Hardcore Gaming to Become an Expensive Niche Market
It’s a great time to be a gamer. The games that we have access to right now for relatively cheap on the Xbox 360 and PS3 are cutting edge. Microsoft and Sony are bringing them to us at a financial loss.
The currently standing console strategy has been to release a cutting edge machine, sell it at a finical lose, wait for hardware cost to fall and recoup your losses on high margin software sales. This has worked pretty well over the last few console cycles but has proven to be very challenging this console cycle.
In the past hardware speeds would increase very quickly. 10 years ago CPU speeds used to double year over year at about the same price point. A console would start to show its age pretty quickly. That trend is slowing. Hardware costs don’t fall off that rapidly anymore, and just adding more CPUs doesn’t scale the way increase CPU speed and memory size does. Going out on a limb and predicting that the console that could be manufactured today at $1,000 will cost only $200 in 5 years might be somewhat risky these days.
Working in the game industry for 7 years I have seen software development cost spiral out of control at the peak of the PS2 cycle and come back to reality in the last couple of years. The industry is starting to mature and take less risks, this all leads to a more conservative business, less exciting to the consumer.
Nintendo had the foresight to see this coming and opted to try to innovate in ways that did not force the company to operate at a financial lose while building a user base. Nintendo created the WII and actually sells it at a profit, out pacing Xbox 360 and PS3 sales. While this is great for Nintendo and casual gamers, it sucks for so called hardcore gamers. Console makers will surely take notice and I expect more conservative plays coming from hardware manufactures in the future. Third party publishes are following the console install bases and investing resources in products that will reach the most users. We may even see Sony does some serious back peddling and release a motion sensor controller to extend the life of its PS2.
Microsoft pushed hard to be the first to the market with its cutting edge hardware. The 360 is a powerful multi-core machine, possibly released before adequate testing. The Xbox 360 has seen a high rate of hardware failures forcing Microsoft to extend warrantees and lose millions. While it’s no fun for consumers to deal with these hardware failures, Microsoft has stood behind the 360 and is covering all the repair costs. I bet Microsoft will also be more conservative with its hardware release next cycle.
It makes me wonder if we will see another Neo Geo next console cycle. A high priced machine only for the hardcore gamers. In 1990 the Neo Geo console cost $649. At that price point it was out of reach to most gamers. I could see hardcore gaming become a niche market like that over the next couple of cycles.
I know a lot of people are going to say “$1,000 for a HDTV, $500 for a consol, $60 for a game, a relative bargain? Are you nuts?” But when you look at entertainment value in dollars per hour, you will find that Xbox 360 really offers very cutting edge entertainment at a pretty reasonable price.
So enjoy this holiday season it is sure to be a pleaser for the hardcore gaming crowd. Next console cycle will be shelling out much more of our hard earned to be on the cutting edge of gaming.
I appreciate this article but have to disagree with nearly all the conclusions. Both the 360 and PS3 use slower, cheaper processors (than PCs) but have many more cores to keep expenses down. The PS3 has its expensive bluray player keeping its price so high. As long as there is competition they will continue to sell them as loss leaders. There is only room for one low-powered console - the Wii. Had Sony and Microsoft tried to emulate that strategy one or both of them would have failed. Both the 360 and PS3 will sell for less than $100 in 10 years since Moore's law is alive and kicking till at least 2020. Also, a minor point but Microsoft is losing *billions* not just millions due to its hardware problems. There is no other company that could bleed money for so long and stick with it other than Microsoft. For that we gamers should all be thankful. The Wii and DS have shown there is a huge untapped market, but that is in addition to hardcore gamers not instead of. As technology improves we will have VR and other deep immersion techniques to spend our hard earned money on. Most likely the biggest shift will be away from yearly release cycles to paid subscriptions.
Reply to this