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jstam on 26 July 2007
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Bodhesatva said:
super_etecoon said:
Bodhesatva...I don't believe a monopoly will occur. This generation could prove to be the most egalitarian of them all. Granted, Microsoft and Sony might not put nearly as much money or processing power into their next systems, but they will rebound.

We cannot forget that gaming as a whole is bigger than ever. Nintendo's Blue Ocean strategy suggests it will only get bigger. My girlfriend is playing games now. She saw Nintendogs. It was over. Granted, she is an extreme casual, but she now can identify herself as a gamer...casual or not.

The same can be true with the older market that Nintendo has had much success with lately. Sony and Microsoft (or whoever decides to enter the next race Apple? Google?) will restructure and redefine themselves within the market. If there is anything that can be said about console wars it is that they are neither won nor lost in a single generation.

And I don't believe that handhelds are merging with consoles. Ask a DS owner how much interconnectivity there is between his touch screen and his Wii and he might not even have a clue what you are talking about. To my dismay there has been very little crossover between the two systems (or any handheld and its console counterpart). Yet the handheld market is alive and well. Even the PSP's limited success against the DS is success overall. 20 million units can not be misconstrued as failure. In fact, it suggests that the handheld market is capable of holding multiple competitors just like the console market.

I'm not saying this to say that my original claim is without its flaws; I'm only saying that your arguments against it don't seem to hold water. I think we both could be wrong. Ha!

The big problem (or flaw, as you say) is that the video game market is really two markets rolled into one, much like the PC market: hardware and software. And guess what happened to the PC market?

The big issue is that specific software needs to be made for specific hardware. A software company needs to choose between making a game for the DS, or the PSP, or the Wii, or invest a great deal more money and develop a PS3, 360 and PC game, with a good deal of money spent on conversion. It makes more economic sense for all the software developers if all of these platforms became a single one.

Development companies are losing a lot of money right now, super. The next gen movement has been very hard on companies, even including EA, who has seen their profits shrink year over year for four years running, since they began investing in "next gen" properties. Observe EA's annual earnings:

FY04: $511 million R&D costs, $577 million total profitFY05: $633m R&D, $504m profitFY06: $758m R&D, $236m profitFY07: $1041m R&D, $76m profit This is the most profitable 3rd party company in the world we're talking about here (okay, they've briefly been passed by Activision, but EA will almost surely eclipse them again within a few weeks, with the release of NCAA 08 and Madden 08). Something is wrong. This is not tenable. Within a generation, if things remain as they are, this will no longer be profitable for any third party trying to juggle their games across all these varied platforms. It's too expensive to develop games and assets, and too much risk is taken with so many possible reasons for failure (the game isn't well received, the system itself isn't well received, and so forth). Additionally, the two companies that are currently "losing" the hardware war -- Sony and Microsoft -- are both billions of dollars in the hole for this generation, and are unlikely to make all of it back. They may both be in the red for the entirety of this generation. Clearly, this market isn't able to sustain this many consoles in a profitable manner. Whoever wins will make a ton of money -- just as MS has with its OS monopoly on PCs -- so its understandable why everyone is fighting so viciously over this territory, but that someone is going to be singular (or, perhaps a two console race, including the portables), and as the finances show, the also-rans are going to lose a great deal of money, both on the hardware and software side.
The current environment simply is not tenable, economically speaking.

 


 could we then see software companies (ea,activision etc) teaming up in the future and either

a) deciding/demanding what they want out of sony and microsofts next systems

b) considering how much r&d ea put into the generation transfer (close to 3billion going by those numbers) deciding that it'd be be more financially viable to go and make their own console or with other big software companies and make it the best system for 3rd parties to develop for...