The stagnation/decline in the AAA console marketplace, its implications on the health of the industry, and what can be done to reverse the trend

Phantom Thief

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Life Will Change
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PLEASE NOTE: For the purposes of this write up, I will be using the Wikipedia nomenclature for console generations (I.e., third generation, seventh generation, etc.). Regardless of whether or not one agrees with this breakdown, ultimately it is an efficient and universally understood nomenclature convention among enthusiasts, so I am leveraging it here. Please do not turn this thread into the merits or validity of that classification system. Please do not take the usage of that system in this thread as an endorsement.

INTRODUCTION

Some time ago - in the early to mid 2000s - I believe Nintendo's then President Satoru Iwata expressed a fear that the console market was becoming insular and catering to a static number of people, with little to no potential for growth at its then current trajectory, and not enough room to justify continued large scale investments in the market by three independent players.

In the years since, we have actually seen Iwata's prophecy bear out; the console market has well and truly stagnated at this point, after generations upon generations of growth. While consoles still sell, and sell well, their overall addressable market is either remaining the same or declining.

If you look at the PlayStation+Xbox ecosystem, that number has remained steady at 140-180 million customers for 20 years, with console manufacturers instead looking for growth by monetizing their existing, stagnant customer base more effectively, via subscription services, digital sales, releasing mid-get refreshes, and so on.

But any marketplace must show persistent growth, otherwise it becomes unsustainable and in the long run just ends up contracting and collapsing. This is universally the case. Even if the console market looks healthy right now, the decline/stagnation (depending on how we measure, I'll get to this in a second) indicates an unhealthy market. Video games as a whole are safe and doing fine - the PC and mobile sectors have seen tremendous growth, by absurd degrees, and dwarf the console market to comical degrees - but dedicated video game devices (consoles and handhelds) are the point under contention here.

THE BREAKDOWN - OVERALL

Here's where things stand with the console market:

NES/Master System/Atari 7800: ~82 million units
SNES/Gameboy/Genesis/Game Gear/TurboGrafx-16: ~156 million
N64/PS1/Saturn/Gameboy Color/3D0: ~200.6 million
GCN/PS2/Dreamcast/Xbox/GBA: ~292 million
Wii/PS3/Xbox 360/DS/PSP: ~509 million

For the eighth gen, I will look at the numbers in two ways, with Switch included and without Switch included:

Wii U/Switch/PS4/Xbox One/3DS/PSV: ~368 million units (assuming 100 million for Switch, 50 million for Xbox One, and 15 million for PS Vita)

OR

Wii U/PS4/Xbox One/3DS/PSV: ~268 million units (same numbers assumed as the previous example, but Switch has been removed)

Now here's the thing, no matter how you classify the Switch, it's irrelevant; regardless of how the Switch performs, the eighth generation is a decline over the seventh generation in total hardware sales. The brunt of this decline is, however, very clearly, borne by the handhelds, which went from 230 million units sold in the seventh generation, to under 100 million sold in the eighth. By itself, this doesn't tell us much about the state of the console market, except that handhelds declined - which we already knew (and which, to be fair, Sony and Nintendo have both already responded and adjusted to).

Which means the numbers warrant a closer look.

THE BREAKDOWN - HOME CONSOLES ONLY

With consoles only, these numbers are far more fascinating in their implications:

NES/Master System/Atari 7800: ~82 million units
SNES/Genesis/TurboGrafx-16: ~95 million
N64/PS1/Saturn/3D0: ~150.6 million
GCN/PS2/Dreamcast/Xbox: ~210 million
Wii/PS3/Xbox 360: ~270 million

Eighth gen with Switch:

Wii U/Switch/PS4/Xbox One: ~280 million

OR

Eighth gen without Switch: ~ 180 million

And this is where an alarming trend manifests more clearly - where earlier a decline may have been assumed to be mostly because of the handhelds, the fact of the matter is that for the previous generation, there is a steep decline over the preceding one in terms of overall unit sales; including the Switch as part of the generation actually dulls this decline (and in fact, if the Switch is included, in the long run, the eighth generation will presumably indicate an at least minor gain) - but if we include the Switch in the eighth generation, that just makes the issue for the ninth generation more acute. The eighth generation was able to post a moderate growth over the previous one off the back of two Nintendo consoles being counted (one of them being their single most successful and record breaking one ever), along with an extremely successful PlayStation console; without that Nintendo console, we see a decline.

However, the point I want to make is even more specific, and it pertains to the industry's AAA ecosystem...

THE BREAKDOWN - THE AAA ECOSYSTEM

The AAA ecosystem for the industry can be defined as PlayStation/Xbox/PC. On the console side of things, it's PlayStation and Xbox that hold up the fort. Nintendo has over time worked to exclude itself from the "arm race" around graphics and production values as a deliberate and conscious choice. Their consoles are no longer considered part of this "ecosystem" as it is, and their console release cadence does not define the development pipelines or paradigms for the rest of the industry. Meaning, effectively, Nintendo is selling to a market either complementary or supplementary to the AAA ecosystem; with the Wii, that market was the blue ocean (which transitioned to smartphones and tablets later on); with the Switch, Nintendo is effectively selling to a consolidated base of players invested in the AAA ecosystem looking for a secondary (or tertiary) platform, kids, families, and lapsed players.

Meaning that the health of the AAA development industry is defined by the overall addressable market presented by PlayStation and Xbox, and that is where things get really alarming:

PS2/Xbox: 179 million
PS3/Xbox 360: 171 million
PS4/Xbox One: 165 million

And now, I hope, the point I am making, is clear.

STAGNATION IN THE AAA MARKET

The AAA console ecosystem is not growing. In fact, it is explicitly declining.

I will allow for a margin of error of a couple dozen million unit sales or so across generations, and assume that the numbers across the three generations aren't coming down, they are holding steady. Meaning we can and should assume that the addressable AAA console market has held steady at, let's say 175 million units across three generations of video game consoles. That's 20 years.

20 years of stagnation in the market.

Not only is that grossly unhealthy in the long run (again, any healthy market has to post some growth, otherwise people are just fighting for, over a longer period of time, a piece of a pie that grows smaller and smaller), but it is especially alarming given the ridiculous increase in production costs and expenditures that the AAA marketplace has shown over the last 20 years. Meaning companies are spending more and more and more money to sell to the same amount of people as before. It is no wonder that we see so many publishers so aggressively push for alternate methods of monetization, whether it be DLC, micro transactions, loot boxes, battle passes, and digital sales, or the misguided push for things such as NFTs - because when the market itself isn't growing, but the costs are, the only alternative left to producers of content is to maximize revenue per user - they still show growth, just in monetary terms.

WHAT DOES THIS MEAN?

The question is, why am I fixating on the AAA market at all? After all, my own numbers show that if we include the broader market, which includes PC gaming, Nintendo gaming, and mobile gaming, video games as an industry are doing great, and showing growth. So why exclude all that and focus on this slice of the market and then sound the alarms?

Because this slice of the market is the one that most of the high end third party creators in the industry are fixated upon. As I mentioned before, the AAA console ecosystem is what defines the industry's development pipelines and paradigms and trends; dozens of publishers around the world are embedded firmly in developing for the AAA ecosystem, western companies such as EA and WB, Japanese ones such as Namco and Square Enix, consciously making the choice to continually invest in a stagnant (to put it charitably, in real terms, it is declining) slice of the market that demands more and more and more monetary investments. And to me, that feels absolutely insane. To me, this is an issue, because if the AAA market is headed for a dramatic contraction or collapse over the long term - and I do need to emphasize, stagnation over such a long period is indicative of longer term failings in any marketplace - then so much of the industry will go with it, given it is invested as inextricably in the AAA space as it is.

So this brings me to my question: what are the parties involved going to do about this? How do they plan to address the issue? Currently, there are multiple facets to this problem:

  • Stagnant or declining addressable market in absolute terms (zero to negative growth over 20 years)
  • Focusing on this market, often to the exclusion of all other segments of the market
  • Record breaking revenues currently achieved by increasingly aggressive monetization of existing user base (which is shrinking)
This requires effort and initiative from everyone involved, if they are to address this problem. Sony and Microsoft must find a way to increase the appeal of Xbox and PlayStation beyond the same 150 million players they sell to; the primary responsibility is on them to increase the addressable console AAA market. Meanwhile, third party publishers need to stop focusing on AAA to the exclusion of all else. This is important, because if they don't stop doing this, sooner or later this entire segment will sink them with it (assuming a lack of action or success on Sony and MS's part in expanding it).

This is really my take on the situation though, and I am most curious to see what the others on here have to say or think about this. Is the stagnation/decline of the AAA console market a cause for concern? What implications do you think it might have for the future of console gaming? Do you think Sony and Microsoft (and their third parties) need to do anything to reverse or stem this trend? What do you think they should do? Do you think they will do anything? I am eagerly looking forward to seeing what you have to say.
 
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Excellent analysis.

Microsoft and Sony (to a lesser extent) are working on their own cloud solutions and PC ports to expand their own markets. Its technically not growing the "console market" but it is growing the "console game market". Other revenue streams have also taken off big time in the last 10 years, like microtransactions and subscriptions.
 
You have ignored the entire PC market, software sales, digital user spend, and subscription services. If you check revenue of most gaming companies, you will see a massive increase. The AAA industry is getting richer, especially with the new DLC, microtransactions and F2P models.
 
You have ignored the entire PC market, software sales, digital user spend, and subscription services. If you check revenue of most gaming companies, you will see a massive increase. The AAA industry is getting richer, especially with the new DLC, microtransactions and F2P models.
I have explicitly mentioned the PC market, digital market, record breaking revenues, and subscription services in the OP multiple times and included them in the analysis where appropriate as well.

Excellent analysis.

Microsoft and Sony (to a lesser extent) are working on their own cloud solutions and PC ports to expand their own markets. Its technically not growing the "console market" but it is growing the "console game market". Other revenue streams have also taken off big time in the last 10 years, like microtransactions and subscriptions.
Thank you! And yes, I think avenues such as Game Pass and cloud gaming are meant to expand the reach of the AAA console industry's products, even if the number of consoles they can sell is hard capped at ~155 million units or thereabouts.
 
Console markets are shrinking indeed. That's why companies/studios invest in mobile,while Sony/Microsoft pivot to PC as well. I don't think it can be reversed only slowed down.
 
I wonder if the amount of software sold for consoles is also steady or shrunk. Given that...

-Companies are releasing fewer games
-Companies have merged and consolidated
-Games are talking longer to make, and require more people to produce
-Games are becoming platforms of their own, updated after launch
 
I have explicitly mentioned the PC market, digital market, record breaking revenues, and subscription services in the OP multiple times and included them in the analysis where appropriate as well.

Yes I read it, what I'm trying to say is those factors NEED to be included if you are making a conclusion about the AAA gaming industry.
  • PC AAA market needs to be included
  • Digital user spend needs to be included (Steam, clients, PSN, XBL, NSO)
  • Have you analysed software sales over the years?
The fact is revenue for nearly every AAA gaming company I have checked has massively increased compared to decades ago.
 
Yes I read it, what I'm trying to say is those factors NEED to be included if you are making a conclusion about the AAA gaming industry.
  • PC AAA market needs to be included
  • Digital user spend needs to be included (Steam, clients, PSN, XBL, NSO)
  • Have you analysed software sales over the years?
The fact is revenue for nearly every AAA gaming company I have checked has massively increased compared to decades ago.
The argument I am making is that if your industry's revenue growth is achieved by more aggressive monetization of the existing user base, rather than actually expanding the addressable market to begin with, then it represents a period of acute stagnation, and in the long run is going to be unhealthy for the market.

I am not denying that the AAA space is making a lot of money thanks to alternative monetization methods. I am arguing that that is just putting a band aid on the wound, treating the symptom rather than the disease.
 
You're correct, I mis-added. I fixed it, thanks!

Glad to help.

This is a interesting subject and not long ago Shawn Layden talked about it in a interview iirc.

Saying production costs keep getting higher and higher while their userbase remains mostly the same, and how companies (like Sony) would have to solve this problem and be able to attract new players to their ecosystem.

He mentioned the controller, which can be a huge roadblock for new players due to the complexity of it (lots of buttons), and I assume this a big reason why Sony is going all in on accessibility, not only for people with disabilities but also for other players that aren't able to adapt to default control schemes.

Also I think I remember a executive (from Microsoft iirc) talking about the importance of Nintendo in this aspect, because they are the ones that excel at bringing new players to the console space, which can later become a plus for Microsoft/Sony.
 
Glad to help.

This is a interesting subject and not long ago Shawn Layden talked about it in a interview iirc.

Saying production costs keep getting higher and higher while their userbase remains mostly the same, and how companies (like Sony) would have to solve this problem and be able to attract new players to their ecosystem.

He mentioned the controller, which can be a huge roadblock for new players due to the complexity of it (lots of buttons), and I assume this a big reason why Sony is going all in on accessibility, not only for people with disabilities but also for other players that aren't able to adapt to default control schemes.

Also I think I remember a executive (from Microsoft iirc) talking about the importance of Nintendo in this aspect, because they are the ones that excel at bringing new players to the console space, which can later become a plus for Microsoft/Sony.
Thank you!

I remember the Layden interview, if I remember right, he brought up Sony's cross-get and PC releases as an example of the company trying to generate more revenue from a static user base, and yeah, I think it's not a coincidence that the rise of multiplatform game development is for example tying into the same time frame as the stagnation of the AAA console space.

As far as Nintendo's role goes, I believe I remember Spencer and Yoshida both having mentioned something similar previously, and I think that this is a point worth examining - Nintendo does bring in new and expanded audiences into console gaming, but this can only work if there is a "graduation" pathway in place for them to be able to move on from Nintendo to PlayStation/Xbox; the question I have is, if the AAA console ecosystem continues to exclude the ecosystems and platforms bringing in new players (Nintendo and mobile mostly, PC in some regional markets as well), then can we say there is that graduation mechanism in place at all?

In other words, if a kid grows up playing Among Us and Fortnite and Minecraft on their Switch or iPad, do they really have any reason to buy into a PlayStation or Xbox later? Would inculcating and fostering brand recognition and fanbases among these expanded audiences not be a smart idea? In the old days, every publisher made sure to have more expanded audience friendly content for their flagship brands on handhelds; even that kind of thing has completely stopped at this point, even if we look at the mobile space.
 
As an industry becomes larger, grows in revenue and costs, risk management becomes a bigger and bigger part of it. This is kind of the same thing happening in big Hollywood movies lately, where everything needs to be a sequel or huge blockbuster to even get into production. I don't think there's a fix, just market fluctuations and maybe even a crash will be the only forces powerful enough to adjust this trend.
 
Thank you for this thread of your efforts.

I think one challenge that everyone will face in the gaming sector is tiered offerings. A portion of gamers are OK with elastic pricing and another, very big, portion is less so. Can you sell the same games to these two demographics?

I guess time will tell. But it is likely that publishers will need to diversify their portfolio. There is no way to 'catch em all' with one bullet.
 
I wonder if the amount of software sold for consoles is also steady or shrunk. Given that...

-Companies are releasing fewer games
-Companies have merged and consolidated
-Games are talking longer to make, and require more people to produce
-Games are becoming platforms of their own, updated after launch
PS4 has already shipped more sw than PS2 did with far smaller hw base so tie ratio has gone massively up. Digital probably plays big part here as it's easy to pick a lot more cheap games.
 
The argument I am making is that if your industry's revenue growth is achieved by more aggressive monetization of the existing user base, rather than actually expanding the addressable market to begin with, then it represents a period of acute stagnation, and in the long run is going to be unhealthy for the market.

I am not denying that the AAA space is making a lot of money thanks to alternative monetization methods. I am arguing that that is just putting a band aid on the wound, treating the symptom rather than the disease.

Couple of things:
  1. What do you numerically define as aggressive monetization? Revenue is massively up, DLC sales are massively up, microtransactions is massively up, softwares sales are up in many cases, hardware spend is up, how can you dissect the data to show which parts are "aggressive monetization" vs "non-aggressive"?
  2. You have ignored the AAA PC market which is part of the AAA gaming industry. Why? Many players use PCs to play AAA games instead of consoles.
  3. You haven't graphed software sales by year which is very relevant to any AAA publisher.
  4. Market size is commonly defined by revenue within the industry.
Many industry analysts have reached the opposite conclusion to you: the AAA gaming industry has grown, massively if you want to go back all the way to PS2 era.
jpg

video-game-graph-1024x651.png
M
 
Couple of things:
  1. What do you numerically define as aggressive monetization? Revenue is massively up, DLC sales are massively up, microtransactions is massively up, softwares sales are up in many cases, hardware spend is up, how can you dissect the data to show which parts are "aggressive monetization" vs "non-aggressive"?
  2. You have ignored the AAA PC market which is part of the AAA gaming industry. Why? Many players use PCs to play AAA games instead of consoles.
  3. You haven't graphed software sales by year which is very relevant to any AAA publisher.
  4. Market size is commonly defined by revenue within the industry.
Many industry analysts have reached the opposite conclusion to you: the AAA gaming industry has grown, massively if you want to go back all the way to PS2 era.
jpg

video-game-graph-1024x651.png
M
Your first graph is making my exact point, the growth comes from segments such as mobile, console gaming's slice in here is very, very constant from CY20 to CY25 projections.

Your second graph, again, does the exact same - the share of consoles has remained mostly stagnant since the mid-2000s, the growth we see comes from mobile and PC. This is my whole argument. Games such as Clash Royale and Roblox making money on mobile or PC have no more bearing on the direction that Ubisoft or WB take any more than Pokemon selling great on 3DS.

EDIT: The only reason I do not count PC in this equation is because PC is doing well, as is mobile, I have zero problems with those segments. The issue is the AAA console space specifically and explicitly, and that space is the one that ultimately dictates the development cycle, paradigms, and pipelines for the rest of the industry, meaning its importance is almost disproportionate given its overall contribution to the health of the industry, going by your own graphs, which show a fairly stagnant console market for the better part of two decades at this point.
 
This is an excellent branch of research and inquiry. I disagree with the other poster about the importance of PC in the sense that any AAA games either comes out for Xbox or Playstation exclusively, but when was the last AAA game that was PC-exclusive? Sure these games arrive on PC, but the primary driver for them are the consoles - which as you have demonstrated are declining. However, maybe he is right in that the question we have to ask is - is that decline or lack of growth explained by people migrating to PC? Perhaps people leaving consoles to go to PC is more or less matching the growth of new console purchasers.

I am dubious that there is some secret desktop PC sales boom - the supply of graphics cards would suggest that's not happening. I cannot imagine more people are building PCs today than 5-10 years ago - or buying laptops.

I think the answer will be found in software sales. That is the aggregate software sales of AAA titles across Xbox/Playstation/PC. By aggregate, I mean the entire pie. Because we know the number of titles is shrinking - we would expect existing titles to increase their sales - the question - are the aggregate of sales in that space declining or not?
 
Good points, OP. You make excellent points about how the AAA ecosystem only plays to a certain demographic (males who grew up between the '80s and 2000's) and has not modernized to broaden its customer base. Any entertainment fandom gradually erodes over time and an entertainer needs to adjust to attract new fans. The AAA ecosystem keeps making the same game with prettier graphics. They play to their own tastes and forget to try to make software for different people. I am one of those people who drifted away. I was ready to never buy a new console again back in 2006 as I was getting bored. The Wii and its simple arcade style games pulled me back.

I also want to discuss this passage:

Nintendo is selling to a market either complementary or supplementary to the AAA ecosystem; with the Wii, that market was the blue ocean (which transitioned to smartphones and tablets later on); with the Switch, Nintendo is effectively selling to a consolidated base of players invested in the AAA ecosystem looking for a secondary (or tertiary) platform, kids, families, and lapsed players.

I don't think it's as cut and dry as Nintendo being a secondary system. The 30+ million sales of Animal Crossing and Mario Kart 8DX also point to it being appealing as a primary/only system to a lot of traditional core arcade-oriented gamers like me and traditional non-gamers like my wife. Those gamers faded away when Nintendo had to stop supporting the Wii to develop for the 3DS and WiiU and they remained out there, waiting for something else to appeal to their tastes. They weren't lost to phones permanently as the forum narrative goes. They were lost to disinterest because Nintendo did not have the development capacity back in 2011 to support the Wii, WiiU and 3DS (hence merging the development lines with the Switch). It's the only video game platform for people like my wife and I who like video games but have no interest in AAA "cinematic" games or MTX-heavy sports games. It's the only system for core video game fans who place gameplay over presentation like myself. I care more about Breath of the Wild's gameplay than I do about Red Dead Redemption 2's ultra-realistic graphics and cinematic presentation but proscribed gameplay. PS4 had some good stuff like Devil May Cry but the emphasis was always on MTX battle royales, MTX sports, and "cinematic" third person action.

I don't know of any data sources other than the fantastic sales of Nintendo's (and third parties like Just Dance, Taiko no Tatsujin, and Momotaro in Japan) arcade and expanded audience titles.

Thank you again for pointing out the stagnation in the AAA marketplace and sales data.
 
You have ignored the AAA PC market which is part of the AAA gaming industry. Why? Many players use PCs to play AAA games instead of consoles.
I think this is important point. Limiting to the "AAA console market" seems like a Sony problem more than an everyone problem. Third parties can still see growth in the "AAA market" even if the PS and Xbox stays constant or even declines to some degree if the PC portion is growing.
 
Your first graph is making my exact point, the growth comes from segments such as mobile, console gaming's slice in here is very, very constant from CY20 to CY25 projections.

Your second graph, again, does the exact same - the share of consoles has remained mostly stagnant since the mid-2000s, the growth we see comes from mobile and PC. This is my whole argument. Games such as Clash Royale and Roblox making money on mobile or PC have no more bearing on the direction that Ubisoft or WB take any more than Pokemon selling great on 3DS.

EDIT: The only reason I do not count PC in this equation is because PC is doing well, as is mobile, I have zero problems with those segments. The issue is the AAA console space specifically and explicitly, and that space is the one that ultimately dictates the development cycle, paradigms, and pipelines for the rest of the industry, meaning its importance is almost disproportionate given its overall contribution to the health of the industry, going by your own graphs, which show a fairly stagnant console market for the better part of two decades at this point.
Couple of things:
  1. What do you numerically define as aggressive monetization? Revenue is massively up, DLC sales are massively up, microtransactions is massively up, softwares sales are up in many cases, hardware spend is up, how can you dissect the data to show which parts are "aggressive monetization" vs "non-aggressive"?
  2. You have ignored the AAA PC market which is part of the AAA gaming industry. Why? Many players use PCs to play AAA games instead of consoles.
  3. You haven't graphed software sales by year which is very relevant to any AAA publisher.
  4. Market size is commonly defined by revenue within the industry.
Many industry analysts have reached the opposite conclusion to you: the AAA gaming industry has grown, massively if you want to go back all the way to PS2 era.
jpg

video-game-graph-1024x651.png
M

Can we get a clear definition of PC? I know where the revenue is coming from all the others on this graph, but are we simply saying Steam/Origin/Epic are "PC"?

Edit: Here is why that is important - PC sales (like actual boxes) have been declining for a long time until the pandemic when a bunch of people were working from home. This suggests that somehow, miraculously, PC game sales, according to this graph, was increasing at a time when PC sales in terms of units were in decline (see 2010-2018). Again, what we are looking at here is revenue and not units. I think there is no question that revenues are increasing - that's not the point of this analysis. The point of this analysis is, I think, about units - bodies - distinct sales of AAA games - rather than the additional revenue streams that are used by modern games to clean more from people.

You can have a decline in gaming - by actual gamer bodies - at the same time those gamers are spending more. I think the decline in actual bodies is the main focus and problem that is driving the revenue and monetization schemes we see today.
 
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Console markets are shrinking indeed. That's why companies/studios invest in mobile,while Sony/Microsoft pivot to PC as well. I don't think it can be reversed only slowed down.

It’s a software problem. The AAA software has been same-y but with better graphics since the Dreamcast/PS2/Xbox/Cube. Any entertainment fan base gradually eroded if you don’t do something the hook new fans.

You reverse a shrinking market by attracting new players with compelling software. In other words, the Wii/DS strategy. The big third parties need to dabble in AA software to take risks to try to find something that brings new players to their product. Unfortunately, it seems that they are more interested in making the same thing with ever higher budgets :(
 
I believe back in the day there were plenty of different exclusive games that made it worth to own various consoles. Today, not so much. That's why Microsoft invests in things like Gamepass, to cater those who 'just wanna play stuff', and Sony invests in AAA exclusives, betting that since people are probably just buying one console, they will default to which ever has the prettiest games.
 
I think this is important point. Limiting to the "AAA console market" seems like a Sony problem more than an everyone problem. Third parties can still see growth in the "AAA market" even if the PS and Xbox stays constant or even declines to some degree if the PC portion is growing.
Sony and Nintendo. Nintendo while they do bring a lot of new players, and are quite honestly doing amazing (maybe even better than ever), really haven grown their install base from their previous peaks. If anything, combining Wii and DS (as the Switch is supposed to be both a handheld and a console), shows theyve shrunk quite a bit.

Im not sure theyll ever bite the PC or Mobile bullet fully though.
 
Sony and Nintendo. Nintendo while they do bring a lot of new players, and are quite honestly doing amazing (maybe even better than ever), really haven grown their install base from their previous peaks. If anything, combining Wii and DS (as the Switch is supposed to be both a handheld and a console), shows theyve shrunk quite a bit.

Im not sure theyll ever bite the PC or Mobile bullet fully though.
While I don't disagree that a shrinking console space isn't a concern for Nintendo, but I don't think it's as dire as they aren't as dependent on AAA productions in the same manner as Sony, which is the focus of this thread.
 
While I don't disagree that a shrinking console space isn't a concern for Nintendo, but I don't think it's as dire as they aren't as dependent on AAA productions in the same manner as Sony, which is the focus of this thread.
While true, their budgets do grow, and will continue to do so as hardware improves. They have the same problem, theyll just be late to the party for a gen or two.
 
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One issue I can see with this is that many people bought the PS2 as a cheap alternative to a DVD player. The PS2/PS3 generation was the generation of the "multimedia console"
With the development of streaming and cheaper alternatives to buying a console as a media center a certain percentage of hardware sales drops.
As has been listed software sales are doing fine.
AAA software, by which you mean, western big budget games are not really shrinking either. There are more middle sized studios making games than ever as far as I can tell. And there is a huge market of independent games.

I think hardware sales drops can easily be understood by the fact that gaming is now more diverse than ever. Consoles used to be the only way to access games for the average consumer, now the average consumer is far more educated about PC gaming and those who only wanted small distractions in life are satisfied with mobile gaming.
The worries of AAA development seem a little overblown considering within the next 8 weeks Elden Ring and Dying light 2 are both releasing. Both of which would be the pinnacle of a gaming year in the early 2000s.
 
Good points, OP. You make excellent points about how the AAA ecosystem only plays to a certain demographic (males who grew up between the '80s and 2000's) and has not modernized to broaden its customer base. Any entertainment fandom gradually erodes over time and an entertainer needs to adjust to attract new fans. The AAA ecosystem keeps making the same game with prettier graphics. They play to their own tastes and forget to try to make software for different people. I am one of those people who drifted away. I was ready to never buy a new console again back in 2006 as I was getting bored. The Wii and its simple arcade style games pulled me back.

I also want to discuss this passage:

Nintendo is selling to a market either complementary or supplementary to the AAA ecosystem; with the Wii, that market was the blue ocean (which transitioned to smartphones and tablets later on); with the Switch, Nintendo is effectively selling to a consolidated base of players invested in the AAA ecosystem looking for a secondary (or tertiary) platform, kids, families, and lapsed players.

I don't think it's as cut and dry as Nintendo being a secondary system. The 30+ million sales of Animal Crossing and Mario Kart 8DX also point to it being appealing as a primary/only system to a lot of traditional core arcade-oriented gamers like me and traditional non-gamers like my wife. Those gamers faded away when Nintendo had to stop supporting the Wii to develop for the 3DS and WiiU and they remained out there, waiting for something else to appeal to their tastes. They weren't lost to phones permanently as the forum narrative goes. They were lost to disinterest because Nintendo did not have the development capacity back in 2011 to support the Wii, WiiU and 3DS (hence merging the development lines with the Switch). It's the only video game platform for people like my wife and I who like video games but have no interest in AAA "cinematic" games or MTX-heavy sports games. It's the only system for core video game fans who place gameplay over presentation like myself. I care more about Breath of the Wild's gameplay than I do about Red Dead Redemption 2's ultra-realistic graphics and cinematic presentation but proscribed gameplay. PS4 had some good stuff like Devil May Cry but the emphasis was always on MTX battle royales, MTX sports, and "cinematic" third person action.

I don't know of any data sources other than the fantastic sales of Nintendo's (and third parties like Just Dance, Taiko no Tatsujin, and Momotaro in Japan) arcade and expanded audience titles.

Thank you again for pointing out the stagnation in the AAA marketplace and sales data.
So I absolutely do agree that the Switch has expanded appeal beyond just being a secondary system for PS4 owners too, and "kids, families, and lapsed players" was meant to convey that, but I don't mean that one can only find the Switch interesting if they also own another gaming platform (as someone who uses the Switch as my primary gaming platform, I am fully aware that it is more than sufficient for a lot of people haha). And yes, the Switch is a great and thriving ecosystem for software that provides a sort of alternative to the traditional AAA space (I liken Switch most to Steam in terms of comparisons to other gaming platforms, though of course that's not an ideal or fully accurate comparison).

And yes, I do agree the issue is software. I assume most people who buy a Switch to play games such as Breath of the Wild or Rune Factory wouldn't have any issue with getting other platforms for similar games too, if those other platforms were assured a steady kind of cadence of these types of games. The problem is that most AAA software companies refuse to invest in much that isn't GaaS or AAA single-player prestige; and this comes back to my original point of third parties needing to make an effort to expand their appeal beyond the traditional AAA sphere too.

One issue I can see with this is that many people bought the PS2 as a cheap alternative to a DVD player. The PS2/PS3 generation was the generation of the "multimedia console"
With the development of streaming and cheaper alternatives to buying a console as a media center a certain percentage of hardware sales drops.
As has been listed software sales are doing fine.
AAA software, by which you mean, western big budget games are not really shrinking either. There are more middle sized studios making games than ever as far as I can tell. And there is a huge market of independent games.

I think hardware sales drops can easily be understood by the fact that gaming is now more diverse than ever. Consoles used to be the only way to access games for the average consumer, now the average consumer is far more educated about PC gaming and those who only wanted small distractions in life are satisfied with mobile gaming.
The worries of AAA development seem a little overblown considering within the next 8 weeks Elden Ring and Dying light 2 are both releasing. Both of which would be the pinnacle of a gaming year in the early 2000s.
I think the PS2's freakishly high attach ratio does dispel any concerns about people buying it to play DVDs and nothing else; while I am sure there were many (maybe even millions in absolute terms, given how much the PS2 sold) who did just that, I think in the big picture, whatever number that is is immaterially small, given the PS2's software moving ability.

While I don't disagree that a shrinking console space isn't a concern for Nintendo, but I don't think it's as dire as they aren't as dependent on AAA productions in the same manner as Sony, which is the focus of this thread.
While true, their budgets do grow, and will continue to do so as hardware improves. They have the same problem, theyll just be late to the party for a gen or two.
Nintendo is an interesting one to discuss here, because they sort of fall between AAA consoles (decline) and mobile/PC (growth); while they are down from their absolute peak in terms of addressable install base, they are still going to end this generation with more hardware sold than any generation but one:

SNES+Gameboy: ~110 million
N64+GBC: ~95 million
GCN+GBA: ~103 million
Wii+DS: ~255 million
Wii U+3DS: ~87 million

Unless the Switch stops selling tomorrow, it's going to be convincingly up over all generations except Wii+DS. There is very clear growth and the cultivation of a sustainable ecosystem Nintendo can carry across generations.

However, even if the current decline (so to say) over the Wii+DS era doesn't matter as much in terms of addressable install base, eventually Nintendo too has to figure out a way to continue increasing the addressable market for its hardware and software going forward if costs are going to continue to scale up. While I do think that, by the time Nintendo gets to, e.g., PS4 level of tech, it will be cheaper to make games at that level than it was in 2014-2019, it will still represent an upfront cost increase over the investment necessary in games now. Meaning while Nintendo has less pressure to continue growing its addressable market, it still does have that pressure - and the company needs to figure out this problem on their end too.
 
Thank you!

I remember the Layden interview, if I remember right, he brought up Sony's cross-get and PC releases as an example of the company trying to generate more revenue from a static user base, and yeah, I think it's not a coincidence that the rise of multiplatform game development is for example tying into the same time frame as the stagnation of the AAA console space.

As far as Nintendo's role goes, I believe I remember Spencer and Yoshida both having mentioned something similar previously, and I think that this is a point worth examining - Nintendo does bring in new and expanded audiences into console gaming, but this can only work if there is a "graduation" pathway in place for them to be able to move on from Nintendo to PlayStation/Xbox; the question I have is, if the AAA console ecosystem continues to exclude the ecosystems and platforms bringing in new players (Nintendo and mobile mostly, PC in some regional markets as well), then can we say there is that graduation mechanism in place at all?

In other words, if a kid grows up playing Among Us and Fortnite and Minecraft on their Switch or iPad, do they really have any reason to buy into a PlayStation or Xbox later? Would inculcating and fostering brand recognition and fanbases among these expanded audiences not be a smart idea? In the old days, every publisher made sure to have more expanded audience friendly content for their flagship brands on handhelds; even that kind of thing has completely stopped at this point, even if we look at the mobile space.

I think it's mostly about those players that really get into gaming from a young age and want to invest in better hardware in the future. The type that just sticks to stuff like you mentioned (Among Us, Fortnite, etc) probably will never make that transition and be happy playing wherever they can.

Microsoft approach seems obvious at this point, PC day 1 and stream/cloud to try reaching new players with a low price of entry.

Compared to them Sony is in a better position in terms of hardware sales so they seem to be taking things slower, and to start they are expanding their reach to PC to combat this problem.

I have my doubts about these companies being able to expand their console base, but maybe other developing countries will play a important part on it. We'll see.
 
Can we get a clear definition of PC? I know where the revenue is coming from all the others on this graph, but are we simply saying Steam/Origin/Epic are "PC"?

Edit: Here is why that is important - PC sales (like actual boxes) have been declining for a long time until the pandemic when a bunch of people were working from home. This suggests that somehow, miraculously, PC game sales, according to this graph, was increasing at a time when PC sales in terms of units were in decline (see 2010-2018). Again, what we are looking at here is revenue and not units. I think there is no question that revenues are increasing - that's not the point of this analysis. The point of this analysis is, I think, about units - bodies - distinct sales of AAA games - rather than the additional revenue streams that are used by modern games to clean more from people.

You can have a decline in gaming - by actual gamer bodies - at the same time those gamers are spending more. I think the decline in actual bodies is the main focus and problem that is driving the revenue and monetization schemes we see today.

Total PC sales != gaming on PC. Steam numbers have been on a continuous rise (look at just the concurrent players if you want) what is decreasing are sales of your average family pc, killed by smartphones and longer upgrade cycles.

Furthermore, we can also theorize a not-so-big overlap between consoles and gaming PCs, since Xbox and Playstation now happily port their system sellers on Steam just to make a bit more money.

I also have my doubts looking at just the numbers posted in the OP: a lot of PS2 sales happened during the seventh generation in emerging markets and we don't have "active install base" numbers. It's also important to know that Sony's and Nintendo's consolidation into a single platform made some console numbers clearly more important: I have no doubt that the ps4's 115m units were more important to them that ps3's 80m + psp's 80m.

The gaming PC market just didn't exist (MMOs aside) in the sixth generation, now it's enormous and thriving

I have no data on this, but I have a hunch that the only markets that consoles have left behind are emerging markets that were previously served by the generation before.

It's also important to note that console gaming is spilling out: PUBG, Fortnite, Genshin Impact are all "console-quality" games that also make money on mobile. Apple's convergence of macos and ios + arcade could also be a potential avenue of growth for AA titles. Things are getting better, not worse. The only negative factor is China's decision to strangle its own market.
 
I am so bewildered at how the OP didn't even go into the actual prices of the systems being sold and the number of revisions/price-cuts. If anything it's damn surprising that with only one price cut for the PS4 (compared to the 3-5 price cuts that the PS1, PS2, and PS3 had) plus a more expensive mid-gen upgraded model that the generation did as well as it did.
 
PC is obviously not a longterm solution when it can barely eek out 1 million sales for a title like Horizon despite the number of active accounts being somewhere in the vicinity of 120 million.
It's obvious that only a small percentage have interests and values that overlap with console gamer sensibilities.... which is why I laughed when I heard Jim Ryan talk about hundreds of millions playing their games. 20 million sales is excellent and maybe he should just be talking about getting to 30 or 40 million first.

The obvious solution I always felt was to have only one console... leave PlayStation to make the console for everyone, it is the most efficient use of silicon and gives the best performance per dollar.

Then put Gamepass on each one, with a library agreed by Msft and Sony. So the Xbox fans are catered to if they want to continue on console. Otherwise I think in the longterm it makes sense for Msft to buy Steam.

Issues like crossbuy, crossplay and console wars would no longer be an issue, the multiplayer bases would be united for every game. All production would be streamlined and make even better use of economies of scale and instead of Sony spreading themselves thin looking at PC, mobile, cloud and all sorts of nonsense..... they could really focus on getting consoles to every possible market and implementing regional pricing to make premium gaming more accessible.
 
Your first graph is making my exact point, the growth comes from segments such as mobile, console gaming's slice in here is very, very constant from CY20 to CY25 projections.

Are you reading that graph correctly:

  1. Console industry is going from $62B to $88B that's a growth of 42% unlike your prediction of decline/stagnation.

Your second graph, again, does the exact same - the share of consoles has remained mostly stagnant since the mid-2000s, the growth we see comes from mobile and PC. This is my whole argument. Games such as Clash Royale and Roblox making money on mobile or PC have no more bearing on the direction that Ubisoft or WB take any more than Pokemon selling great on 3DS.

Might be harder to read but the second graph also shows growth in the console sector.

  • The problem with your conclusion is that it isn't data driven. Where is software sales, spend, subs, microtransactions, which all massively account for the revenue, profitability and future of the AAA console space. After all you are expecting pubs to take some action, pubs look at said variables closely. Why do you think most MP titles are going F2P?
  • The title is more accurate by saying the PS+XB hardware sales are stagnating.
  • Not to mention, by the end of their lifecycle, by my estimates, PS4+XB1 = 118+52M = 170M
  • So your conclusion is that some action needs to be taken because PS+XB hardware sales fell 0.6% or 5% from PS2. You can see why its wrong right? Its a miniscule percentage and counteracted by console hardware spend being much higher as consoles are more expensive and do not reach the low price floors of prior generations as quickly or ever.
 
Then put Gamepass on each one, with a library agreed by Msft and Sony. So the Xbox fans are catered to if they want to continue on console. Otherwise I think in the longterm it makes sense for Msft to buy Steam.
Oh yeah, back to GFWL and filthy megarich megacorporation M$ trying to scam you into paying for the online on windows after successfully convincing the console market paying for online access is something normal. Hell yeah.

Jokes aside, everything you wrote in your post sounds dystopian
 
Your talk was interesting but you had to make too many concessions for it.

A lot of data such as those make a huge impact:
1-How much revenue each game on those AAA platfforms generated just from sales
2-How many players of the total userbase buy those games
3-How much the games used to profit x how they profit now(much higher costs and taxes than in the 90's)
4-How much the AAA console games nowadays are going towards heavy microtransactions and DLC packs to cover costs bigger than the $60 pricetag

Of those, the point 1,3,4 are pretty much impossible to get.

The "AAA console" numbers are shrinking, that's the only thing we know.

Offtopic: Did FFVII+FFVIII+FFIX on PS1 sold better than FFXV? Did they cost less to make? Did they got more profits?
It is weird to see in the past we had much more AAA games. It is like in the actual days making just one game generates more money than 3.
 
Total PC sales != gaming on PC. Steam numbers have been on a continuous rise (look at just the concurrent players if you want) what is decreasing are sales of your average family pc, killed by smartphones and longer upgrade cycles.

Furthermore, we can also theorize a not-so-big overlap between consoles and gaming PCs, since Xbox and Playstation now happily port their system sellers on Steam just to make a bit more money.

I also have my doubts looking at just the numbers posted in the OP: a lot of PS2 sales happened during the seventh generation in emerging markets and we don't have "active install base" numbers. It's also important to know that Sony's and Nintendo's consolidation into a single platform made some console numbers clearly more important: I have no doubt that the ps4's 115m units were more important to them that ps3's 80m + psp's 80m.

The gaming PC market just didn't exist (MMOs aside) in the sixth generation, now it's enormous and thriving

I have no data on this, but I have a hunch that the only markets that consoles have left behind are emerging markets that were previously served by the generation before.

It's also important to note that console gaming is spilling out: PUBG, Fortnite, Genshin Impact are all "console-quality" games that also make money on mobile. Apple's convergence of macos and ios + arcade could also be a potential avenue of growth for AA titles. Things are getting better, not worse. The only negative factor is China's decision to strangle its own market.
Yeah. Sw sales of PS2 cratered far quicker than its hw sales. For example FY2010 PS2 still shipped 6.4 million units of hw (with extremely low prices) but just 7.9 million units of sw (with again most being discount titles). That is pocket change for Sony or any other publisher.
 
Part of it is shrinking presence of genres, in my mind. You can’t really make, just for one example, a massive attention-grabbing big-budget puzzle game, so games like that are typically relegated to mobile because that’s where you have the largest addressable market. And even in the genres they still serve, there’s less room for wild experimentation, which is often relegated to the indie market.

But the mobile and indie markets at least partly exist because these non-big-budget ideas and genres were abandoned by publishers in the console space and left a huge lack that others were interested in filling, so they became a convenient way to shunt experimentation into other segments of the gaming market that are typically poorly promoted and are much more of a volume-based business due to a race to the bottom (unless you make a game that makes money by whale-hunting, that is, which is what the entire mobile market quickly became), as well as to have smaller companies and individuals shoulder a lot of risk that bigger companies could rightfully and easily absorb.

Meanwhile, these games and genres were abandoned by that portion of the console market and thus there is no push to get customers interested in that content. There’s a reason that PS and Xbox don’t have favourable numbers for indie game sales, it’s because it‘s a market that has no cultivation for much of anything outside of the blockbuster, whereas these games do the bulk of their sales on PC and Switch (and mobile to a lesser degree now). I don’t consider that coincidental, how there’s a correlation between the market segments that are in a growth period and the ones that support and promote the widest variation of content by genre, budget, scope, etc.
I dunno, I think there’s something to that.
Thank you!

I remember the Layden interview, if I remember right, he brought up Sony's cross-get and PC releases as an example of the company trying to generate more revenue from a static user base, and yeah, I think it's not a coincidence that the rise of multiplatform game development is for example tying into the same time frame as the stagnation of the AAA console space.

As far as Nintendo's role goes, I believe I remember Spencer and Yoshida both having mentioned something similar previously, and I think that this is a point worth examining - Nintendo does bring in new and expanded audiences into console gaming, but this can only work if there is a "graduation" pathway in place for them to be able to move on from Nintendo to PlayStation/Xbox; the question I have is, if the AAA console ecosystem continues to exclude the ecosystems and platforms bringing in new players (Nintendo and mobile mostly, PC in some regional markets as well), then can we say there is that graduation mechanism in place at all?

In other words, if a kid grows up playing Among Us and Fortnite and Minecraft on their Switch or iPad, do they really have any reason to buy into a PlayStation or Xbox later? Would inculcating and fostering brand recognition and fanbases among these expanded audiences not be a smart idea? In the old days, every publisher made sure to have more expanded audience friendly content for their flagship brands on handhelds; even that kind of thing has completely stopped at this point, even if we look at the mobile space.
Marketing budgets are the compensatory method of choice, to drown you in awareness of a product in the hope that it creates a customer. I don’t think it’s as effective as they believe it is.

The graduation method of the past was software continuity. In the PS1’s era, the games they were playing on Nintendo hardware were largely the same or better than they were before, creating a through-line that was obvious. It was a really great graduation mechanism.
But that’s no longer the case, there’s little to no through-line between Nintendo hardware and PS/XB hardware and seemingly little interest in regenerating one. Same is true for the mobile market.
 
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While true, their budgets do grow, and will continue to do so as hardware improves. They have the same problem, theyll just be late to the party for a gen or two.
Nintendo arcade roots maybe prevent this. The arcade has a concern: bring new customers and appeal to former gamers, and concern bring a broad of games, not only action AAA games. Nintendo brand managers with genre kings. Nintendo has a real concern for expanding the market, with Wii, DS and now with Switch. The technical problem with Nintendo's big numbers is not a problem. And Nintendo pricing helps more. Sony and Microsoft emulate Pc market, because of this the AAA production will be their downfall.
 
First off, it's great to see such a well thought out OP with lots and lots of data.

The OP brings up alot of great points, but i will say this. There were alot of publishers caught with their pants down at the start of the PS4/XBO generation because they genuinely thought people didn't want consoles anymore and had to scramble to get games ported to those platforms, then it happened again with the switch.

The fact that there's still 200+ million people every gen willing to buy dedicated hardware when everyone has a powerful PC in their pocket with pretty good cloud capabilities is remarkable and speaks to the demand there is for high quality video games.

It's not that these companies don't do anything to try and reach more audiences, Playstation does things like PSVR, Xbox is pushing cloud gaming, Nintendo has portability, touch screen, and motion controls in their current platform. The most important thing though is high quality content, which all 3 have in abundance, which brings the 200+ million players who are far more valuable than your average mobile player who doesn't spend a single penny on the platforms, and the games basically have to be F2P because the overwhelming majority of those people don't care enough about video games to spend one cent on them unless you get your Gatcha hooks in them, far more insidious than Playstation telling you "$500 for the console, $70 for the games".
 
Excellent job on this post, very detailed and high effort. It's interesting to see what impact this might have down the line on the industry. This reminded me of that whole "niche product" thing from Sony and it shows the sort of mentality you are criticizing. I definitely agree that gaming companies should be trying more to expand audiences and create new fans as I think you are correct that they don't seem very focused on that.

 
which brings the 200+ million players who are far more valuable than your average mobile player who doesn't spend a single penny on the platforms
What? Mobile gaming has higher returns and much lower costs then consoles. Apple and google make more then Sony and microsoft/nintendo do just by taking the store cut.
 
I think you illustrated well the stagnation of the traditional home console market, but I think you are vastly overstating the importance of this. The third parties that you claim are so intrinsically tied to this market are already branching out to PC and finding success there. New markets and revenue streams have been emerging in the past few years too. It's a very slow decline as well, so they have plenty of time to continue to react and adapt.
 
Nintendo arcade roots maybe prevent this. The arcade has a concern: bring new customers and appeal to former gamers, and concern bring a broad of games, not only action AAA games. Nintendo brand managers with genre kings. Nintendo has a real concern for expanding the market, with Wii, DS and now with Switch. The technical problem with Nintendo's big numbers is not a problem. And Nintendo pricing helps more. Sony and Microsoft emulate Pc market, because of this the AAA production will be their downfall.

This arcade vs. PC market needs further exploration. Nintendo is and always will be an arcade game company. Even a long adventure like Breath Of the Wild has arcade gameplay. In fact, the allure of the original Legend of Zelda was arcade gameplay in a RPG sized map! Arcade games need to hook the player in a short period of time. They can create more customers because they are accessible but can also more quickly lose customers.

Sony started off as courting all the arcade game developers in Japan and having a large library with lots of arcade gameplay games. After the dramatic failure of the PS3, they inadvertently transformed themselves into a PC game oriented company because those games have always had a smaller but more dedicated fan base. (I know that the PS3 sold 80 million units but it was a failure in that it lost crazy money and greatly tarnished the brand outside of enthusiast forums. It also greatly hurt all the Japanese third parties that filled the PS1 and PS2 libraries with gems.)

Microsoft is more in the PC-like game side with Halo, Gears of War and Flight Sim being their tent pole software.

We talk about AAA in this thread but we also need to think about PC-like games vs. arcade-like games. AAA software like RPG’s are descended from stuff like Dungeons and Dragons on the Commodore 64. On the other hand, Mario Brothers was a successful arcade game. All the lore in games like Horizon Zero Dawn is an attempt to have arcade gameplay in an RPG world like the Legend of Zelda. (That concept never really translated to 3D until Breath Of the Wild, which is why that game has sold like the original Legend of Zelda but more due to the video game market being bigger.)

The fundamental business model between PC-like games and arcade-like games is completely different; one seeks investment from a stable fan base, the other seeks constant new adoption to make up for the previous fans who don’t feel like popping in another quarter into the arcade machine.
 
So I absolutely do agree that the Switch has expanded appeal beyond just being a secondary system for PS4 owners too, and "kids, families, and lapsed players" was meant to convey that, but I don't mean that one can only find the Switch interesting if they also own another gaming platform (as someone who uses the Switch as my primary gaming platform, I am fully aware that it is more than sufficient for a lot of people haha). And yes, the Switch is a great and thriving ecosystem for software that provides a sort of alternative to the traditional AAA space (I liken Switch most to Steam in terms of comparisons to other gaming platforms, though of course that's not an ideal or fully accurate comparison).

And yes, I do agree the issue is software. I assume most people who buy a Switch to play games such as Breath of the Wild or Rune Factory wouldn't have any issue with getting other platforms for similar games too, if those other platforms were assured a steady kind of cadence of these types of games. The problem is that most AAA software companies refuse to invest in much that isn't GaaS or AAA single-player prestige; and this comes back to my original point of third parties needing to make an effort to expand their appeal beyond the traditional AAA sphere too.


I think the PS2's freakishly high attach ratio does dispel any concerns about people buying it to play DVDs and nothing else; while I am sure there were many (maybe even millions in absolute terms, given how much the PS2 sold) who did just that, I think in the big picture, whatever number that is is immaterially small, given the PS2's software moving ability.



Nintendo is an interesting one to discuss here, because they sort of fall between AAA consoles (decline) and mobile/PC (growth); while they are down from their absolute peak in terms of addressable install base, they are still going to end this generation with more hardware sold than any generation but one:

SNES+Gameboy: ~110 million
N64+GBC: ~95 million
GCN+GBA: ~103 million
Wii+DS: ~255 million
Wii U+3DS: ~87 million

Unless the Switch stops selling tomorrow, it's going to be convincingly up over all generations except Wii+DS. There is very clear growth and the cultivation of a sustainable ecosystem Nintendo can carry across generations.

However, even if the current decline (so to say) over the Wii+DS era doesn't matter as much in terms of addressable install base, eventually Nintendo too has to figure out a way to continue increasing the addressable market for its hardware and software going forward if costs are going to continue to scale up. While I do think that, by the time Nintendo gets to, e.g., PS4 level of tech, it will be cheaper to make games at that level than it was in 2014-2019, it will still represent an upfront cost increase over the investment necessary in games now. Meaning while Nintendo has less pressure to continue growing its addressable market, it still does have that pressure - and the company needs to figure out this problem on their end too.
The combining of home and portable numbers is a bit tricky given the premise of the OP. Nintendo sold 255 million Wii/DS, but many consumers bought both. Hell, some of us bought 4 or more DS systems alone.

Nintendo’s handheld strategy that’s been ported to Switch is selling multiple devices to the same consumer/household. The mid-gen refreshes for XB1 and PS4 did something similar.

I doubt the data exists, but it would be fascinating to see how many individual consumers purchased at least one system, rather than just seeing the total units sold per platform. I think the lower tie ratios of handhelds have hinted at this differentiation.
 
A couple things:

1) I found your use of AAA very difficult to follow. It's a term already questionable for software (we had that debate just days ago), but applying it to consoles? And excluding Nintendo from it, because Switch isn't as powerful as Xbox/PS? It's your thread and you defined that, but I can't say I agree with it. "AAA" shouldn't be used for hw nor in that way specifically. A console isn't universally defined by power, there's many other factors that would need to be taken into account. Just one example: The Switch being the only console that's portable and hybrid and thus best fitting into the modern lifestyle of many people who are constantly on the move could be seen as an AAA-trait, too. Personally, I just wouldn't use that term, not fir sw, but especially not for hw.

2) I only mention this because I JUST got done watching a great documentary about capitalism and its growth-fallacy (I will link it below, but I'm not sure if it has auto-generated English subtitles. Audio is German). Growth is not eternal, any system has its limits. System meaning the overall industry here. Instead of seeking the carrot that is growth, game makers should seek sustainability. We have some historical examples of this working for at least some time: When SNK had their own expensive console witj expensive games, but a very dedicated fanbase that made it work. Or right now Nihon Falcom who aren't big selling, but have nurtured their little fanbase (only now self-destructing for ignoring where the audience has moved). Even Nintendo made do with a very contracted audience during the GameCube and Wii U days - afaik they still turned a profit. And that brings me to another point: the video gaame market has been growing and shrinking permanently for any individual console maker. Especially Nintendo. And yet they made do. Growth can not be the answer, not beyond a certain point, and I'd rather console makers understand that instead of chasing something that ruins and alienates the existing customers. NFT has 'great' potential to do that.



3) But growth is still happening, just not limited to within the traditional console market. GamePass, PSVR2, Labo, and now also Meta, mobile phones and sooner or later even medical entertainment technology (for when the main portion of the currently 35-40 yo gamers reaches retirement age). There is actually so much growing in the overall entertainment technology industry that it feels like artificially limiting yourself just to make this argument of the end of growth. Another user here mentioned 'this is more a Sony problem' and I'm inclined to agree: The only type of games that are at risk of becoming a rarer occurrence a ambitious singleplayer-titles, the kind of game that costs a lot to make, but isn't guaranteed to sell a lot, especially when compared to multiplayer/mobile games that are made on cheaper budgets and have potential to really blow up big in sales. Personally, I like Sony's singleplayer-titles and I wish both Microsoft and es Nintendo made more of thosee. But unless your argument revolves specifically about that kind of games, lack of growth is not an issue at the moment from how I see it.
 
@Phantom Thief, this is a great discussion you started with alot of info. Threads like these are what make IB great! Now my thoughts are going all over the place, so I'll try to stay focused.

Why the base is stagnant: So, the first thought that came to my head was how the customer base shifts as time goes on. I'm trying to find some data to support this theory, but my theory is that as new players enter the console world others are moving out. Think about it. There are plenty of people who grew up playing video games and probably played through college and afterwards. However, as time goes on and life gets in the way a good chunk of the gaming population age out either to being occasional gamers or completely give up the hobby. There is data that shows the majority of gamers range from their teens to their thirties. There are plenty of people that game past the "gaming prime" and I hope to be gaming until my dying breath, but IMO there is a decent chunk of the population that move on from gaming at a certain point in life.

Another thought that I have had is that the big 3 have to fight PC and more than ever mobile for the attention of new gamers. Your charts show that mobile gaming revenue keeps increasing. At least in the US, practically every 3rd grader on up carries a phone of some sort. They are already "in the game". When parents are already paying for their kids to have a phone and everything else, a $500 video game console can be a big ask in this day and age.

Cost of entry (aka "Is the value of console gaming increasing): I decided to compare the barrier of entry to 20 years ago and gradually up. For this, I am including a console, second controller, online sub if required, and a memory card in the PS2's case since that was basically required.

2001: Games- $49.99 ($78.50 in 2022 dollars)
  • PS2: $299.99 console + $34.99 controller + $34.99 memory card = $369.97 ($580.97 in 2022 dollars)
  • Xbox: $299.99 console + $39.99 controller = $339.98 ($533.88 in 2022 dollars)
2005/2006: Games- $59.99 ($82.71 in 2022 dollars)
  • PS3: $599.99 console + $59.99 console = $659.98 ($902.92 in 2022 dollars)
  • Xbox 360: $399.99 console + $51.98 controller/battery + $49.99 online sub = $451.97 ($643.24 in 2022 dollars)
2013: Games- $59.99 ($71.58 in 2022 dollars)
  • PS4: $399.99 console + $59.99 controller + $49.99 online sub = $509.97 ($608.46 in 2022 dollars)
  • Xbox One: $499.99 console + $59.99 controller + $59.99 online sub = $619.97 ($739.70)
2022: Top game price is $69.99
  • PS5: $499.99 console + $69.99 controller + $59.99 online sub = $629.97
  • Xbox: $499.99 console + $69.99 controller + $59.99 online sub = $629.97
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So as time has gone on, the cost of entry for consoles have slowly risen (with the PS3 launch being an outlier). This has happened partially due to the rise in controller and online subscription costs as time has gone on. Consoles have added features every generation, but most of the non-gaming features are not as appealing as before. In the PS2 and especially the PS3 generation, those consoles were known for being great DVD/blu-ray players (especially the PS3). It is no secret that in 2022, the home movie market is a fraction of what it was in the DVD era. Digital films and streaming have really hit those markets. Speaking of streaming, using Netflix/Hulu/ect on a console isn't as much of a selling point when there are smart TV's and other cheap devices that can stream shows and films just as good. The value of consoles mostly comes down to the gaming only.

Games on the other hand have seen a drop in costs even as the size and scope of AAA games haves gone up over time. On one hand, that is good for the industry. However, with the rise of F2P, it becomes harder for publishers to push $69.99 games. Granted console games come at different price levels, but the big AAA headliners cost $59.99 and $69.99 (and the latter will probably be the standard in a couple of years). As mobile games continue to improve, the burden will grow for developers to add value to AAA games.

The sleeper console that can help the console marketplace: While I have been talking about high end console launches, there is a console that could provide more value than ever. Xbox Series S. Microsoft has a $300 next-gen console on the market that will play all games for this generation. That along with Gamepass gives more incentive for new consumers to enter the console space. Once they get into console gaming, maybe they upgrade to a more powerful console down the road? Maybe not. Time will tell how much of an impact the XSS has on the market.


Those are my thoughts. Sorry if I went too long.
 
I think you illustrated well the stagnation of the traditional home console market, but I think you are vastly overstating the importance of this. The third parties that you claim are so intrinsically tied to this market are already branching out to PC and finding success there. New markets and revenue streams have been emerging in the past few years too. It's a very slow decline as well, so they have plenty of time to continue to react and adapt.
I'm sure many Japanese PlayStation fans thought the same thing as recently as last generation.
Another thought that I have had is that the big 3 have to fight PC and more than ever mobile for the attention of new gamers. Your charts show that mobile gaming revenue keeps increasing. At least in the US, practically every 3rd grader on up carries a phone of some sort. They are already "in the game".
The thing that such ubiquity doesn't inform is that most of them aren't spending any money to play those games. We have the term "whale-hunting" for a reason, it's because the mobile gaming industry itself (in the West, anyway) coined the term "whale" to refer to the consumer that makes them their money, those who will spend their lives away to put an end to manufactured tedium or roll the dice for a better piece of ephemera. Based on stats from 2017, on average, 5% of players make up the entirety of the money earned from in-app purchases in mobile games, which was nearly half of all the money made in the mobile space at the time and rising (with most of the rest being from adverts and a tiny fraction from standard purchase). That 5% of players were given a shorthand: whales.

Hardcore gamers in the console space are a bit like whales, in that they generally spend more to buy a larger overall software library than the average consumer, but that's where the comparison ends, because hardcore gamers do not provide the bulk of the console industry's monetization. The average "core" gamer (minus the hard) is actually more influential in the console space as they make up the bulk of all software sold, even though they buy less of it overall.

In this way, mobile and console gaming are diametrically opposed. The console market demands wider appeal because every person in that wider appeal financially contributes to the console market's success, whereas mobile gaming demands wider appeal to increase profit opportunities, but it's clear they support a large player base only to entice whales to stumble into it while the super-majority don't give a penny. Mobile casts a wider net but might only catch one actual customer.

But this hyper-targeted monetization strategy was thought too lucrative to ignore, so it's come to consoles, too, even in retail direct purchase software, which the bulk of players find repulsive since... well, double-dipping like that is legitimately repulsive.
 
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Oh yeah, back to GFWL and filthy megarich megacorporation M$ trying to scam you into paying for the online on windows after successfully convincing the console market paying for online access is something normal. Hell yeah.

Jokes aside, everything you wrote in your post sounds dystopian

Videogames loves dystopia!
 
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