Don't write off consoles just yet, it's a lot mor complicated than saying Mobile gaming will kill consoles…

I was reading an article over at Motely Fool at lunch time and it talks about the growth of Mobile gaming an pitches it as the existing console gaming to suggest that consoles are dying. Furthermore it suggests that somehow the Xbox One will regain hardware parity with the PS4 via a hardware update, neglecting to mention/realize that the PS4's own hardware update will likely again place the PS4 slightly ahead of Xbox on the hardware.

The article fairly makes the point that there is the potential for splitting users between the new and old versions of the PS4 or Xbox One.

Perhaps the oddest points made are that first party games are no longer differnce makers (Uncharted begs to differ), and second The article proposes that a new Amazon set-top box could launch with equivalent hardware, at a lower price and receieve many of the same game releases.

Then we talk about game streaming and set top boxes, etc…

But the biggest point in the article is to say that gaming giants like EA or Activision Blizzard are growing their customer base, by growing outside consoles – in other words Mobile gaming.

I think though that this article misses the point on almost every occasion.

Mobile Gaming

Mobile gaming is a new market, so it is/was bound to grow. Console gaming and PC gaming are both mature markets, well established with known parameters and lower growth. So relatively speaking Mobile looks like a monster while consoles lag.

However just a quick look at the top 10 mobile games vs the top 10 console games shows you just how different the markets are.  If that's not enough, look at the game business models. Games on mobile devices frequently use the micro-transaction based free to play model, and ultimately cost gamers more than the up front cost of a AAA title like Uncharted 4.

The fact is that console gaming and mobile gaming are utterly different markets. This is true even in Japan where the common wisdom says that mobile gaming is killing console gaming. The problem I see with that line of logic is that Nintendo and to an extent Sony have catered to mobile gaming for decades, and rather than console sales, the sales of hand held games and game units are more threatened by mobile.  We've seen good evidence for that in the West where the Vita struggled to find acceptance because of the rise of the iPhone.

Despite Vita having both touch and physical game controls and only costing a fraction of the cost of an iPhone (even including a Vita memory card), Vita did not gain traction in a market being saturated by iPhones on 2 year vendor lock-in contracts.  Fortunately for both Nintendo and Sony, their handheld units had already captured a good market share in Japan, which is why Vita continues to live in Japan with new games flowing, and 3DS continues to sell very well to this day.

Consoles vs Mobile

The truth here is that the markets are completely different. Home consoles are by definition not mobile devices. While smartphones are with you all the time, even when you don't have your 3DS or Vita. The devices are complementary not mutually exclusive. Tablets have opened up some avenues into 'home' gaming, however the kinds of game played on smart devices like phones and tablets are very different from those on home consoles.

The kind of comparison I would make here is like comparing the toy in a McDonalds Happy meal which is free vs a Lego kit. The Lego will cost you more, but you can make different things with it, and it will last. That Happy Meal toy is disposable and will only 'last' long enough to get to the next Happy meal. While a Lego kit might cost you $40 it will last years, but those Happy Meals cost$3 a pop, and you're gonna be feeding that habit regularly as the toys change and you try to collect them all. You might spend $6 a week on a couple of meals to get different toys, and doing that all year you'd clock in at $312 spent on Happy Meals to get the toys, and that excludes the cost to your health.

The market segments and consumers are different groups with some degree of overlap. But since Home consoles have existed since the Atari VCS, and smart devices really only came to prominence with the iPhone a little less than 10 years ago. Mobile gaming is growing fast because it's a new market. Video gaming in general, and console gaming specifically has existed for decades, and has gone through a industry crash and several stages in maturity. To say that Mobile games are the death-nail of home consoles is a bit like saying that the Segway would kill the automobile.

The truth is that Mobile gaming is not eating up Console gaming like some kind of deranged Pacman eating power pills.

Mid-life crisis or Mid-life rejuvenation?

PlayStation 4 and Xbox One are 3 years old this fall. Their designs are 6-12 months older. If they were PCs (which they almost are), they would be considered obsolete by now. Nintendo's NX is apparently arriving in 2017, and as far as we know is a bit more powerful than a PS4 – currently.  For Both Microsoft and Sony, the current generation of consoles is different from what went before and presents an opportunity that they lacked before.

Home consoles are now much closer to commodity hardware, and software. They are essentially closed box PCs.  In the days of PS2, PS3 and Xbox 360, the idea of a full hardware refresh was dangerous because many games used low level tricks/hacks that depended on specific hardware being there, and not changing.  In fact when Sony moved to the PS2 slim, there were a small number of PS2 games that broke because the chip-set changed.  Game development today is a bit different with more abstraction in the software than was the case in prior generations.

For PS2 and PS3 lovingly hand crafted binary code could whip the pants off compiled code. For PS4 (and Xbox One) almost everything is done at a higher level with APIs (Application Program Interfaces) used for almost everything. The importance of this is that it reduces the direct dependence on the hardware. Yes a PS4 game needs a PS4 to run, it won't work unchanged on an Xbox One. However, a hardware update that bumps clock speeds up, and increases the number of Compute Units results in a device that to older software looks just like a PS4 (or Xbox One).

There has been talk of developers needing to develop separate games for PS4 and Neo, but that's not the case at all. Developers need only make one version of the game, PS4 and Neo (or whatever it gets called) are going to be 100% binary compatible. What runs on one will run on the other.  However Developers will have slightly different rules going forward.  There will be a performance standard required for PS4 that games must achieve. If a developer only develops to that their game will run unchanged on either PS4 or Neo. If the developer makes their game capable of scaling to the hardware (which they absolutely can), then things become much simpler.  The same version of the game adjust itself to the differing hardware. Devs would have to introduce some more testing to ensure that the scaling of performance did not break anything, but fundamentally speaking you're running the same game regardless of running it on PS4 or Neo, so you only need test one time.

Developers may  produce a game that runs at 1080p30 on PS4, but hit's 1080p60 on Neo running the same binary, not a different version.  Or perhaps the game scales resolution, or throws in more filtering or better anti-aliasing.  The point is, these things are things that are already in the PS4 hardware. The developer could allow a high quality setting for PS4 that renders to 720p, with all the bells and whistles, and at 1080p on the Neo, or a game that runs happily on PS4 at 1080p30 runs at WQHD resolution (2560×1440) scaled to 4K on Neo.

Increasing resolution or graphical quality for PS4 Neo is in reality an option for developers, not mandatory. So the big scary future of two version of every game and development costs spiraling out of control are really unfounded. Adding PS VR capability will be harder on developers than making their game performance scale.  In reality, yes PS4 Neo may run game better than original PS4, but existing games will run identically, and new games will run on both with. Your game library will transfer with you from PS4 to PS4 Neo. Yes, customers will complain because their old system is obsolete, I have argued that point strongly. But thinking this all through to the logical conclusion, I can't help feeling that as long as Sony and their developers stick to Sony's rules, the negative impact of PS4 Neo on consumers will be limited.

Set top Boxes and Amazon.

PlayStation Now is probably the largest game streaming service that streams game play, not simply delivering games that run locally via streaming. And if your connection is weak, or congested, it doesn't play quite so nicely as it does on a fast, clean connection. The same is true for Video streaming. There is this idea that Apple, or Amazon could kill consoles with a set top box. Except, it's been tried and failed before. Set Top boxes as console killers do not bring established gamers into their fold, and require heavy upfront investment (and risk) from their backers. Amazon specifically appears not to fear such things as we have seen with the Fire. Fire was an attempt to undercut an existing market with a low budget, inferior device.In the end, even a Fire Fire-sale failed to move them.

Could this generation of console be the last?  It's possible. However, this generation is a long way from being over. If both Sony and MS succeed with their mid-life rejuvenation of their platforms, the length of this 'generation' could increase, rather than shrink. With a second hardware refresh in late 2019 or early 2020, we could actually see a 10 year product life before either Xbox One or PS4 is actually replaced. During that time Streaming of games will likely increase in popularity and effectiveness.

Streamed games, however,  lack something that running a game on a console locally gives you, near instant responsiveness to control input. The simple reality is that no amount of smoke and mirrors will address network latency and routing delays on the Internet. Game streaming like PlayStation Now will remain locked into being very effective remote play because of the physical limitations of the Internet.

Conclusion

Don't write off the console just yet.  Mobile gaming grows quickly, but it's both a new market and a different market from home consoles. the markets are complimentary with some overlap, but very little direct cannibalizing of the other. Console games are just very different to mobile games, the business models are different and the control inputs are different. This leaves room for both to thrive.

A Mid-life refresh seems on the surface of things to be borderline terrible idea for game consoles. However, it doesn't have to be, and the current generation of console is, by virtue of it's use of 'commodity parts' in a position to pull off a refresh without leaving behind a whole library of games and consumers. This mid-life refresh could even extend the life-cycle of the current console generation, it does not have to be a disaster that kills consoles.

Set top boxes represent inferior devices made more cheaply that are not compatible with existing libraries of game. Even with game streaming, the inherent limitations of cheap hardware and network lag & congestion make streaming a very bad choice for the primary mode of use.

In the end, home consoles still offer, and will continue to offer advantages over streaming and set top boxes. Consoles will remain complementary to mobile gaming, and vice versa because there will always be differences and inherent limitations on what can be done on a mobile device with a touch interface vs a home console with a controller.

Also, can anyone here seriously say that playing Uncharted 4 on a 5 inch screen with onscreen buttons getting in the way would be preferred over playing it on a 50-inch HD screen with a DS4 controller?  Thought not.

This is the only way you'll see Uncharted 4 on a Phone anytime soon…

Consoles are here to stay.

Related Game(s): PlayStation 4, Uncharted 4