A new report from market research firm NPD shows that only 29%
of "core gamers" will purchase the next generation of gaming
consoles right after they are released. The report, named "Core
Gaming 2013," defines "core gamers" as those who spend more than
five hours a week playing games and who play most genres of
The report follows data from NPD which showed that 2012 was the
end of the sole dominance of the physical video game. Stock
keeping units (SKUs) had begun to give way to digital transfers
and download. But what was more disturbing was that video games
sales had declined by 9% from the previous year. And of the $14.8
billion worth of sales, excluding hardware, $5.92 billion came
from digitally distributed content.
The alarming detail about the second figure is that even though
it represents a 16% increase over digital sales in 2011, growth
was at 14% in 2011. This implies that though growth is happening,
it's sluggish in nature and may not be enough to compensate
These numbers clearly show a developing trend which is bringing
about sweeping changes in the gaming business. The next
generation of gaming platforms has to change the game radically
in favor of the industry. These sentiments were echoed by Andrew
House who heads Sony Computer Entertainment's (SCEA) PlayStation
At an event held to introduce the new PlayStation 4 console from
), House admitted that the company was betting big on the
product. The stakes are probably equally high for
Nintendo Co. Ltd.
) as the next generation of gaming consoles is launched. Both the
PS4 and the successor to the Xbox 360 are now expected to launch
towards the end of the year and to be priced between $350 and
In fact, price and underlying costs have become a key factor
behind the success of gaming consoles going forward. And this is
closely linked to the price and availability of gaming
Publishers have disagreed over the development costs of the
next generation PS4 and Xbox games, leading to concerns that the
cost of these titles will rise. An analyst from Wedbush
Securities Research has predicted that these games will cost
around $70. SCEA CEO Jack Tretton says PS4 titles will not
cost more than $60. But that has done little to allay these
This may directly affect sales of the new consoles because many
of the new titles can be played on both current as well as next
generation consoles. This means that only staunch loyalists will
buy these consoles when they are first introduced. Instead, they
are likely to wait for prices to drop. This is far from good news
for console makers.
Console-makers have already made key decisions to drive down
costs. Unlike, the past where consoles ran on custom made chips,
both Sony and Microsoft will use off-the-shelf chips produced by
Advanced Micro Devices, Inc.
). AMD's chips are able to deliver the required visual horsepower
using accelerated processing units or APUs. The risk here is that
the success of these platforms is now closely tied to the
fortunes of AMD.
This negates the need to set up dedicated chip manufacturing
facilities or ordering custom made chips as was done in the past
from the likes of
). Besides, focus has shifted from raw processing power to the
versatility of these chips. Consoles are increasingly being used
to play audio and video content as well, morphing into a central
entertainment hub for the home.
This fits into the trend where tablets and smartphones are
changing the face of gaming, at least of mobile gaming at any
rate. They are also being viewed as versatile entertainment
devices. They have also popularized casual gaming which is
growing as a category, giving traditional console makers much
food for thought.
Of course, the serious gamer will stick to the gaming console.
But the future success and growth of console gaming will closely
depend on whether the industry can successfully match up to these
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