Posted by & filed under Consumer, Technology.

Later this month consumers will begin replacing their current game consoles with next generation offerings from Microsoft (Xbox One) and Sony (PS4). As a result, the ‘Battle for the Living Room’ and ‘Console War’ chatter begins anew.

Gaming capabilities aside, the Xbox One and PS4 offer enhanced media, social and ecommerce capabilities, further blurring the lines between PC, gaming and media devices. While DVR, VOD and services such as Hulu and Netflix nibble at TV’s edges, Sony and Microsoft attempt full frontal assaults on consumer living rooms. Both companies share a singular goal – shift the center of media gravity away from cable and satellite set top boxes to become the definitive ‘hub’ for multiple activities within consumer households.

Will consumers make the jump? Will next-gen consoles attract a sizable non-gamer audience?

The potential rewards couldn’t be greater. Success would translate into huge dividends – influencing media, communication and commerce functions within households for years.

There was similar ‘hub’ chatter back in 2005 and 2006 when the Xbox 360 and Sony PS3 made their respective debuts. Along with the original Nintendo Wii, Sony and Microsoft eventually sold tens of millions of units. While not displacing cable and satellite outright, they found homes in many a household, typically sitting alongside the main living room box, cable or otherwise.

consolewar1-640x360-US-only


The Next Round of Console Challenges

For game consoles, 2013 is not 2005. While Sony and Microsoft’s new systems are powerful and will attract legions of core gamers, challenges against mass adoption are many:

Wii U omen? – if last year’s lackluster Wii U launch is any indication (fewer than 4 million units sold as of Sept ’13), consumers may have lost their appetite for new consoles. However, recent game purchases suggest otherwise. The latest release in the Grand Theft Auto franchise (Chapter 5) has taken in over $1 billion in sales since its debut in September, making it the highest-grossing video game of all time. Time to coattail.

Casual gamers have moved on – buoyed by huge marketing pushes (already underway) new console launches typically spark heightened interest. Long term viability, however, will depend on broader appeal beyond core gamers. The success of the original Wii centered on the casual gamer, who ‘so far’ has ignored the new Wii U. Is it too late? Casual gamers may have already found a new home among tablet and smartphone users.

Teens & young adults prefer multipurpose devices – though selling well, game-centric handhelds such as the Nintendo 3DS and Sony Vita have not enjoyed the breakout success of their previous iterations – also likely victims of the widespread adoption of smartphones and tablets.

High price points – the launch price of the PS4 is a steep $399; the Xbox One is even pricier at $499. Are these systems must buys? Gamers have more options than ever to satiate their gaming appetites including PCs and still viable Xbox 360 and PS3 systems. Considering new PS2 games were still being released as late as last year (console launched in March 2000), both the Xbox 360 and PS3  have many years of gaming life left in them. In addition, though struggling to find buyers, new low cost platforms such as Ouya and Gamestick ($99 and below) may also eventually lure gamers.

Entering a crowded living room – another difference between 2005 and 2013, the living room of today is already full of connected devices such as Apple TV, Roku, and Google Chromecast. According to NPD Research, the average US household has close to 6 connected devices (including tablets and smartphones). If the ‘Internet of Things’ mantra holds true, that same figure (6) should be PER PERSON by 2020.

Room for an Xbox One or PS4?

Consoles-20131-1024x665

 

The TV itself – in an already crowded living room, new TVs now come preloaded with ‘smart’ capabilities that directly tap into multiple online sources of content including Netflix, Vudu and Hulu Plus. If the Xbox One and PS4 are to expand beyond core gamers they must convince consumers to jump away from either cable or the default ‘smart’ TV screen interface.


So where are the near-term growth options?

In recent weeks both Sony and Microsoft have each boasted of surpassing 80 million in unit sales worldwide since their respective debuts of the PS3 and XBox 360 (Nintendo moved over 100 million Wii units during the same period).  Each company will look to these consumers first to both replace and extend console penetration. Considering the number of unique 2013 challenges, Sony and Microsoft may find the march to 80 million units for their latest consoles both a tougher and longer journey than the last.