The intriguing Transition to the Next Generation of Consoles
The instant sell-out of Sony’s PlayStation 5 and Microsoft’s Xbox Series X|S at launch in November 2020, following the typically long teasing campaign for new consoles, was no surprise. Since release until February 2021, Sony has sold through around 4.5 million units of PS5s, while Microsoft has sold approximately 3.5 million units of X Series X|S.
While these numbers are similar to those of the last console generation, in my view, they are still somewhat disappointing, given the growth of the games industry in general, but especially when taking the increasing hunger for gaming during the global COVID19 pandemic into account.
The demand for the new consoles is still high, especially for the PS5. It is still practically impossible to buy a PS5 on Amazon or through licensed retailers’ regular sales channels. The only available options seem to be eBay or similar channels, where often scalpers profit from the scarce supply situation.
Given that many gamers looking to upgrade their consoles can’t, at least for the next few months, the question is, what does the new generation of consoles offer gamers that the former generation does not?
The answer is that currently, most of the new features of the PS5 and the Xbox Series X|S are convenience features, like faster loading times or smart delivery. At least about 90% of games released between the launch of the next-gen consoles and today still run perfectly fine on the older versions, PlayStation 4 or Xbox One, especially on the PlayStation 4 Pro and the Xbox One X. Furthermore the difference in processing power between the Xbox One Series S and the Xbox One X is not substantial. Even the naming, which should help differentiate between new and old Xbox consoles, is confusing.
There are currently no system seller games, like a new Halo or a God of War available, which are only playable on next-gen. The upcoming console exclusive games, like Halo Infinite, which was supposed to be Microsoft’s system seller for Xbox One Series X|S, are still being released for the former console generation.
The same is true for the big third-party games. Capcom’s next chapter in their Blockbuster Resident Evil franchise, Resident Evil Village, releases on PS5 as well as PlayStation 4, and Xbox One Series X|S as well as Xbox One, and also for Gaming PCs.
For first-party companies and third-party publishers, this all makes perfect sense. Who would want to rely on the relatively small install base of next-gen when you can target a console audience of more than 100 million? This massive install base is possible because of the current and next-gen consoles’ architecture, comparable to modern Gaming PCs.
Talking about an extensive install base, Nintendo is rumored to be preparing a Switch Deluxe for release in Q4 2021. The Switch Deluxe will likely be an upgraded Switch console, capable of 4K output and additional enhanced features, but still fully compatible with the original Switch and its extensive library of games. Nintendo has been using this incremental hardware upgrades strategy very successfully for many years with their Gameboy & Nintendo DS handhelds, but not for their home consoles. Still, this decision seems to be a no-brainer given the runaway success of the Switch.
A glaring example of a game launch for current and next-gen, which went wrong, is CD Project Red’s Cyberpunk 2077. The studio’s grandiose ambitions weren’t fully compatible with the older consoles. At release, the game was almost unplayable on PlayStation 4, which lead to Sony’s decision in December 2020 to remove the game from the PlayStation Store, where it is still not available for PlayStation 4.
The dilemma of wanting to deliver new and more ambitious games and at the same time comply with the old consoles’ technical restrictions puts a new focus on the technology that could resolve this: Cloud Gaming. Cloud gaming players do need a fast internet connection, but the PC or console hardware is negligible.
While no one knows for sure if and when cloud gaming will take over the gaming industry, the battle over the most significant user base is already in full swing. First parties know that gamers who have already bought into an ecosystem are precious customers, and they want to minimize the risk of losing them.
Therefore, incremental upgrades rather than entirely new systems to maintain a high level of backward compatibility in the future seems to be the way forward. The gaming industry has always been more hardware-focused than other entertainment industries, but when the hardware doesn’t make that much of a difference to the player experience anymore, then the importance of content is even more significant to win over gamers.
That’s where the main focus will lay for the first parties going forward. Delighting consumers with unique, high-quality content and not primarily focusing on each platform’s hardware power will guarentee the gaming industry’s growth for many years to come.