We could see the end of dedicated games hardware in the near future, states Wedbush analyst Michael Pachter.
Speaking at DICE Europe last week, the outspoken industry expert tackled the issue of the end of the console era, and pointed out that in terms of pure sales figures, this generation is unlikely to beat the last one - indicating that the market has plateaued:
The console installed base is as big as it's ever going to get. [This] generation is not going to be bigger than the last generation. We're going to be about the same.
The Wii U is going to sell 20 million units compared to 100 million for the Wii. The PlayStation 4 is going to sell 120 million or 130 million - that's great. The Xbox One will sell 100 million to 110 million - that's great. Add it all together and it's 260 million units, maybe, and the last cycle was 270 million.
This is the last real console cycle. I don't mean that Microsoft, Sony and Nintendo will go bankrupt and shut down - they will not. Each of them will make another console, some people will buy them, and the next console cycle will be to this console cycle what the 3DS is to the DS. The 3DS is selling about 15 million units a year, the DS had five consecutive years where it sold more than 26 million. So about half as big.
So when I say that this console cycle is the last console cycle, the reason is that console games shouldn't require a console. And I'm not talking about the cloud.
Pachter's outlook takes in the fact that the number of people in the world who play video games is now higher than ever thanks to the impact of smartphones and tablets, as well as the entry-points which were the Wii and DS. Gaming is a popular pastime that is indulged in by people of all ages and walks of life, making the industry bigger than ever. However, Pachter feels that the existing console market is limiting further growth by ensuring that all of the biggest and best titles require you to purchase an expensive gaming system.
Pachter argues that for the market is continue growing, it needs to abandon its fixation with dedicated home consoles in the same way that many game developers have turned their backs on consoles and made millions on smart devices which are used for many different activities, not just gaming. He feels that all that should be needed to play games at home is a CPU, a GPU, storage, a controller, and a screen.
Of course, we've already seen devices of this kind fail badly at retail. Android micro-consoles like the Ouya have failed to find an audience, and the reception given to the recent Apple TV refresh - which has a strong gaming focus - is curiously muted. In Pachter's eyes, we're not quite at the point of giving up consoles yet, but when these set-top boxes become powerful enough to faithfully reproduce a AAA console experience, then there will be no turning back:
What happens when you lower the entry so nobody has to buy a console? If Activision sells 20 million copies of Call of Duty to people with a console, how many people would buy it who don't have a console? I'm guessing 20 million more. To make it easier for the Europeans in the room, how many more people would play FIFA if a console wasn't required? Another 20 million.
How many people would play Grand Theft Auto if you didn't need a console? 100 million. It's crazy numbers. This just makes so much sense. It is going to happen.
There's plenty of 30 or 40-somethings who would like to play FIFA or Call of Duty, but they can't. They're not going to buy a console for one game, and I'd say that's true of every single [console] game made. There's a market of probably several million people who would never buy a console to play the game, but would absolutely buy the game.
I think the traditional gamer market - which has high standards - does broaden. But the only way you actually see a step function change in that is to pull the console out of the equation, and make it open to people who can't afford or won't buy a console.
I think this shift to full-game digital downloads, where everybody has the opportunity to play a game without having to invest $399 is a huge opportunity. It's an opportunity for everyone in the value chain, except the retailer and maybe the console manufacturer.
So where does this leave Nintendo, a company which Pachter has singled out in the past for criticism? Unlike Sony and Microsoft, Nintendo has always taken pride in the fact that it is focused on games above everything else, and the Wii, DS, 3DS and Wii U have all demonstrated the firm's commitment to creating hardware which supports its software by coming up with unique control or visual elements which can only be appreciated by owning a dedicated system.
However, even Nintendo is moving with the times by developing games for smartphones - an unthinkable event only a few years ago - and this shows that the industry as a whole is changing.
What are your thoughts on these comments? Where do you think the games industry will be at the end of this current hardware generation, or in 10 years time? Let us know by posting a comment.