At this week’s E3 trade show in Los Angeles, the leading video-game console makers have made an interesting marketing choice about not pushing new products with features that include the ability to play Internet radio, Netflix movies and YouTube video clips.
Instead, they’d rather just talk about the games.
Last year, by comparison, Microsoft was promoting its Xbox One as an all-in-one entertainment system for the masses, where one could play games, then shift to television viewing, and changing channels with voice commands.1
At this year’s conference, however, Microsoft has moved its focus back to the console’s core game-playing capacity, while also announcing a lineup of almost two dozen game titles.
Part of the shift is undoubtedly a realization by Microsoft that its console sales are lagging behind those of rival Sony. Both companies introduced their new game systems last November, but Sony has sold 7 million PlayStation 4s, while Microsoft has moved 5 million Xbox Ones.1
However, even outside of the two console rivals, returning the overall focus back to gaming’s core audience of mostly young males appears to be a top theme at this year’s show. As the Wall Street Journal noted this week, gone are the days when the rapid rise of the Nintendo Wii, with its simple motion controls and popular games like “Guitar Hero” had investors thinking game makers had permanently tapped a new market of casual gamers.2
Those players evaporated amid the onslaught of cheap and free games on smartphones and tablets.
And that shift in how games are increasingly played now has some analysts saying the usual bump in games for consoles that used to follow new hardware releases may be a thing of the past.
PricewaterhouseCoopers said recently that it expects sales of console video game software around the globe to rise more than 7% this year to $26.9 billion. PWC also expects sales to rise an additional 19% from this year’s estimate by 2018.3
But that’s a fraction of the 28% growth the industry saw in 2007, shortly after the last batch of new video game consoles hit the market.
Now compare that rate with PwC’s expectations for mobile games, as well as titles for computers that are played primarily over the Internet. Mobile game sales this year are expected by PwC to jump more than 11% to $10.5 billion, while sales of games played primarily over the Internet, such as “League of Legends” from Riot Games, are expected to rise nearly 9% to $23.3 billion.
During that same period, the S&P 500 has gained 6.4%.
1Nick Wingfield, “At E3 Gaming Convention, Microsoft Shifts Emphasis of Xbox One Console to Games,” nytimes.com, June 9, 2014, http://www.nytimes.com/2014/06/10/technology/microsoft-shifts-emphasis-on-xbox-one-to-games.html?_r=0.
2Dan Gallagher, “E3 Shows Software Publishers Getting Back in the Game,” WSJ.com, June 10, 2014.
3Ian Sherr, “Xbox, PlayStation won’t do much to level up game sales,” cnet.com, June 3, 2014, http://www.cnet.com/news/xbox-playstation-wont-do-much-to-level-up-game-sales/, (accessed June 3, 2014).