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Consoles make a comeback in 2014

The introduction of the new gen hardware did exactly what many hoped, breathing life back into a stagnating marketplace

Editor's note: This is part of a series of features this week that look back at the biggest news trends of 2014.

The last few years of the previous console generation were generally pretty bleak. The Xbox 360 and PlayStation 3 had been on the market for the better part of a decade, hardware and software sales were plummeting, and some felt innovation was falling by the wayside as developers eagerly looked for fresh platforms to spark creativity. Indeed, Ubisoft chief executive Yves Guillemot was one among a number of key voices at publishers who felt that the console cycle had dragged on past its welcome.

"We need new consoles and at the end of the cycle generally the market goes down because there are less new IPs, new properties, so that damaged the industry a little bit," he said at the end of 2012.

Fast forward to this holiday season, and it would seem that the calls for new consoles to revive the business were largely accurate. Looking back at 2014, it's clear that excitement for the PlayStation 4 and Xbox One drove the AAA market. In every NPD Group report we covered, hardware sales skyrocketed as consumers simply couldn't get enough of the new consoles. Microsoft has shipped 10 million Xbox One units as of November, while Sony's PS4 installed base is close to 14 million now. By comparison, during their respective first years, the Xbox 360 sold fewer than 8 million units and PS3 had shipped around 10.5 million.

The difference between the seventh and eighth generations of course is that Nintendo's console platform suffered a precipitous drop. While the original Wii caught lightning in a bottle and soared to 20 million units in its first year alone, the Wii U - now completing its second year on the market - has yet to even reach half that figure (sitting at 7.29 million as of the end of September). That said, even Nintendo is now feeling some momentum and analysts are expecting it'll have its best holiday in years, driven by Super Smash Bros., Mario Kart 8 and new revenue sources like Amiibo.

"The landscape is changing, and the platform is becoming the retailer itself, much to the chagrin of companies like GameStop"

On the software side - at least in terms of the AAA market - Guillemot's hope that new consoles would drive more successful new IPs has proven partially accurate. While we've seen commercial successes like Watch Dogs, Bungie's Destiny, EA's Titanfall and a solid showing from Insomniac with Sunset Overdrive, there were others that performed average at best - Knack, Ryse, etc. - and the rest of the market has been saturated with the same AAA franchises we've grown accustomed to (Assassin's Creed, Call of Duty, Forza, Dragon Age, Far Cry and more). The good news is that anticipated new IP like Evolve, No Man's Sky, The Order 1886, Bloodborne, The Division, and Quantum Break, to name a few, is still coming.

The bad news is that console software no longer "just works." In the old days, you'd choose console over PC because you knew that when you put in that cartridge or disc, it would boot up and you'd be playing shortly (longer load times notwithstanding) without significant errors. Now, with eighth generation consoles more connected than ever before, you're often confronted with day one patches, mandatory updates to make anything playable online, and even then you may run into problems, as evidenced by the troubles encountered by Drive Club, Assassin's Creed Unity, Master Chief Collection and more. This is really the subject of a separate editorial, but if publishers continue to ship broken products, they should at least treat them like unfinished games and charge far less, effectively beta testing with users similar to Steam's Early Access.

The more exciting element of the new consoles essentially being always-on is that digital gaming is reaching new heights. On the AAA side you can buy any major release digitally on day one, and indeed digital sales are becoming a larger and larger portion of a title's total. Some of the year's top games took in 20 percent or more in digital receipts - and that's great news for publishers who receive higher margins on digital sales. The landscape is changing, and the platform is becoming the retailer itself, much to the chagrin of companies like GameStop.

On top of the AAA business, Sony, Microsoft and Nintendo have all made great strides in bolstering their digital storefronts, offering numerous titles on a smaller scale, often from indies. Sony, most of all, has capitalized beautifully on this, luring in indies and grabbing the attention of gamers with free games as part of PlayStation Plus. The focus on indies has not only helped to diversify consoles' offerings in the early part of this console generation, but it's also served to offset some of the gaps left by the still-in-development or delayed AAA IP.

"260 million units is hardly small potatoes, and ultimately, if you make a unique and innovative console game you can still be incredibly successful without chasing the mobile scene"

So where do consoles go from here? Needless to say, judging Xbox One and PS4 on just one year of sales isn't going to tell us where they'll be in five or six years. But barring a major surge in 2015 and beyond, it doesn't look like the eighth generation will significantly outperform the prior generation. In fact, Wedbush Securities' Michael Pachter expects around 240-260 million consoles to be sold when it's all said and done. The Xbox 360, PS3 and Wii combined for 260 million, so the eighth generation ultimately could see flat sales. "So it's not a growth industry. For everyone in this room not chasing that market, you're going to be fine. The market is going to get a lot bigger, just not on console," he said at the recent Game Monetization conference in San Francisco.

Indeed, the overall gaming pie will be getting much, much bigger, thanks to the booming mobile/tablet sector. A new IDC Research report points out that the smartphone and tablet gaming installed base has topped 1 billion in 2014. So consoles obviously are becoming more of a "niche" market, but that's not really a fair word either. 260 million units is hardly small potatoes, and ultimately, if you make a unique and innovative console game you can still be incredibly successful without chasing the mobile scene.

In 2014, consoles put their foot down, shouting "I'm still here and I'm not going anywhere!" It remains to be seen how they'll fare over the long haul, but memory constraints on devices and bandwidth troubles online will make it difficult for them to be replaced by any phone, tablet or streaming service any time soon. Moreover, if virtual reality does begin to take off, consoles could have another exciting avenue to pursue as we've seen with Project Morpheus (no expensive gaming PC rig required). And perhaps then motion controls like Kinect and Move, which - let's face it - were essentially swept under the rug in 2014 will be given new life as VR accessories.

Pressure from other platforms and technologies isn't the only challenge consoles will face, however. It's ultimately the business model that will have to evolve in order for the industry to really move forward. Mobile has been dominated by freemium, which isn't always ideal, while console often asks too much of its audience with $60 purchases and a flow of DLC add-ons. Customers deserve more options. As Xbox co-creator Seamus Blackley told us a year ago, "What we need is the next generation of business infrastructure to make [innovation] possible. And iOS isn't doing a great job at that. There needs to be new excitement injected into the console world to provide more infrastructure for that to happen."

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Latest comments (17)

Russ Cogman Senior Game Artist, Serious Games International6 years ago
So, is David Jaffe being proven wrong? I do hope so.

Game consoles will be extinct after next-gen, says Jaffe

Edited 2 times. Last edit by Russ Cogman on 17th December 2014 4:26pm

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James Brightman Editor, North America, GamesIndustry.biz6 years ago
Russ, Jaffe was saying after next-gen. So that most likely wouldn't be for another 7-8 years to determine if new consoles are launched again or not.

Edited 1 times. Last edit by James Brightman on 17th December 2014 4:29pm

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Adam Campbell Product Manager, Azoomee6 years ago
Problem is, the death of 'something' is always being predicted, until its not dying, again :)
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Show all comments (17)
Adam Acuo Investment Banking 6 years ago
I think that closed console systems will be replaced by open systems and maybe even an Android variant in the next 10 years. It's far fetched now - and Ouya ain't it - but the success of Steam and their normalization of what is effectively an open console like experience with multiple vendors (GMG, GoG, etcetera) and the availability of digital downloads at lower cost is going to push everything toward this model. Amazon made a soft entry via Fire TV, Google might jump into it, Steam is always a threat as is the Steam Machine - again none of these are likely the killer app but just first steps in a 10 year process.
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Jordan Lund Columnist 6 years ago
The people predicting the death of consoles were looking at the global market and ignoring the Wii bubble that burst pretty bad. The largest part of the decline wasn't because people were abandoning consoles, it was because the Beanie Baby crowd that bought Wiis because they were the hot thing to buy didn't keep buying games or hardware.
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Craig Page El Presidente, Awesome Enterprises6 years ago
Don't call it a comeback, consoles been here for years.
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Adam Campbell Product Manager, Azoomee6 years ago
I think that closed console systems will be replaced by open systems and maybe even an Android variant in the next 10 years. It's far fetched now - and Ouya ain't it
Agree. I backed the Ouya because I liked this direction, knowing full well it wasn't the console to really change the industry in this sense.

I also accurately predicted Google and Amazon making their own branded (Nexus, Fire) TV boxes and still predict Apple to do the same, and actually allow proper gaming and iOS apps one day.

As you said its long process and by no means the death of any console, just a change in approach.
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Paul Jace Merchandiser 6 years ago
This is really the subject of a separate editorial, but if publishers continue to ship broken products, they should at least treat them like unfinished games and charge far less, effectively beta testing with users similar to Steam's Early Access.
I look forward to that editorial. Hopefully it starts to open publishers/developers eyes about how much of a disservice it is to ship broken games to their customers for $60.
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The console space is pretty exciting due to the range of high fidelity or quality titles to be offered. Just need to ensure tighter QA before pushing a product out the door...this will in the long run ensure a good gamer base and satisfaction,and hopefully good sustainability
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James Brightman Editor, North America, GamesIndustry.biz6 years ago
@Paul, we've got the esteemed Rob Fahey tackling the broken games and QA issue tomorrow actually, so look forward to that!
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Klaus Preisinger Freelance Writing 6 years ago
Nothing says 'it's Friday' quite like Rob Fahey baiting people to comment on something. Why worry about broken games though? There is nothing a 50GB patch cannot fix.
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I thought it was 40 gigs for poor xbox r users :)
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Paul Jace Merchandiser 6 years ago
@James, thanks. Can't wait to tune In.
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Jeff Kleist Writer, Marketing, Licensing 6 years ago
No one will develop an open console because there's no money in it, as Ouya and the poor suckers that jumped on the Steambox are finding out. It costs a billion dollars to design and launch a box, and even if you create a reference design thst can be licensed, well, hello 3DO.

It's not happening.

Dave Jaffe has direct financial interest in streaming gaming, so of course he's predicting the death of consoles
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Carlos Brandão Director, Game Rental6 years ago
When E-commerce came in the early 90's, everyone said that the malls would end, but it did not. I think the consoles will still last a long time even for a more hardcore audience. The most explosive games and the use of more resources are still made for game consoles.
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Adam Campbell Product Manager, Azoomee6 years ago
@Jeff

That's like saying there's no money in Windows, iOS or Android. Few will look to make money of the hardware, more will look to make money off the services that come with them.

As for Steamboxes, they're still effectively PCs and guess which manufacturers are making them? These aren't new players on the hardware market with no experience making a box. Most of them already have small form factor PCs or PC based consoles.

Even for new entrants to the market, making a generic PC or arm powered device is not a billion dollar proposition like a Sony, Nintendo or Microsoft console, in fact, far from it.

Edited 1 times. Last edit by Adam Campbell on 22nd December 2014 11:35am

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Caspar Field Consultant, Talk Management6 years ago
The 'death of the console' predictions were basically a lot of biased spin from a bunch of people with vested interests. Hats off to them for successfully putting on the agenda what was really a non-point, conjured in the vacuum of an over-stretched hardware cycle. But now, let's stop talking about it because it was, as history has thus far proven, spin and nothing more.
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