Years of work by Microsoft, Sony and many publishers and development studios have resulted in two very successful launches for the new next-generation consoles, the Xbox One and the PlayStation 4. Does that mean the industry can relax and watch the installed base grow by leaps and bounds while sales and profits grow along with the base If that’s what you think, you need to take a reality check. The hard work needs to continue, and it will not get easier — and success is not assured.
First of all, let’s look at the picture for the next several months. Supply of new consoles will likely be constrained until sometime in the first quarter, and possibly beyond. Certainly it’s possible to ramp production faster, but the cost is high — and neither Sony nor Microsoft wants to build production lines and massive inventory that turns out not to be needed. Right now production is being fine-tuned, and chip yields are increasing. There will be manufacturing problems, hardware and software issues to overcome (the PS4 pulsing blue line and the Xbox One’s disc munching, for example, though both appear to affect only a small number of users).
Eventually, manufacturing will cease to be an issue. — then the fun really begins. The second quarter of 2014 will show us how strong ongoing demand will be for the PlayStation 4 and Xbox One. Will there be great software to kick sales higher Or will this wait until the summer or the fall Typically we don’t see the very best titles on new hardware until the developers have gone through at least one cycle, and tools get better. Here it should be faster due to the familiar architecture and generally better tools. Already we’ve seen some impressive titles on the schedule for next year, like The Witcher 3 Wild Hunt, Watch Dogs, Titanfall, Destiny, and many more. However, we’re still not sure of the release dates are even if the titles will live up to the early buzz.
It’s around the first quarter that the essential reality of new consoles will really settle in for the majority of the market. November, December and perhaps January are all about capturing the hardest of the hardcore fans. These are people who love being the first to own the new hardware, and they’re willing to put up with flaws, omissions, and a relative shortage of software. One important fact about both the Xbox One and the PlayStation 4 that hasn’t really come into play yet is the lack of backwards compatibility. That’s really not important to the hardcore fan, but to someone who has a big library of existing games they love and perhaps not a lot of money to spend on new software as well as a new console, it’s a big issue. Those are the very people who are the next wave of next-gen console buyers.
Marketing’s got its work cut out for it. It’s not just putting out good messaging about the next-gen consoles, it’s about identifying the barriers to sale and trying to lower or remove them. We already know Sony is likely to provide some form of backwards compatibilty with old PlayStation games through Gaikai, and Microsoft has hinted at similar possibilities. That sounds good, but even if the technology works great it doesn’t help the existing console owner with a library of games. Neither Sony or Microsoft is likely to stream games for free, at least not for all of them all the time. How could you verify that a user already purchased a given game for a previous console
There may be an answer, though it will require some work to arrange. Perhaps you could let users bring their old disc into GameStop and turn it in to get a code (and store credit ) that would allow them to stream it on their new next-gen console. This would remove a big barrier to next-gen console adoption, if it could be arranged.
That’s just part of the sort of thing marketing must consider when moving into the next phase of the next-gen console adoption. Ultimately, we all have to remember that it’s really all about the games. Without that you have a very expensive Netflix streaming device, and maybe a few other features (like Skype on the Xbox One) that are pretty cool, but probably don’t justify a sale for most people. Microsoft and Sony need to keep adding great features to their systems, of course, to extend the list of reasons why people would want to buy the console. The best selling point, though, will be as many must-have games as possible. Encouraging indie developers as well as mainstream publishers is an important part of the strategy for both companies, and they would do well to keep pushing that.
Next-gen consoles aren’t just about raw graphics power; that’s nice but it’s not going to provide a really different gaming experience. The real advances will come with things like changing business models, massively multiplayer gaming, design innovation, cloud computing, social gaming features (like streaming) and second-screen integration. We’re already starting to see this happen in games like Destiny and The Division, and we need to see more of this to keep gamers from wandering off to other platforms.
The challenge for Sony and Microsoft is to keep pushing on system-level improvements to enable these sorts of innovative designs, and to continue to reduce their bureaucracy and barriers to get more games on their platforms. Next-gen consoles need to take advantage of all the things the modern connected world has to offer and integrate that into a gaming-centric environment where there are no barriers to fun. Next-gen consoles have the potential to take the best of other platforms and connect it to gamers — let’s hope Sony and Microsoft make that happen.