For investors, the video game sector has been mostly full of
doldrums since late 2007/early 2008.
During those glory days, consumers were carpet-bombed with an
astonishing quantity of high-quality titles that spanned from the
super hardcore to the truly casual. Among the stars of the day were
Call of Duty 4: Modern Warfare
, and of course, we can't forget the
(OTCMKTS:NTDOY) Wii, which was a blockbuster commercial success at
We've seen individual gaming stocks have their ups and downs since
then (lately, mostly ups), but only one (Activision) has come even
remotely close to exceeding its past highs, courtesy of the staying
power of the
Call of Duty
Now, let's go chart by chart with the rest of the industry's
stocks, along with some brief history that will nicely lead us into
today's topic of discussion: the Microsoft Xbox One and
) Playstation 4.
) was down for the entirety of the last cycle as it was outgunned
in shooters by the aforementioned Activision(serious overvaluation
was also an issue):
) peaked during the aforementioned glory days, just as the
financial system was falling apart:
Same for Nintendo, which was riding high on the booming Wii, as
well as the DS handheld, which was a monster in its own right:
(THQIQ) once rode high on the success of its video game adaptation
, as well as hardcore titles like
Company of Heroes
, but recently filed for bankruptcy:
Sony was once the 900-pound gorilla of the industry, but the
success of the Microsoft Xbox 360 and Nintendo Wii resulted in
market share destruction for the Playstation franchise, which was
once Sony's primary profit generator.
Last but not least, there's
(TTWO), which has had some serious ups and downs over the years
courtesy of an erratically-timed lineup of absolutely brilliant
games (such as the
Grand Theft Auto
series), and a failed 2008 bid for the company from EA.
Underpinning the negative stock trend has been weak industry
revenues. Following a booming 2007 and 2008, annual industry
revenues declined from 2009-2012, according to NPD. This was
primarily a result of casual gamers migrating from the Nintendo Wii
and DS to smartphones and tablets, or out of games altogether.
Another major factor was the collapse of the rhythm/music genre,
which was led by the now-defunct
And year-to-date, NPD's industry sales data has not been
encouraging, which is not a suprise, given the multi-year slowdown
as well as the coming rollout of new consoles. Most recently, for
April, total sales fell 25%, with software sales down 17% and
hardware sales down 42%.
Now it does appear that hardcore gamers have stuck around. The big
Call of Duty
, while showing some chinks in their armor, have been pretty
So the question becomes, are the Xbox One and Sony PS4 equipped to
create a healthy new population of console gamers?
We've already seen three major pieces of gaming hardware fall flat
relative to their prior iterations: the Nintendo Wii U console
Weak Wii U Sales Are Dragging Nintendo Down
), and the Nintendo 3DS (see:
Nintendo Joins the Long List of Apple Victims
) and Sony PS Vita handhelds.
The Nintendo products failed because of the shift of casual gamers
to smartphones and tablets, and the PS Vita definitely suffered
from a high price and underwhelming game lineup.
So they're not directly comparable to the hardcore-themed Xbox One
and PS4 -- but these are signs that the casual audience will have
zero interest in the Xbox One and PS4, both of which will lean on
the expensive side.
Yes, I get that Microsoft wants to own the living room by
integrating consumer-friendly features, but no one who is not
already a hardcore gamer is going to pony up $300 to 400 or more
for an Xbox One at launch to watch movies on
(NFLX) or watch NFL clips or make Skype calls.
At the same time, Sony and Microsoft may be facing a new generation
of gamers who are less likely to care about consoles. I was playing
an Atari 2600 in the early 1980s, when I was five years old, so I
was indoctrinated to consoles very early.
Today, kids younger than that are playing with iPads.
Check out young Ibrahim here:
Both Sony and Microsoft are throwing around specs regarding
teraflops and polygons and lens flares and megahertz and blah blah
blah, but where does the next generation of hardcore gamers come
from when kids are getting used to smartphone and tablet games that
are basically good enough?
And if the hardcore gaming audience was growing, why have industry
revenues been stagnating for so long? Surely they would have
eventually picked up the slack for the casual group, right?
So what does this industry really need? New gaming consoles? Or new
I suspect that both the Xbox One and PS4 will sell well out of the
gate, but each's longer-term outlook remains much tougher to gauge.
If you've got a different view, please use the comments section
below to make your voice heard!