something when he says consoles are too complicated now.

Has anyone here ever tried to shut off their PS4 controller, but leave the system running? The option for that is buried five menus deep in the OS.

Or watch Netflix on their PS3, only to be confronted with a forced system update, that tells you to go find it in another menu, click on an endless number of confirmation messages, sit through the download, click through four more screens of new legal terms and services, then thirty minutes lately FINALLY get Netflix running.

Even playing a new game on PS4 is a hassle, you can't just put the disc in and play. It has to copy the whole bluray to your hard drive, which takes forever, and there's no messages letting you know what's happening. So the main screen just sits there being unresponsive, and maybe playing an animation and some music to show it hasn't crashed. If you want to play the game's multiplayer mode there is always more updates to download, more confimation messages to click, more waiting.

NES games were simple, you put them in and played. If anything didn't work, you took out the cartridge and blew in it. If that didn't work you blew in the console itself.
8Sign inorRegisterto rate and reply
Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.2 years ago
They do realize that by 2019, the consoles will be 7 and 6 years old, right? And new homes consoles will likely have been released.
4Sign inorRegisterto rate and reply
The prediction of this nature is fascinated in how much "crystal-ball" gazing is needed against actual factual observation.

What will Sony be in 2019 - will Xbone division still be with MS? Will the new Nintendo machine address the gaps appearing - or more fundamentally will the console promise of business be superseded by a DLC approach that could sweep aside the existing business landscape?

Lets throw a new possibility into the mix - could a new location-based entertainment approach totally change the way the Millennial audience wants to play?

http://www.dna-association.com/silica-nexus-launched-as-first-cross-screen-cross-reality-based-mmorpg/
4Sign inorRegisterto rate and reply
Show all comments (16)
Donald Dalley Freelance writer 2 years ago
Here we go again with someone dusting off their crystal ball.

VR may very well end up on the cutting floor rather than being cutting-edge, but what better platform to use VR than with something convenient and homebased (a console) versus, say, a phone? I mean really.

The naysayers have been dissing consoles ever since they were released, but they are still here and, as far as I understand, are still holding their own against a myriad of new platforms.
5Sign inorRegisterto rate and reply
Peter Warman CEO & Co Founder, Newzoo2 years ago
I guess this is without China and Japan? Mobile 2014 Revenues at $15Bn? Even Google and Apple's public announcements show a significantly larger market than $15Bn for mobile in 2014. I will stick with our own $24.5Bn :-)
0Sign inorRegisterto rate and reply
Craig Bamford Writer/Consultant 2 years ago
There's another story on this very site talking about how social is in "freefall",and that mobile is flat.

So, contra the research firm, I'm a bit skeptical that PC and mobile are necessarily going to take up the slack...unless the "PC" market stops being dominated by cut-rate laptops with video hardware that wouldn't be out of place in an Intellivision.

Edit: Wait, did this guy seriously just haul out the Shield as an example of Sony's diminishing importance?

Edited 1 times. Last edit by Craig Bamford on 16th April 2015 5:16pm

2Sign inorRegisterto rate and reply
Steven Hodgson Programmer, Code in Progress Ltd2 years ago
"We think the biggest issue is that the current generation of consoles have taken a step back in terms of usability. The beauty of game systems in the past was anyone could plug the systems in and be playing a game in seconds. This is the first generation of systems that really requires tech support and are in many ways behind what Steam has done for PC games and Apple has done for mobile devices," Cole said. "My kids have no problem playing their PC or mobile games but if I am out of town they have trouble getting on to the console systems. That is a BIG issue."
Last night I turned on my PS4, scrolled the library to a game I wanted to play and selected it, I don't see how this is any different from opening Steam, scrolling through the games on the library tab then clicking play.
Or are they complaining about the one off setup when you first buy the console? It has been a while since I've had to do it, but I'm sure I had to do that with my PC, phone and tablet.
4Sign inorRegisterto rate and reply
Kevin Patterson musician 2 years ago
By 2019 Coleco will come back with the Colecovision 2 and dominate the industry!.... In all seriousness....MS or Sony or both will still be relevant, but the once gloomed and doomed PC gaming market will continue to thrive and gain on consoles. The PC market may change causing some flux on that, and I do believe eventually PC gaming will have a truly console like expierence for the masses, be it a PC running Windows, a Steambox style device, or other. VR and AR are the unknowns, and how they affect the market is anyone's guess and just opinion and conjecture for now.
0Sign inorRegisterto rate and reply
Klaus Preisinger Freelance Writing 2 years ago
When Microsoft's image was shaped by your elder relatives and their hate for the Windows they endured at work, along cam the Xbox and made you a believer in the brand.

Now that your Xbox games look somewhat drab and stale, you need not worry about Microsoft. After all, they bought Minecraft and each time you meet younger relatives these days, you are reminded of its existence with glowing fervor.

Cue Elton John entering the stage blasting you with Circle of Life on his grand piano. All 35-55 year olds are kindly ask to wave their hands to the rhythm of the music while reminiscing about the absence of their childhood toys.
1Sign inorRegisterto rate and reply
Greg Wilcox Creator, Destroy All Fanboys! 2 years ago
So, by 2019 ALL of America and the world will have flawless LAG-FREE internet available at a fair price for everyone so we can all be on the same level playing field? AND consumer behavior re: wanting a physical product over a download will be completely erased so that they all buy into the hype? AND all security and privacy issues will be 100% perfect?

Sure. Jet pack pigs with laser-eyed cat-monkeys, meet my butt runway. But, let's see what happens.
1Sign inorRegisterto rate and reply
Paul Jace Merchandiser 2 years ago
Previously we thought the Xbox One could potentially outsell the Xbox 360 but now we don't think that will be the case.
I doubt that too. Microsoft's launch blunders will most likely continue to haunt them thru out this entire generation.
The PlayStation 2 was the best-selling console system ever and we don't see the PlayStation 4 beating it,
I also agree with this. Considering the lack of compelling exclusive software on the PS4 I think it's sales success is due for a bust sometime soon.
In other words, instead of expanding the market they have focused on a core base of users that could be ripe for the picking."
I thought the whole point of Microsoft and Sony bringing non-gaming apps and features to their consoles(this gen and last) was helping to expand the market beyond core gamers. That's not an end-all solution but it's better than just making a console that does nothing more than play games, especially now that we are in 2015.
"My kids have no problem playing their PC or mobile games but if I am out of town they have trouble getting on to the console systems. That is a BIG issue."
Do they know where the power button is?
Prior to the new generation launch there was speculation among some manufacturers and analysts that the market for this new generation could be as large as one billion units worldwide
The only place I remember seeing that before this generation started was a quote from a Microsoft exec and I think it's safe to say that he only said that after watching an Austin Power movie and realizing that Dr. Evil was his hero.
Sure. Jet pack pigs with laser-eyed cat-monkeys, meet my butt runway.
You need to copyright that idea before someone steals it and tries to release it on the Nvidia Shield since apparently that's where gaming is going in 2019. And I agree with you as usual, these crystal ball forecast always forget to add a side of reality. That's why they seem to think that everyone's internet connections and speed will be top notch in four years regardless of where they live.

And I'd like to add my own crystal ball speculation that will totally come true because I typed it out. And by totally I mean sort of, maybe, perhaps. By 2019 analyst will be completely irrelevant as their jobs will have all been replaced by robots, trained monkeys and Peter Molyneux.

Edited 1 times. Last edit by Paul Jace on 16th April 2015 9:05pm

2Sign inorRegisterto rate and reply
Jordan Lund Columnist 2 years ago
I love the assumption that mobile games are in the same marketspace as console games. "Well, it has the word 'games' in it, doesn't it?"

The audience for mobile games is completely different from that of console or even PC games. They don't buy a phone to play games, they buy a phone to do other things and oh, if it plays games too then that's OK I guess.
17Sign inorRegisterto rate and reply
Istvan Fabian Principal Engineer, Sony Computer Entertainment Europe2 years ago
I think a few words got mixed up in the title... let me fix it.
Sony and Microsoft: Will DFC and analysts remain relevant in games by 2019?
9Sign inorRegisterto rate and reply
Sandy Lobban Founder, Noise Me Up2 years ago
Any business can become irrelevant if they fail to adapt. Lets not kid ourselves. It's about turning out products fit for the market at the time. Many more mobile developers are in danger if you ask me, and I believe you will see many companies drop like stones in the next few years simply because user acquisition is increasingly expensive and getting noticed is increasingly difficult. Those who are more passionate about the money than the medium will face difficulties, and I think some mobile companies are already showing signs of this. Those with strong ideas and a passion for the medium will remain. Always the optimist!
1Sign inorRegisterto rate and reply
Andy Samson QA Supervisor, Digital Media Exchange2 years ago
Most publishers have stated that they don't want a repeat of last gen that lasted for too long. Also, the PC like architecture of the PS4 and the XBOne don't seem to leave much room for surprises later on its life cycle. Expect Nintendo to roll out their next gen console by the 4th Quarter of 2017. This will once again force SONY and Microsoft (if the XBOX is still around by that time) to release their new console much earlier than expected.
0Sign inorRegisterto rate and reply
Jeff Kleist Writer, Marketing, Licensing 2 years ago
This generation doesn't require tech support, it requires people to RTFM. Using these consoles is not Rocket science, and if your kid can't figure out how to play games on a console, but can figure out a Steam, you're either lying, or the kid likes playing on the iPad and can't be bothered.

And then they go online and cry on forums instead of actually calling tech support, because that involves human interaction. They even try to use Twitter tech support, rather than make a five minute call. Why would anyone use Twitter for tech support?

I swear, the real issue is avoidance of human interaction. I waste six hours a week, easy, because people insist on doing everything via email instead of picking up the phone.
0Sign inorRegisterto rate and reply

Sign in to contribute

Need an account? Register now.