Console gaming is more successful than ever before - the PS4/Switch give us proof

[zomgbbqftw]

Seems like a controversial statement after so many high profile failures recently, but the figures, especially today's figures from Sony really prove otherwise.

I did a little comparison in the other thread between the peak year of the PS2 vs this year's forecast for the PS4, here's how it breaks down.

PS2 FY 2002
Unit sales - 22.5m (production shipments)
Revenue - ¥955bn
Operating profit - ¥112bn

The sales and profit figures also include some legacy PS1 sales which pad them out a bit.

This year's PS4 forecast:

PS4 FY2017 Forecast
Unit sales - 19m
Revenue - ¥2,000bn
Operating profit - ¥180bn

In a like for like comparison we can see that the PS4 by itself (what's a Vita?) is making double the revenue of the PS2/PS1 and 60% more profit as well. Despite overall lower unit sales for the year.

How is this possible? Network sales. PSN is an absolute fucking monster division now, the new head of SIE (John Kodera) has quietly built one of the most profitable web platforms in the world. YTD network services accounts for 56% of all revenue within the division, it makes more money for Sony than hardware and packaged software combined, network services income is growing at a rate of 43% YoY. Packaged software and packaged software licence income fell YoY by 10%. What most people see is the latter story, that packaged software sales are dropping at an alarming rate and assume that consoles are slowly dying. We can, IMO, conclusively say that this is not the case. The model has just changed from packaged retail software to premium subscription services, DLC, GaaS and other forms of network engagement.

Once we add in Nintendo's success with the Switch, I think we can now say that console gaming is the most successful it has ever been.

 

[II JumPeR I]

Uhm isnt Xbox doing well too?

 

[Heilige Kip]

Interesting to read! The numbers really tells us consoles wont die off. I also think consoles wont die out fast because a lot of people still think a gaming pc is to hard to maintain. You also dont really see people talk about the pc but you see people tall about an ps4 or switch or a xbox one. The name attachts people.

 

[Bitch Pudding]

Revenue - ¥955bn
Operating profit - ¥112bn

How much is that in today's money (inflation-aligned)?

 

[Y2Kev]

The industry seems to be at its most profitable in some time, but it follows waves of consolidation and business transformation in the dedicated traditional publisher space. Makes you wonder about the cost of said profitability. Oh well.

 

[Allseeingeye]

I always cracked up and the doom and gloom posters everytime we had a month PS4/X1 were down, they would disappear during good months....another case of people pushing a narrative. Consoles are clearly doing very well.

 

[v_iHuGi]

Uhm isnt Xbox doing well too?

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Not really but that might change.

Nintendo and Playstation are absolutely on fire though.

 

[Edge]

Uhm isnt Xbox doing well too?

Click to shrink...

 

[Deleted member 152]

Damn that Sony network profit is craaazy. Kudos to them for working hard and creating eco systems that benefit gamers and alike. I definitely want to see traditional gaming scene stay around for many years to come and I am glad the digital market space is complimenting this.

 

[Elandyll]

Good to see Nin back in the game, and Sony doing great.

First time Ive actually entertained the idea of getting a Nin console in years sctually (since the 64).

 

[Jonnax]

Uhm isnt Xbox doing well too?

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If I recall correctly, Microsoft doesn't really publish figures about gaming. They roll it up with other things like their Surface computer line.

 

[Deleted member 26768]

Uhm isnt Xbox doing well too?

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if it ws they wouldn't made such an effort to emulate old releases

 

[gueras]

Uhm isnt Xbox doing well too?

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No man... not really maybe 26-28 million consoles at best.

 

[Ge0force]

Uhm isnt Xbox doing well too?

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It is, selling 30 million consoles is nothing but a succes. It's just that Sony's and Nintendo's consoles are selling extremely well compared to last generation.

 

[Allseeingeye]

It is, selling 30 million consoles is nothing but a succes. It's just that Sony's and Nintendo's consoles are selling extremely well compared to last generation.

Click to shrink...

Selling 30 is not nothing but a success...coming off a console that sold 85+.....Companies do not call large shrinking market a success.

 

[texhnolyze]

The model has just changed from packaged retail software to premium subscription services, DLC, GaaS and other forms of network engagement.

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I don't think this is what most 'core gamers' wanted to hear from this success story.

 

[zomgbbqftw]

Uhm isnt Xbox doing well too?

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Not massively, but it's difficult to make the comparison as MS have obfuscated their gaming division revenue/profit so much in the last couple of years so I didn't include them. I think they are doing fairly well in network services too, but I think that it also includes PC gaming income so it's tough to include the figures.

 

[Tsuyu]

Revenue - ¥955bn
Operating profit - ¥112bn

How much is that in today's money (inflation-aligned)?

Click to shrink...

At say ~3% annual compound inflation, operating profit is about the same tier.

 

[zomgbbqftw]

At say ~3% annual compound inflation, operating profit is about the same tier.

Click to shrink...

That's not a good assumption of inflation, especially not for a Japanese company.

 

[entremet]

Thankfully, Mobile wasn't a huge threat. Although mobile business practices are invading console gaming lol.

 

[Sulik2]

What's crazy is the PS4 is doing this when it's still expensive. Just wait until the Blu-ray less $100 mass market version finally hits. I fully expect the PS4 to lifetime outsell the PS2 and hit 200 million units.

 

[Allseeingeye]

Thankfully, Mobile wasn't a huge threat. Although mobile business practices are invading console gaming lol.

Click to shrink...

The "Phones will kill consoles" was the dumbest argument ever...different markets. Big analysts don't do their jobs well lol.

 

[Lukas Taves]

Not really but that might change.

Nintendo and Playstation are absolutely on fire though.

Click to shrink...

Going by revenue/profit (the metric OP is using) then yes, it's doing very well, despite not selling as much units.

Edit: And if anything it adds to the point. Not only the market is bigger to support all that money flowing, but that network and services are making tremendous amount of revenue.

 

[v_iHuGi]

Going by revenue/profit (the metric OP is using) then yes, it's doing very well, despite not selling as much units.

Click to shrink...

Oh yeah thanks to Minecraft and services sure but units sales not very good but not terrible either.

 

[Inuhanyou]

Your wrong OP. Remember that Ars technica article about not extrapolating much from day 1 million sales. PS4 and Switch could both fall off cliffs tomorrow. MS's XBL subscriber count could drop through the roof overnight. Hailstorms, earthquakes, dogs and cats living together, mass hysteria

 

[Deeke]

Nice data analysis my man. But don't discount Xbox either; Microsoft has done somethig Sony can't by future proofing its gaming segment via PC+console unification.

Xbox Live is super lucrative and if MS rolls out Game Pass on PC and mobile as they plan, things could get really big.

 

[Mars]

Good to see Nin back in the game, and Sony doing great.

First time Ive actually entertained the idea of getting a Nin console in years actually (since the 64).

Click to shrink...

The Switch is the 2nd Nintendo console I've purchased in my lifetime thus far. It's been a better experience than I'd imagined it would be.

 

[Chittagong]

This is certainly thread worthy, because it's a bit off topic for the PS4 thread, but hugely interesting and relevant to this community. So it's good to have a discussion of the state of the industry. I'll post some thoughts from the PS4 thread.

Current generation is outpacing last generation, significantly

Last gen did 284M consoles total. We are now at around 117M sold, if I am not mistaken - at 41% of the previous generation. PS4 and Xbox One X are 4 years in, Switch is less than a year in, so in total consoles have 9 primary years in the market. Last generation, PS3 had 7 primary years, Xbox 360 8 primary years, and Wii 6 primary years, so in total the consoles had 21 primary years to reach that number. Purely linearly, we are now 42% into the previous primary time of the generation.

Another amazing number to consider is that after Q4 this generation LTD installed base is very likely to be at 50% of last generation, in just 41% of the time. And in console generations, the pace just accelerates in the second half.

This means that this generation will *vastly* exceed the previous generation for several reasons. First, console generation sales tend to be back heavy, as masses buy cheaper consoles. Second, this generation will very likely to have more primary years, because Switch has barely started, and PS4 and Xbox One just got new mid-generation consoles.

We are likely witnessing a 350M installed base generation

Looking at the recently published numbers, this generation should be able to stretch to 350M - 400M units sold, which is utter madness.

PS2 / Xbox / GameCube generation - 200M LTD
PS3 / Xbox 360 / Wii generation - 284M LTD +42%
PS4 / Xbox One / Switch generation E - 350M LTD +24% <—> 400M LTD +40%

That would give the PS5 generation a shot at hitting half a billion installed base. Console gaming has literally never been better.

Console business is adapting, not dying

Against expectations, console gaming overall is not dying, it's simply finding new forms.

- mid generation console updates
- fully digital games
- games with mandatory day one patches
- multiplayer focused games with thin campaigns
- indie games
- VR
- GaaS

A huge amount has changed in the last few years, and the core desire of gaming has not disappeared, nor has it been completely served by smart devices. That's why console business is thriving.

Increase of population and reduction of poverty will ensure consoles keep breaking new records

The increase of population and people above the poverty line, console business is bound to keep breaking new records.

World population at halfway point through the generation

Year 2003 - 6,381M
Year 2010 - 6,958M +9.0%
Year 2017 - 7,550M +8.5%

Middle class size

2000 - 1.5B
2015 - 3.0B +100%
2030 - 5.5B +83%

Bottomline

The best years of console industry are ahead of it

1 - Smart devices, death of physical or exploding budgets did not kill console gaming
2 - Console gaming found new ways to monetise
3 - The core desire to play on consoles has not disappeared, on the contrary
4 - Console manufacturers are making record revenue and profit
5 - The expansion of population and middle class will continue driving expansion of console generations by 20-40%
6 - This generation is only just starting to hit its prime
7 - Next generation has a shot at hitting 0.5B installed base

 

[THEVOID]

Nice data analysis my man. But don't discount Xbox either; Microsoft has done somethig Sony can't by future proofing its gaming segment via PC+console unification.

Xbox Live is super lucrative and if MS rolls out Game Pass on PC and mobile as they plan, things could get really big.

Click to shrink...

This.

 

[WaqarYounis]

Agreed man, massive congrats to both Sony and Nintendo. Console gaming is well and alive, thank to these two.

 

[pharmboy044]

OP, I totally agree with you and I just want to say I'm glad you are back and posting here.

 

[KonradLaw]

Almost everything is doing better. Consoles, PC gaming and mobile are constantly growing. We've moved past the ridiculous "death of the platform" prophecies and are just enjoying happy growth.

Well..aside from browser games, they're fucked for good :D

 

[zomgbbqftw]

Nice data analysis my man. But don't discount Xbox either; Microsoft has done somethig Sony can't by future proofing its gaming segment via PC+console unification.

Xbox Live is super lucrative and if MS rolls out Game Pass on PC and mobile as they plan, things could get really big.

Click to shrink...

None of that is specific to console gaming, which is what the thread is about. No denying that Microsoft are doing interesting things with trying to merge their PC and Xbox gaming divisions though.

 

[Lukas Taves]

Oh yeah thanks to Minecraft and services sure but units sales not very good but not terrible either.

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But look at this last quarter for example.

It's safe to assume sales of minecraft remained the same or lower than before (otherwise they would state something about them), but despite a 48% drop in hardware sales, they had a 20% increase in revenue from game sales and services (and attribute the game sales to the industry shifting to digital). So the majority if not all of the increase came from the services and sales from the platform itself.

Understandably, as they launched game pass in that period for instance.

Another point of curiosity is the hefty increase in xbox live users, despite the console userbase not growing. Is it people coming back to xbox due the services? People playing on PC? Either way means that strategy is not completely off base. And if people is not buying xboxes, but playing their games from their store it's good for them as well.

 

[v_iHuGi]

But look at this last quarter for example.

It's safe to assume sales of minecraft remained the same or lower than before (otherwise they would state something about them), but despite a 48% drop in hardware sales, they had a 20% increase in revenue from game sales and services (and attribute the game sales to the industry shifting to digital). So the majority if not all of the increase came from the services and sales from the platform itself.

Understandably, as they launched game pass in that period for instance.

Another point of curiosity is the hefty increase in xbox live users, despite the console userbase not growing. Is it people coming back to xbox due the services? People playing on PC? Either way means that strategy is not completely off base. And if people is not buying xboxes, but playing their games from their store it's good for them as well.

Click to shrink...

Yeah they have a healthy dose of members and stuff but on Pc Steam is way ahead and Windows Store needs alot of work.

 

[The King beyond the wall]

I think the PS4 is far from done as well, I think we'll have a situation where it keeps on selling for another 3 years or so after the PS5 is released (similar to the PS2).

I really don't think 125 million+ total sell through at the end of the day is out of the question.

 

[2+2=5]

It's exactly the opposite, people has less consoles to choose from, both Sony and Nintendo ditched a line of consoles so now a single console seem to do better than the relative predecessor but what about the sales of the sister console? Ps3+ psp was around 170 millions units sold, the ps4 alone(or with vita) will never be able to reach those numbers, it would be even hard to reach the 100+ millions of ps3+vita, let's not even start comparing switch with wii+ ds, maybe switch will sell more than wiiu+ 3ds.
Maybe Sony and Nintendo make more money now because they don't have to mantain and support a second console but it's obvious that the console market shrinked.

 

[newmoneytrash]

Uhm isnt Xbox doing well too?

Click to shrink...

In a vacuum it is, but comparative to it's competition it isn't

 

[Lukas Taves]

Yeah they have a healthy dose of members and stuff but on Pc Steam is way ahead and Windows Store needs alot of work.

Click to shrink...

Absolutely, but that's what validates their strategy the most.

They have a failing, bottom of the barrel store, and a console that's doing mostly ok in some markets and pretty terribly on most of the world. And they still are bringing 9+ billion a year in revenue. Can you imagine how big those numbers would go if they ever manage to make those two platforms really popular?

 

[Madao]

a while ago it seemed like this gen would fall behind last gen due to the Wii U bombing super hard and the XB1 falling behind PS4 after being neck to neck at the start but now with the Switch and PS4 picking up more, this could be the first gen ever to have 2 consoles break past 100 million.
it also shows us how it looks when Sony and Nintendo both are at their top when competing against each other.

 

[zomgbbqftw]

It's exactly the opposite, people has less consoles to choose from, both Sony and Nintendo ditched a line of consoles so now a single console seem to do better than the relative predecessor but what about the sales of the sister console? Ps3+ psp was around 170 millions units sold, the ps4 alone(or with vita) will never be able to reach those numbers, it would be even hard to reach the 100+ millions of ps3+vita, let's not even start comparing switch with wii+ ds, maybe switch will sell more than wiiu+ 3ds but in any case it's obvious that the console market shrinked.

Click to shrink...

You've fallen into the trap of only looking at one side of the picture, exactly what this thread is about. You can't look at hardware unit sales in isolation and declare the market dead, not when Sony's game division is set for it's most profitable year ever and Nintendo are finally back to making money and are looking to have a banner year in 2018/19. Unit sales are just one measure, and tbh, not a very good one.

 

[v_iHuGi]

Absolutely, but that's what validates their strategy the most.

They have a failing, bottom of the barrel store, and a console that's doing mostly ok in some markets and pretty terribly on most of the world. And they still are bringing 9+ billion a year in revenue. Can you imagine how big those numbers would go if they ever manage to make those two platforms really popular?

Click to shrink...

Only time can tell but I don't see PC Gamers leaving Steam and Xbox selling on EU or Asia.

 

[pestul]

This is certainly thread worthy, because it's a bit off topic for the PS4 thread, but hugely interesting and relevant to this community. So it's good to have a discussion of the state of the industry. I'll post some thoughts from the PS4 thread.

Current generation is outpacing last generation, significantly

Click to shrink...

Impress as hell post man..

 

[Coolwhip]

I'm still not sure this console gen will behave like the previous. People expect the masses to come at pricedrops for PS4/Xbox, but unlike last gen people don't need a cheap dvd player anymore and they have many more sources of gaming and entertainment. Until proven wrong I still think this gen is very frontloaded and will drop off earlier, making a PS5/Xbox2 needed sooner.

 

[H.I.V.E.]

Thankfully, Mobile wasn't a huge threat. Although mobile business practices are invading console gaming lol.

Click to shrink...

Well the threat when discussed was more in relation to handhelds. PC gaming is what is going to get bigger and bigger at the expense of consoles.

 

[Tickling]

Xbox is doing well but the PS4 is doing stellar which makes the Xbox performance look poor and it all goes back to that E3. Discounting the Xbox but including the Switch is very strange to me as the Xbox has more out there. Console gaming has adapted and the move to x86 for the PS and Xbox should allow greater flexibility going forward. This should allow the trickle down approach as well with moving towards the phone model the old consoles either go to a family member or traded in reducing the barrier to entry.

 

[2+2=5]

You've fallen into the trap of only looking at one side of the picture, exactly what this thread is about. You can't look at hardware unit sales in isolation and declare the market dead, not when Sony's game division is set for it's most profitable year ever and Nintendo are finally back to making money and are looking to have a banner year in 2018/19. Unit sales are just one measure, and tbh, not a very good one.

Click to shrink...

An industry is made by companies and consumers, you can't judge the state of an industry just by looking at the profit of single companies.
Let's make the example of a company that fires people and makes the remaining ones working more(and with less money probably), it will surely make more profits than before, but if it needed to fire people is because it needed to.

 

[Deleted member 5167]

You've fallen into the trap of only looking at one side of the picture, exactly what this thread is about.

Click to shrink...

But you yourself are only looking at revenue to paint the picture you would like to see, not unit sales to show the picture that you don't.

Unit sales drive all other revenue, because you can't sell console games to people that don't own consoles, period.
Increasing revenue per user is offsetting shortfalls in userbase. But those shortfalls in userbase are still there.

I personally do not consider a reduction in the number of people playing console games to be healthier than ever, even if those that remain are being monetised more effectively than ever,

 

[zomgbbqftw]

An industry is made by companies and consumers, you can't judge the state of an industry just by looking at the profit of single companies.
Let's make the example of a company that fires people and makes the remaining ones working more(and with less money probably), it will surely make more profits than before, but if it needed to fire people is because it needed to.

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It's not just the profit though, Sony are bringing in over double the revenue from the peak of the PS2 era, even taking into account some level of inflation it's a huge increase. I believe that a couple of years in the Switch Nintendo will be beating the Wii in terms of revenue, though maybe not unit sales.

In terms of revenue and profit this is going to be the most successful console generation ever, which runs counter to the narrative of console gaming being on its last legs.

 

[Chittagong]

I'm still not sure this console gen will behave like the previous. People expect the masses to come at pricedrops for PS4/Xbox, but unlike last gen people don't need a cheap dvd player anymore and they have many more sources of gaming and entertainment. Until proven wrong I still think this gen is very frontloaded and will drop off earlier, making a PS5/Xbox2 needed sooner.

Click to shrink...

I know what you are saying about DVD / BluRay players, but also consider that this generation has a huge amount of momentum left. There are absolutely monster sellers coming in the next few years

First entries this generation for huge franchises
- First new God of War
- First new Red Dead
- First new Grand Theft Auto
- First new Monster Hunter
- First console Pokemon
- First new Super Smash Bros
- First new Kingdom Hearts
- First new Last of Us

All new franchises
- Anthem, an absolutely massive new EA/Bioware franchise
- Death Stranding from Kojima
- Spiderman
- PUBG (debatable if it'll do as well on consoles, see Counter Strike)
- Cyberpunk

Other big sellers
- Halo 6
- FF7 Remake (debatable as SE keeps struggling)
- Essentially all of Nintendo's generation post-launch - Donkey Kong, Metroid etc.

This is not to even mention the "smaller" new titles like Detroit, Metro, Sea of Thieves, Days Gone, Psychonauts 2, Beyond Good & Evil 2.

This generation is kicking in a new gear.