NPD January 2012

[Shifty Geezer]

I'm not disagreeing per se but a couple notes

I acknowledge your notes and agree with you. There are lots of different perspectives that can be talked about and different ways to measure. However, I won't continue this discussion as it'll involve another party who would be on my ignore list save for the fact that as a mod I feel obliged to view everything.

Maybe "OT" but NPD threads tend to turn into business discussions anyway, but I started wondering, why does a generation have to "end"?

I'd say because technology fizzles out. PS2 proves this. It's still available but sales have dwindled from consumer choice, because it looks dated I guess and they'd rather have other experiences that old tech can't provide. Console companies are aware of this and aware of the limited shelf-life of their product, so they have to keep looking forwards.

 

[Silent_Buddha]

Make fun all you want, Nintendo won't be laughing 5 years from now.

Hmmm, I remember hearing or reading those exact same things multiple times ever since the N64. And oddly enough it hasn't happened yet. During the N64 times, there was all sorts of people saying Nintendo are now in trouble. Yet they made buckets of cash. During the Gamecube's lifespan you heard the same things again. Yet they made buckets of cash.

Probably helps that they make consoles that are profitable from Day One. So they are rarely in a situation where they are losing money.

Right now they are in a bit of a bind because after Wii's huge success, they may have over invested in R&D and Hardware expecting a more gradual softening of Wii sales. However, Wii sales are decreasing at a rather astonishing rate, catching them by surprise. I highly doubt it's going to lead to Nintendo not raking in buckets of cash in 5 years however.

Have you seen how much MS is making in XBL subs?

40 million at $50/yr ... I'll let you do the math.

Not sure why people continue to spread this internet myth. MS doesn't make 50 USD a year from those subs unless you sub directly from MS via credit card. If you buy yearly subs with the XBLive Gold Cards, then MS receives significantly less than 50 USD. There's a very hefty retailer margin built into those gold cards.

And considering that most people get their Xbox Live Gold subs through the gold card, then obviously MS isn't making anywhere near 50 USD per XB Live Gold member. I'd predict that on average they make 25-30 USD per year per Gold membership, perhaps a little more. And considering much of that has to go towards operating expenses and licensing fees for some of the services offered it's impossible to know how much of that is actually profit.

Indeed... at the point of hardware sales decline, I would think you'd have the highest amount of potential software consumption (far more lucrative than a new loss leading hardware launch). I would launch when the software sales numbers begin to decline. How have the Wii software sales looked in the last couple years?

There'll probably be a short period when software sales continue to do well, especially if there is no obvious upgrade path either to a direct successor or to a competitor. But even software sales will start to decline if there is no influx of new console purchases.

I believe there was a study a few years back that noted that the new console purchases tended to buy the most software in their first year of ownership. And that on average as time goes by software purchases slow down (remember as an average) due to the hardware getting used less. Which happens as people move on to something else, hardware fails, or they just gradually lose interest as it isn't as new.

In general then, new console purchasers will offset that effect as they buy more software in their first year of ownership. Especially the first month of ownership. So the first few months of hardware sales decline might still see growth or stabilisation of software sales, but if the hardware sales continue to decline software sales will follow.

That process will accelerate if there's an upgrade path (either direct or via competitor). Wii's downturn for example is probably greatly accelerated by the appearance of Kinect for X360. If not for that I think we'd see a far more gradual decline of hardware and software sales for the platform.

Regards,
SB

 

[AlphaWolf]

How about this, would DVD sales have maintained forever, if digital had never existed, and Blu Ray (or any "superior format) had never come along, or would they have inevitably declined, simply because the hardware and format was "old"? Wasn't DVD declining before Blu Ray came along?

Yes DVD sales were well into decline, but they had reached saturation. They had a back catalog of titles which carried DVD sales well above the new+recent release threshold. Blu-ray plus DVD has not reached the peak sales figures from the past and it may never due to digital and the fact that many movie collectors will have filled out their collections already, and newer collectors might prefer digital.

Games consoles have always been in this situation. There is no back catalog that will get good sales. No one is lining up to buy 30 year old games for $50. New consoles stimulate new sales because there is significant improvement in hardware and visuals, much more so than the jump from DVD to Blu-ray.

 

[Teasy]

Make fun all you want, Nintendo won't be laughing 5 years from now.

Oooh, I bet they're shaking in their boots

 

[TheChefO]

I highly doubt it's going to lead to Nintendo not raking in buckets of cash in 5 years however.

I'll be interested to see if they can turn WiiU into an ATM machine too, but from what I see of the system and what I expect to see for competition, I don't think that's going to be the case.

...

As for people predicting the death of Nintendo, I can't speak for others, but I certainly did not expect Nintendo to fail with GC, or Wii. In fact, I started a predict thread and forecast near parity by 2010 as I figured the novel interface would draw in non-gamers and that would offset the core gamers heading to Sony/MS.

The reason I'm not projecting success for WiiU is their novel interface has been trumped by both MS and Sony. This forced Nintendo to try and think of another novel interface (why they refused to go head to head on NG spec is beyond me, they had the R&D funds), and the fools decided to copy devices which are already selling gangbusters, thus nullifying any perceived unique advantage.

They would have been better off making a deal with Apple and becoming an exclusive IOS developer.

IMO

And considering that most people get their Xbox Live Gold subs through the gold card, then obviously MS isn't making anywhere near 50 USD per XB Live Gold member. I'd predict that on average they make 25-30 USD per year per Gold membership, perhaps a little more. And considering much of that has to go towards operating expenses and licensing fees for some of the services offered it's impossible to know how much of that is actually profit.

The actual numbers aren't all that important.

What is important is that the sum is substantial, growing and important enough not to risk losing.

That process will accelerate if there's an upgrade path (either direct or via competitor). Wii's downturn for example is probably greatly accelerated by the appearance of Kinect for X360. If not for that I think we'd see a far more gradual decline of hardware and software sales for the platform.

I just ran the numbers on this as I was curious what impact Kinect and Move have had on Wii sales as well.

12months prior to Kinect/Move launch,
XB260 7.03m
PS3 5.19m
Wii 9.78m

12 months after Kinect/Move launch,
XB360 8.77m
PS3 5.31m
Wii 7.10m

So Wii deficit 2.67m
PS3+XB360 gain 1.85m

Of course we assume based on Dec sales that Wii sales had started declining prior to this and xb360/ps3 sales were on the upswing so it may just be a coincidental match.

However, looking at the 12month data from November to November in sequential years prior to Kinect, Wii was selling roughly 10million a year for 36 months straight (10.3m, 9.9m, 9.8m).

In that same stretch, PS3 gained slightly year on year (4.08m, 4.08m, 5.19m)
Xb360 (5.32m, 5.74m, 7.03m)



So it could be that Wii buyers were suddenly uninterested in Wii after Kinect came out as the sales drop-off is dramatic and does coincide with the time period, but the sales upswing isn't directly related to Kinect and the increase does not directly match the decrease.

Further research with software sales could bring more clarity to this issue.

 

[Rangers]

Yes DVD sales were well into decline, but they had reached saturation. They had a back catalog of titles which carried DVD sales well above the new+recent release threshold. Blu-ray plus DVD has not reached the peak sales figures from the past and it may never due to digital and the fact that many movie collectors will have filled out their collections already, and newer collectors might prefer digital.

Games consoles have always been in this situation. There is no back catalog that will get good sales. No one is lining up to buy 30 year old games for $50. New consoles stimulate new sales because there is significant improvement in hardware and visuals, much more so than the jump from DVD to Blu-ray.

I understand all that, what I'm asking is, lets say for example:

The 360 was the only console.

No new consoles were ever introduced.

In this hypothetical world, would the 360 follow the normal rise and fall model of consoles anyway?

For example, we see right now no next gen consoles on the market, yet it appears PS3 and 360 are beginning a decline phase.

One can ask the same question of the DVD player. I believe it's implied DVD would have died off even if digital and Blu Ray never came along to compete with it.

It just puzzles me because there seem to be indications that is the case, but it doesn't make sense to me.

New hardware in and of itself is needed to stimulate sales? Even when the old hardware is perfectly fine and has buttloads of games? Seems bizzarre and nonsensical. Yet we can presume if no new consoles arrived, PS3, 360, and Wii would simply die off anyway ?

 

[TheChefO]

New hardware in and of itself is needed to stimulate sales? Even when the old hardware is perfectly fine and has buttloads of games? Seems bizzarre and nonsensical. Yet we can presume if no new consoles arrived, PS3, 360, and Wii would simply die off anyway ?

The medium is far from ideal, still.

It would be comparable to VHS days. People bought movies, they enjoyed them, but were fully aware that the experience was lacking. Sound hiss, low resolution, weak color contrast, and degrading quality with time and usage. Not to mention, the rewind.

With technical improvement, it was bound to be replaced and improved upon.


As is the case in real-time interactive environments.

If the only console which ever existed was xb360, then eventually people would either move onto PC, or some Entrepreneur would raise capital and box up the latest PC goods into an easy to use configuration which is affordable and bring the xb360 down.

That will be the case until that interactive experience is "good enough", and we are still quite far away from that point.

(Though I will concede that certain efforts this gen lead me to believe that further investment into tools and libraries would squeeze more out of this gen and could be leveraged again for nextgen, but doing so would only prolong the transition.)

 

[TheChefO]

Oooh, I bet they're shaking in their boots

I bet they were as soon as MS came out on stage and demoed Natal and Sony followed the next day with Move.

They clearly didn't have a well thought out replacement strategy, and the result is a Hodge-podge of social-Wii and isolated-tablet with a sprinkle of old hardware to top it off.

And the reception has been as expected.

Have you seen their stock price lately?

So yeah, I'd say they are shaking in their boots. Poor planning and execution will do that to a company.

 

[dlm]

I think you're placing way too much stake in this mythical concept of "momentum". Where's the evidence that "momentum" means anything?

Sony had all of the "momentum" in the world going in to the current gen and for a long time were buried in the US by both Nintendo and MS.

Nintendo meanwhile had just about no momentum coming out of the last gen, and yet they blew the doors off of the industry when the Wii came out.


This isn't "momentum", it's just about business decisions. The goal is to make money. Nintendo has consistently made money, despite repeated claims about their "irrelevance." Microsoft and Sony both made some excellent business decisions that expanded their audiences in the last few years. Nintendo has simply been treading water and may have reached the saturation point for who wants to buy the particular piece of hardware that they're offering right now.

They're still selling quite a bit of software. You may have noticed that Wii is the lead SKU on the #2 piece of software last month. And for them it's all profit.


It turns out that just like with the Wii, they're one good business decision from another blockbuster. So yeah, a lot of people are down on WiiU right now. Turns out a lot of people were down on the Wii and DS too, and those did alright. So we'll just have to wait and see. If the WiiU flops, it's not because it wasn't launched soon enough, it's because Nintendo took a risk and made a piece of hardware that the market didn't want.



Ultimately, it turns out that when it comes to gaming, buyers have almost zero brand loyalty whatsoever, despite what the console warriors of the world would have you believe.

 

[AlphaWolf]

New hardware in and of itself is needed to stimulate sales? Even when the old hardware is perfectly fine and has buttloads of games? Seems bizzarre and nonsensical. Yet we can presume if no new consoles arrived, PS3, 360, and Wii would simply die off anyway ?

No, it does not seem bizarre. And you can't presume nothing would come along to replace them. Perfectly fine by what measure? In a world without competition tic tac toe is the best game ever, we do not live in that world.

 

[dlm]

No, it does not seem bizarre. And you can't presume nothing would come along to replace them. Perfectly fine by what measure? In a world without competition tic tac toe is the best game ever, we do not live in that world.

But something has *not* come along to replace them. This entire discussion has been predicated on the "need" for new hardware by MS and Sony... yet unless either MS or Sony moves, there's currently not much reason for the other to do so.

The only alternative proposed was PC, but given the relative inconvenience of PC gaming compared to console gaming, I don't know that I'd really consider that to be a particular threat to any of the big 3.

 

[Silent_Buddha]

Of course we assume based on Dec sales that Wii sales had started declining prior to this and xb360/ps3 sales were on the upswing so it may just be a coincidental match.

However, looking at the 12month data from November to November in sequential years prior to Kinect, Wii was selling roughly 10million a year for 36 months straight (1.03m, .99m, .98m).

In that same stretch, PS3 gained slightly year on year (4.08m, 4.08m, 5.19m)
Xb360 (5.32m, 5.74m, 7.03m)



So it could be that Wii buyers were suddenly uninterested in Wii after Kinect came out as the sales drop-off is dramatic and does coincide with the time period, but the sales upswing isn't directly related to Kinect and the increase does not directly match the decrease.

Further research with software sales could bring more clarity to this issue.

There's a couple things you have to factor in other than just looking at the pure numbers.

Both PS3 and Wii had price cuts in those last couple of years. For PS3 it maintained some growth. For Wii it mitigated much of the losses they might otherwise have had.

For X360, if there had not been a Kinect launch, it is quite likely sales would have declined without a price cut. And even with a price cut I high doubt their sales would have been as good without Kinect.

And one more point for X360. There were also many Kinect stand alone kits sold. So, while the Wii losses to X360/PS3 gains may not be 1:1, I'd say it was pretty darn close. Especially if you consider that some, rather than getting a Wii for their wife/kids, may have just gotten a Kinect sensor to go with their existing X360.

Regards,
SB

 

[TheChefO]

I think you're placing way too much stake in this mythical concept of "momentum". Where's the evidence that "momentum" means anything?

Sony had all of the "momentum" in the world going in to the current gen and for a long time were buried in the US by both Nintendo and MS.

Nintendo meanwhile had just about no momentum coming out of the last gen, and yet they blew the doors off of the industry when the Wii came out.


This isn't "momentum", it's just about business decisions. The goal is to make money. Nintendo has consistently made money, despite repeated claims about their "irrelevance." Microsoft and Sony both made some excellent business decisions that expanded their audiences in the last few years. Nintendo has simply been treading water and may have reached the saturation point for who wants to buy the particular piece of hardware that they're offering right now.

They're still selling quite a bit of software. You may have noticed that Wii is the lead SKU on the #2 piece of software last month. And for them it's all profit.


It turns out that just like with the Wii, they're one good business decision from another blockbuster. So yeah, a lot of people are down on WiiU right now. Turns out a lot of people were down on the Wii and DS too, and those did alright. So we'll just have to wait and see. If the WiiU flops, it's not because it wasn't launched soon enough, it's because Nintendo took a risk and made a piece of hardware that the market didn't want.



Ultimately, it turns out that when it comes to gaming, buyers have almost zero brand loyalty whatsoever, despite what the console warriors of the world would have you believe.

The momentum statement wasn't meant to be a cure-all master plan to abide by.

It was simply a statement of observation. But for the gaming++ devices which MS and Sony have been cultivating, momentum is key to generating long-term profit (especially MS).

...

In response to the bolded, I'd say I agree and disagree.

If they had the exact same plan they have now with WiiU, but launched it at the same time Kinect came out, it would have sold better than I anticipate the sales will be.

Mostly because they had momentum at the time, tablets were still new, xb360 level tech would have been more acceptable, and nextgen machines from Sony/MS weren't right around the corner.

As is, it's the wrong hardware at the wrong time.

 

[TheChefO]

There's a couple things you have to factor in other than just looking at the pure numbers.

Both PS3 and Wii had price cuts in those last couple of years. For PS3 it maintained some growth. For Wii it mitigated much of the losses they might otherwise have had.

For X360, if there had not been a Kinect launch, it is quite likely sales would have declined without a price cut. And even with a price cut I high doubt their sales would have been as good without Kinect.

And one more point for X360. There were also many Kinect stand alone kits sold. So, while the Wii losses to X360/PS3 gains may not be 1:1, I'd say it was pretty darn close. Especially if you consider that some, rather than getting a Wii for their wife/kids, may have just gotten a Kinect sensor to go with their existing X360.

Regards,
SB

Good point WRT existing xb360 owners buying Kinect add-on instead of Wii.

Pricecuts were indeed integral and I did not note the time periods.

As I said previously, the Wii sales this past year are with significant pricecuts (down to $99 bundles this past Christmas) and the sales decline is still severe. There is nothing more Nintendo can do to boost sales aside from start selling it for a loss.

Thus, my warning on momentum to MS, Sony.

Good point also on Kinect sales deterring Wii sales from existing xb users, but I think it's safe to say those that wanted a Wii up to this point, already have one (as these numbers illustrate).

 

[AlphaWolf]

But something has *not* come along to replace them. This entire discussion has been predicated on the "need" for new hardware by MS and Sony... yet unless either MS or Sony moves, there's currently not much reason for the other to do so.

The only alternative proposed was PC, but given the relative inconvenience of PC gaming compared to console gaming, I don't know that I'd really consider that to be a particular threat to any of the big 3.

Eventually even smart phones will surpass them in quality. Their customers will begin to move away to alternatives whether it be PC, smartphones, tablets or whatever competitive product, or even some other form of entertainment may wind up with those dollars as consumers get tired of the current products. The Wii is already in serious decline and while MS and PS3 have picked up some of that slack I expect there are people out there waiting for the next thing. The only question is when. The Wii:U should launch with superior graphics which will force Sony and MS to defend their base, in the short term that will probably be via price drop, but they'll most likely need a new product or risk erosion of their platforms.

 

[dlm]

Eventually even smart phones will surpass them in quality. Their customers will begin to move away to alternatives whether it be PC, smartphones, tablets or whatever competitive product, or even some other form of entertainment may wind up with those dollars as consumers get tired of the current products. The Wii is already in serious decline and while MS and PS3 have picked up some of that slack I expect there are people out there waiting for the next thing. The only question is when. The Wii:U should launch with superior graphics which will force Sony and MS to defend their base, in the short term that will probably be via price drop, but they'll most likely need a new product or risk erosion of their platforms.

I'm not banking on this ever happening without a huge revolution in processing and power technology. And even with that, it would be years and years before it would be cost-effective.

Yes, "one day" that may happen. But does that really represent a reason for MS and Sony to rush to shove another loss-leader on to the market while they're raking in profits on the mature hardware they've got right now?


I also don't think there's any evidence to support that there's this big pool of buyers who aren't in the console space already that aren't buying because they're waiting for something new. There's probably no evidence either way, but that doesn't seem to hold much water to me.

For those who aren't buying more consoles because they already *own* one... why is that a problem for MS and Sony? As long as they can keep coming out with games for those people to buy, that's the best case scenario.


The box is not terribly important to most consumers. It's the games they care about. If the flow of *games* stopped for 7 years, yes, people would move to other mediums. PC's have been graphically superior to consoles for years, yet for the most part, the popularity of PC gaming has continued to decline (excluding things like Facebook games, of course, which are not graphically impressive anyway). If technology were really the driver, don't you think this trend would be different?

 

[dlm]

The momentum statement wasn't meant to be a cure-all master plan to abide by.

It was simply a statement of observation. But for the gaming++ devices which MS and Sony have been cultivating, momentum is key to generating long-term profit (especially MS).

That satement does not seem meaningful to me.

The key to long-term profit is having a business plan that maximizes the number of dollars that you can extract from every dollar that you invest.

The sooner new hardware is launched, the sooner the current hardware "dies" and all of the profit that they're making on software sales goes away. New hardware *loses* money. What matters is how much software is being sold. The brand awareness of XBox is not going to decline just because the target market is saturated.

Historically, "I liked the old hardware" hasn't been a very big driver for determining what hardware people buy in the future. What your friends have and what is perceived as "good" are much bigger motivators. If all that mattered was beating the competition to the next version, we wouldn't be using almost every one of the most popular brands today.

In response to the bolded, I'd say I agree and disagree.

If they had the exact same plan they have now with WiiU, but launched it at the same time Kinect came out, it would have sold better than I anticipate the sales will be.

Mostly because they had momentum at the time, tablets were still new, xb360 level tech would have been more acceptable, and nextgen machines from Sony/MS weren't right around the corner.

As is, it's the wrong hardware at the wrong time.

At the time Kinect launched, sales were still pretty good, and they continue to move a lot of software. Launching a new box tends to have a very quick negative affect on the software support of the old device. This was a huge problem for Sony and the PS2 when the PS3 came out. They really wanted the PS2 to last a lot longer than it did, but support fell off almost immediately after the PS3 launched (yes, some in-development games and easy ports like EA Sports games still came out, but that was about it).

Nintendo knew this, and I doubt that they were eager to bury the Wii while they still saw profit to be extracted from it.


Remember that people bought the Wii not because it was a "better GameCube"... they bought it because it represented a gaming niche that no manufacturer had ever supported before. Releasing another box with a faster chip isn't going to cause most of those people to buy again. There's a decent likelihood that console gaming will go down as a fad for much of that market segment and they will simply never buy another box again. It remains to be seen.

Regardless, Nintendo's best bet for a hit is to do something disruptive again, which is clearly what they want to do with the WiiU. If people buy it, it will be because it's disprutive, not because they bought the Wii.

 

[AlphaWolf]

I'm not banking on this ever happening without a huge revolution in processing and power technology. And even with that, it would be years and years before it would be cost-effective.

Yes, "one day" that may happen. But does that really represent a reason for MS and Sony to rush to shove another loss-leader on to the market while they're raking in profits on the mature hardware they've got right now?

There's no might about it, it will happen, just a matter of when. Perhaps on 28nm, but not likely, 22 quite possibly. Denying that tech will continue to advance isn't new, people have been making that claim for years, perhaps someday they will be right, I don't expect it will be in my lifetime.

I'm not saying when, or how much. But if they are overly complacent they could lose their market very quickly. Something new is always coming. Obviously they don't want to lose money, but a loss leader can protect your market. If MS had launched with 20% lower clocks, or only 256MB of memory, would they still even be a competitor today? It's possible Sony would have lowered their specs as well, but there's no guarantee.

I also don't think there's any evidence to support that there's this big pool of buyers who aren't in the console space already that aren't buying because they're waiting for something new. There's probably no evidence either way, but that doesn't seem to hold much water to me.

Just look at YoY sales numbers. There's money leaking from the gaming industry.

For those who aren't buying more consoles because they already *own* one... why is that a problem for MS and Sony? As long as they can keep coming out with games for those people to buy, that's the best case scenario.


The box is not terribly important to most consumers. It's the games they care about. If the flow of *games* stopped for 7 years, yes, people would move to other mediums. PC's have been graphically superior to consoles for years, yet for the most part, the popularity of PC gaming has continued to decline (excluding things like Facebook games, of course, which are not graphically impressive anyway). If technology were really the driver, don't you think this trend would be different?

People move all the time, consumers are fluid, they are always waiting for the next thing. You think consumer electronics continue to add features and performance out of the goodness of their heart? Perhaps onlive will make a huge breakthrough and I'll have quality 1080p gaming through my phone, while it's not likely today or tomorrow... how long will it take? The longer console manufacturers sit on their tech the more threats to which they are open. There's always something coming along and if you sit on what you've got too long, you won't have much. There's companies out there that want those dollars, whether it be Valve, Apple or Onlive or someone you have never heard of before. Part of what keeps MS, Sony and Nintendo as the only competitors in the console arena is the cost of entry, and the longer they wait, the lower that cost gets so the more likely they will spawn more competition.

We don't have the data that Sony, MS and Nintendo get, but you can be certain that they keep an eye on sales trends and do market analysis of when to launch and all 3 have been around long enough to know how to protect their brand. And not just from each other.

 

[dlm]

There's no might about it, it will happen, just a matter of when. Perhaps on 28nm, but not likely, 22 quite possibly. Denying that tech will continue to advance isn't new, people have been making that claim for years, perhaps someday they will be right, I don't expect it will be in my lifetime.

And when using for even the pretty low-quality games that are on cell phones today, you're lucky to get 2 hours of battery life, if that.

The power ratings on PC's have been going up dramatically for the last decade, despite the process shrinks, and battery power has not really improved all that much in the last 5. We're hitting some very real physics problems here.

Yes, it's possible that an entirely new way of delivering power to mobile devices will emerge, but that sort of shift isn't going to happen overnight. Technological *evolutions* are generally quite rapid, but revolutionary shifts in the way things are done are generally adopted much slower (see every new format of everything ever).

Now, if your argument was that the market may decide that "well what I get on my phone is 'good enough' for my gaming purposes", I think that's a very real thing. But releasing a box with a more powerful processor isn't going to make the difference to the group of people who feel that way.

Just look at YoY sales numbers. There's money leaking from the gaming industry.

Money spent by consumers is immaterial. What matters is profit to the platform holders. As long as games are still selling, reduced sales of boxes simply means decreased shipping and material costs. The margins on the boxes (if you aren't Nintendo) are not typically very high (and early in the cycle are typically *negative*).

These sorts of numbers are almost impossible to find because of the way these companies manage their balance sheets when it comes to public reporting.

Beyond that, it isn't always necessary for every year to sell more dollars worth of product than the previous year. Overall, the games industry has fared remarkably well throughout the recession, if there's a down year that doesn't require the platform holders to expose themselves to enormous risk during a dicey financial period to still realize a profit... that seems like a good trade to me.

People move all the time, consumers are fluid, they are always waiting for the next thing. You think consumer electronics continue to add features and performance out of the goodness of their heart? Perhaps onlive will make a huge breakthrough and I'll have quality 1080p gaming through my phone, while it's not likely today or tomorrow... how long will it take? The longer console manufacturers sit on their tech the more threats to which they are open. There's always something coming along and if you sit on what you've got too long, you won't have much.
-snip-

There is a huge difference between "working on the next thing" and "releasing the next thing." You seem to be talking as if Microsoft and Sony are just sitting on what they have and doing nothing to plan for the future. It's pretty much a guarantee that they've been working on those things since the day the last console was released, and probably even longer.

The simple business fact is that the moment they announce and start talking features and dates, they've signed the death warrant for their own in-market product and basically put themselves in a position where the potential of that box will be constrained by what is possible as of 1-2 years ago.

The longer they wait to announce, the better the silicon can get and the better the box is that they can release at the same price.

So again, with no actually existing threat in the market today... what is their motivation to pull that trigger *now*?

 

[AlphaWolf]

And when using for even the pretty low-quality games that are on cell phones today, you're lucky to get 2 hours of battery life, if that.

A docking station takes care of that.

The power ratings on PC's have been going up dramatically for the last decade, despite the process shrinks, and battery power has not really improved all that much in the last 5. We're hitting some very real physics problems here.

The performance threshold moves up all the time, even for lower performing parts. You can get 8 hours of gaming off of a tablet, if it had a wireless controller and a docking station it would essentially be unlimited. Don't be so dismissive, these devices are taking more of peoples time every day.

Yes, it's possible that an entirely new way of delivering power to mobile devices will emerge, but that sort of shift isn't going to happen overnight. Technological *evolutions* are generally quite rapid, but revolutionary shifts in the way things are done are generally adopted much slower (see every new format of everything ever).

They don't need anything revolutionary, the normal evolution of technology will EOL current consoles in the near future. My laptop will kick the crap out of a console in performance, runs for about 2 hours off of battery, but I can plug it in and still use it. It won't be that long before that much power is in a more portable device with a longer battery life.

Now, if your argument was that the market may decide that "well what I get on my phone is 'good enough' for my gaming purposes", I think that's a very real thing. But releasing a box with a more powerful processor isn't going to make the difference to the group of people who feel that way.

You seem to be operating under the delusion that what you can get on your phone won't ever exceed what you can get on a console, it will. Probably not before MS and Sony actually launch a new product, because they aren't stupid. You don't wait for the threat to hit the market and build momentum before you try to deal with it. That time might be too late.

Money spent by consumers is immaterial. What matters is profit to the platform holders. As long as games are still selling, reduced sales of boxes simply means decreased shipping and material costs. The margins on the boxes (if you aren't Nintendo) are not typically very high (and early in the cycle are typically *negative*).

Wrong. Investors (major shareholders) are very growth driven. They want to hear about expanding markets and growth in revenue. They'll be much more tolerant of a negative balance sheet than a receding revenue base. Yes they want a positive bottom line as well, but if they see negative growth they are going to be electing new board members shortly. Look at a company like RIM which hasn't posted a negative quarter in forever, but their market share is threatened so their stock prices have plummeted and their CEO's were forced out.

These sorts of numbers are almost impossible to find because of the way these companies manage their balance sheets when it comes to public reporting.

YOU'RE IN AN NPD THREAD, try looking in their press releases.

Beyond that, it isn't always necessary for every year to sell more dollars worth of product than the previous year. Overall, the games industry has fared remarkably well throughout the recession, if there's a down year that doesn't require the platform holders to expose themselves to enormous risk during a dicey financial period to still realize a profit... that seems like a good trade to me.

It's only necessary if you want to stay in business. Stagnant companies are just waiting to become someone's IP property with their assets sold off. Entertainment has historically always managed economic downturns fairly well for whatever reasons, in no way does that mean that they should be complacent, and neither should they expect a bounce when they economy recovers.

There is a huge difference between "working on the next thing" and "releasing the next thing." You seem to be talking as if Microsoft and Sony are just sitting on what they have and doing nothing to plan for the future. It's pretty much a guarantee that they've been working on those things since the day the last console was released, and probably even longer.

The simple business fact is that the moment they announce and start talking features and dates, they've signed the death warrant for their own in-market product and basically put themselves in a position where the potential of that box will be constrained by what is possible as of 1-2 years ago.

The longer they wait to announce, the better the silicon can get and the better the box is that they can release at the same price.

So again, with no actually existing threat in the market today... what is their motivation to pull that trigger *now*?

I've never suggested any such thing, I have no idea what you're talking about. I don't think MS or Sony are doing anything stupid atm, and they will pull the trigger when they feel they have to (and I've no doubt they've had ongoing plans for their followup since their current products launched), but I don't think your suggestion that there is no real threats in the near future is anywhere near the truth. Eroding sales and consumer complacency are serious issues, the entertainment market is fluid. I can watch a movie or play a game, not both. Social, mobile and cloud gaming are also serious threats to their market share and those entertainment dollars. And the Wii:U certainly should be, that's going to depend on how much it offers, but if it does wow people, how many years do you want to give it unchecked on the market? A new product will build hype, it's free advertising.

Did the PS2 die the minute Sony announced the PS3? No... I didn't think so. Certainly it's an issue to have competing products in the same space and I think Nintendo showed their cards a bit too soon, but it's hard to keep things under wraps because developers need access to the hardware.

They pull the trigger now, because they want to expand on marketshare rather than squeeze every last dime out of their current platforms.