Here we are in 2024, and games are more expensive than ever, publishers are less at risk, and layoffs are rampant. Xbox CEO Phil Spencer, the foremost of the Big Three gaming executives, gave an interview and lamented the current state of the video game industry. “How can this industry return to growth?” This is the resonant question he left us with in a recent interview with Polygon.
It's clear that console sales aren't growing as fast as even the sector's leaders would like. PlayStation is porting the game to PC via Steam. Xbox has expanded its release strategy to include Steam, PlayStation, and Nintendo, and there appears to be a consensus among both Playstation and Xbox that the entire industry is recalibrating. It's becoming clear. We start with console “exclusives”.
The readjustment is accelerating thanks to the wave of mass layoffs that have disrupted the video game industry. has been covered. Affecting these layoffs It has affected those who have been making games in the past, and with thousands of applications flooding into the inboxes of the few companies looking to hire them, many of the displaced people will be Likely to move to a new industry. “The entire industry is being reset to commercial reality, with some companies finding themselves overextended, losing focus on strategy, or becoming overly stretched financially,” Amphere said. Analytics' Piers Harding-Rolls told IGN.
It is widely known that the recent wave of layoffs has two main causes. The coronavirus is one of them, according to Michael Pachter of Wedbush Securities, and Dr. Serkan Toto of Kantan highlighted the new wave hitting the industry. “…high interest rates, slowing growth, inflation, and overall negative sentiment are clearly weighing on both the gaming industry and gamers.”
As a result, Spencer said it's clear we'll see a shift away from console exclusivity over the next few years to help alleviate the revenue losses everyone is reporting. The revenue impact needed to break even on the $300 million budget had devastating consequences in the form of mass layoffs. “Going forward, I believe the industry is not done with layoffs yet. We will see more bad news into 2024.”Response from Dr. Serkhan Toto of Kantan Games It's a worrying prediction that is increasingly true. PlayStation, Xbox, and EA have drastically reduced their staff, making headlines in major gaming publications. In addition to cutting jobs, Embracer has begun spinning out recently acquired companies, such as Gearbox, to new owners.
Spencer is the latest to lament the negative impact budget and staff cuts are having on the gaming industry as a whole, but he emphasizes: Publishers avoid risk Given the market, the rising cost of producing AAA games, and the flat console business, it's clear to him that things need to change drastically. PlayStation seems to agree as well. cut out The console sales forecast for 2024 is between 25 million and 21 million units, and the company emphasized plans to be more aggressive in releasing PlayStation games on PC. All of this has implications for the gaming industry as we know it, and more specifically the console business.
While PlayStation still champions the value of exclusive releases on consoles, it's slowly but surely adopting a more aggressive PC release strategy as well.In a notable statement during Sony's third quarter earnings, the PlayStation CEO said: Yuki Totoki said this. “As you all know, we used to want to popularize consoles and the main purpose of first-party titles was to popularize consoles,” he added. [T]There is a synergy here.So if you have strong first-party content, not only on our consoles, but also on other platforms like computers, then first-party [content] By being able to grow on multiple platforms, you can contribute to improving operating profits. Therefore, we would like to actively work on this as well. ”
Sony President Hiroki Totoki talks about the opportunity to grow PlayStation games on PC/multi-platform.
“Previously, we wanted to popularize consoles… but there's a synergy to that. So if you have strong first-party content, you want to make it popular not just on our console, but on others. of… pic.twitter.com/FblyzQNL8D
— Tom Warren (@tomwarren) February 14, 2024
But this isn't the first time PlayStation has proposed a change in perspective on console exclusives. Hermen Hulst, head of PlayStation Studios, also spoke about the importance of PC, stating in May 2023 that PC is a “substantive part” of PlayStation's business. jim ryan “Our PC business is contributing significantly to our profits,” he said during a similar conference call.
Amphhere Analytics' Harding-Rolls explains a little more. “Clearly, the macroeconomic context will be conducive to companies looking to streamline operations, reduce costs, reduce commercial risks and reduce investment. He goes on to cite wage inflation and increasing game design costs as reasons why many studios have started considering the safest path forward. This also means that the market will be more risk-averse for several years. Pierce said the cancellation of one big-budget match could lead to “hundreds of layoffs”.
All of these changes will reshape the industry and the games we play for years to come. Gamers want more access in more places, and both Xbox and PlayStation are ready to meet that demand, albeit in different ways, to meet ballooning budgets. As for Xbox, it's releasing former console exclusives on rival hardware, and PlayStation is ramping up its PC port business. This could mean fewer console-exclusive games as hardware sales forecasts decrease, but it could mean more ways to play the games we love.
“While pure console exclusives still help drive console sales to some extent, more so for Nintendo than others, it's clear that gamers expect to be able to play games on a variety of devices. Daniel Ahmad, director of research and insights at Niko. “In Japan, anywhere, [the] Consoles have traditionally been the mainstream, with 41% of gamers playing a console game in the past year, but a 2023 survey of Japanese gamers found that 14% of gamers play exclusively on consoles. % only. ”
Players will have more access and more options for how to play, which is great news for customers. Porting to PC and mobile is not a new strategy, but it is happening at a much faster pace. And that will have a dramatic impact on the console market and how games are consumed in the future. “Console platform owners have adopted broader strategies over the past few years and will continue to do so with the aim of reaching gamers on non-console platforms,” Ahmad told his IGN. Told.
And Phil Spencer's recent comments seem to indicate an incredibly proactive approach in this regard. Rumors are flying around that the Xbox handheld will become more open to services like Epic Games, and possibly Steam. It's a strategy aimed at disrupting the walled garden approach the industry has used for years in the console business.
Harding-Rolls added: “Every console player has a strategy in place to bring their services, games, and IP to a wider audience. Of the three companies, Microsoft has been the fastest and most aggressive in evolving its strategy. This was primarily due to a deeper need to grow beyond the console business.”
Even Nintendo is expanding its reach through theme parks and movies, albeit in different forms. Think of it this way, you don't need to own a Nintendo Switch to go to Universal Studios or see the upcoming live-action Legend of Zelda movie.
And Toto points out that console sales have remained flat for everyone. “If you look back over the past few years, it's easy to see that the audience for Xbox and PlayStation consoles hasn't grown.” The data backs that up. As of 2012, no console has sold more than 155 million units of the PS2. Even with the highly successful Nintendo Switch, he couldn't surpass the PS2's sales of 155 million units in 2012. Over the past 20 years, the closest equivalent has been the Nintendo DS, which sold around 154 million units. Even the Nintendo Switch, which everyone cites as a hurdle to success, seems to be preparing for a successor, but sales are currently just shy of 140 million units.
And how does this affect you? “If you spent a purported amount of US$300 million developing Spider-Man 2, you could significantly improve your bottom line by reaching a wider audience.” So it makes sense to invest a relatively small amount of money and port it to PC,” says Toto. In my opinion, the customer wins.
“There are two main factors driving expansion into PC and mobile.” “The first is the opportunity in terms of viewership and player spending, especially in Asian markets where these platforms are dominant. The second factor is that AAA game development budgets have continued to increase over the past decade, which has encouraged many publishers to raise the price of console games from $60 to $70. . Free-to-play games also need a large and engaged audience to be successful in the long term, but this can be limited by the console's installed base caps. So launching the game on PC or connecting to mobile from a first-party IP is a way to address these two points.
While change may be scary for some, take comfort in knowing that console spending is still going strong. This seems to indicate that console and hardware fans have nothing to worry about. Rolls says the handheld strategy Xbox is hinting at is a sound strategy. “When it comes to hardware, there has been a lot of innovation in the console market in recent years, mainly focused on the handheld sector, and we expect that to continue for the next few years.
And in terms of revenue, there will always be a place for consoles. “Console accounts for approximately one-third of total global spending on video game software and services, indicating an opportunity for console platform holders to expand into mobile and PC. , the contrast is even more stark in Asia and MENA, where more than 90% of player spending occurs on non-console platforms,” said Daniel Ahmad. Rolls added: “No company can afford to exit the console market as a platform holder without significantly reducing gaming revenue, so I expect them to remain committed to the console market for many years to come. ”.
“Microsoft and Sony could put more emphasis on handheld and cloud, especially after Steam Deck revealed high demand for high-fidelity gaming on the go,” Toto said. Masu.
But for today, one thing is clear. Change is coming. Change is here. Being able to offer gamers more games, in more places, and at better value is a huge benefit. Console exclusivity may become less and less common, but if it means these companies create more options, I'm all for it.
Destin Legarie is IGN's Director of Video Production.
