Something big is happening in the game. It’s not the release of a new franchise or another controversy that has hit the industry, but the unthinkable is happening: gamers against consoles.
Specifically, Xbox. On July 30, the company reported earnings – and they worried readers. The numbers revealed that hardware sales (that is, consoles and kits) fell 42 percent, even steeper than the 31 percent decline reported in the previous quarter.
This is not a new trend: Xbox sales have been declining steadily for the past year. To spell it out, Microsoft is no longer changing consoles, but why – and what does it want to suddenly open up games that were once exclusive to all platforms to players?
The console is down
It’s not just Xbox that’s suffering: the entire industry is going through tough times. A new report from marketing platform Circana to the industry shows that Xbox, Sony and Nintendo all saw “double-digit percentage declines” in sales of Xbox, PlayStation and Switch consoles. in May 2024.
PlayStation sales figures, which came out earlier this week, also showed the weakest quarter yet, with PS5 sales falling by almost a million units to 2.4 million, a 27 percent drop from last year. And look at the downloads for June 2024 on PlayStation Plus – Witcher III, Grand Theft Auto V, Modern Warfare III – most of them choose versions compatible with older hardware. This shows that people are not upgrading to PS5, but prefer to stick with their old console.
Why are people rejecting from the console? It’s a big piece of kit, for one thing: with the Xbox Series X clocking in at 4.5kg, it can’t be easily transported anywhere. It’s expensive: the X Series will set you back £479. The PlayStation 5 is only slightly cheaper at £349. And in the cost of living crisis, that’s a lot of money, especially in an age when you can only download Candy Love or Assassin’s Creed to your phone.
“The direction of travel for console sales is bleak,” said Gareth Sutcliffe, of Enders Analysis. “Microsoft has had a bad year; Sony has followed them with a bad quarter. And in some respects, it’s not surprising because what we’re seeing is that the model they’re offering is really under stress.
“It’s expensive. It is a fixed model because you have a box that stays in one place, and it has to be connected to a TV or a big monitor… and now there are several devices that allow (consumers) to play games. which began to be of the same quality as consoles. That is, PC and mobile games, both of which continue to see massive growth.
Clearly, there are problems for all console producers, especially with Xbox. Despite getting a monster game organization Activision Blizzard, the past five years have not been good for the company.
Like many other studios, there have been many layoffs. GamePass has not grown at the speed expected – in February, there were 34 million subscribers, far from the goal of 100 million in 2030. And developing consoles is also expensive. And unlike the PlayStation, whose sales have been fueled by a raft of critically acclaimed hit games such as God of War: Ragnarok, Horizon Zero Dawn and Spider-Man, the Xbox hasn’t had a hit game in years.
“I think that the floor has fallen out of Xbox for good,” says Sutcliffe. “(And) there will be questions about whether the Xbox hardware model looks forward.
“They’ve tried everything, they have discounts, the prices are great. They have more than one model. And they still don’t sell… do they really want to invest tens of millions, hundreds of millions of dollars in another console cycle?
What is the alternative to developing another console? Going online. Because even though console sales are declining, the industry is also growing. Despite falling sales, Microsoft’s game revenue rose 44 percent this year, mostly due to its acquisition of Activision Blizzard.
The online game studio Activision King, which is responsible for Candy Crush, earned $739 million in one quarter only in 2023 – and apparently, holding the online game library was a big factor in the takeover of Activision Blizzard. And without mentioning Call of Duty Online, which generates more revenue than Candy Crush through constant micro-purchases of the game.
Clearly, there is money online and mobile, and Microsoft is paying attention. And that means Xbox’s hint that it’s planning to port games to other consoles points to a wider trend: those who ditch their consoles and go digital, using Cloud online data storage services to save and run games.
“What Microsoft wants is to move everything to the Cloud, and get out of hardware completely,” Sutcliffe said. “If they can get out of hardware tomorrow, if they can do it in an elegant way, Microsoft can too. It’s a software-based business, or a Cloud-based business. Hardware just isn’t in their DNA. They just do it because they have to.”
The shift to Cloud-based gaming is becoming clearer with each new announcement from Microsoft. The Xbox Series S launched without a disc drive, completing the switch from physical to digital content, while legal documents released for the Activision Blizzard merger show that Xbox plans to permanently remove this from future console launches.
The company has invested heavily in Xbox Cloud Streaming, which allows users to play hundreds of console games on the device without having to download them – while a streaming-only console box, called Keystone, tried and failed to come out in 2021.
As Game Pass and Cloud Streaming make their way to more TVs and software, including the Meta Quest 3 headset and Amazon’s Fire Sticks, the future certainly looks digital.
It also looks mobile. There is also an Xbox mobile game store being developed for the EU release, and Phil Spencer, CEO of Microsoft Gaming, has spoken about his interest in a “handheld Xbox”: whether that means apps, a Nintendo Switch-style device or a Windows version remains to be seen. With millions of mobile gamers around the world, this is a very lucrative market, if Microsoft can handle it.
It looks like the console wars are over. It will certainly be interesting to see where the gaming giant goes from here: although the Xbox is out the door a little faster than its competitors, the race to define the coming era is just beginning.
