Deep Dive: Console Wars
The video game industry has long been defined by the wars between console manufacturers, from Nintendo vs. Atari vs. Sega to the modern battles between Microsoft and Sony. With the next generation of consoles set to be released in the coming month, let's take stock of the major players and what external forces could influence them in the future.
Microsoft's entry into the gaming market is still polarizing. While the original Xbox was not a commercial success, Sony's misstep in pricing the PS3 gave Microsoft a strong foothold with the Xbox 360. Despite this, it is clear that Microsoft's focus has never been gamers; instead, it wants to dominate the living room. The launch of the Xbox One confirmed this strategy as it was marketed as an "all in one" entertainment system. Microsoft suffered a significant defeat in the last generation of consoles when 108.9 million PS4s were sold compared with 46.9 million Xbox Ones. Microsoft hopes that the low-cost Series S console can appeal to more casual gamers and increase its market share.
Sony has been the dominant console since the first PlayStation revolutionized gaming with its 3D graphics. Its position is still compromised by the lasting effects of the launch of its PlayStation 3, priced at $600. This high price tag gave Microsoft a significant advantage (the Xbox 360 cost only $400). Because of this strategic error, Microsoft was able to outsell Sony for a considerable period before a price drop and redesign of the PS3 allowed Sony to claw back its market share. Despite the blunder, at the end of both console's lifespans, 87.4 million PS3s had been sold compared to 84 million Xbox 360s. With a clear victory in the last generation of consoles, Sony's "for the players" branding is continuing to attract a large segment of the consumer base. The well-priced PS5, starting at $399, is widely considered the best value of the consoles launching later this year.
Nintendo is the oldest player in the market. It monopolized the market after defeating Sega and Atari in the earliest days of the industry. The company looked to be left behind when Sony announced the PlayStation, which used CDs to store games, providing them with quicker read times and more data to build complex games. Nintendo continued to use cartridge games even after this. Despite this massive misstep, the Wii's success allowed the company to maintain a foothold. In the U.S. from 2007-2010, the Wii outsold the Xbox 360 and PS3, accounting for 46.5% of the console market. The Nintendo Switch also outsold the Xbox One in the last generation by 62.08 million units to 48.31. Despite this, Nintendo's position as family and kid-friendly continues to plague analysts' outlook as games become increasingly for teenagers and adults.
While these three companies continue to battle for market share in the console market, the gaming industry faces some monumental shifts – Cloud gaming is on the horizon. Google launched its Stadia platform and competition is expected from Amazon, who can leverage Twitch to attract gamers to a service of its own hosted on Amazon Web Service's infrastructure. Offerings for more casual gamers, including Apple Arcade and Facebook Gaming, also capture a share of the market.
