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kazuyamishima on 15 September 2022
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Shadow1980 said:
DonFerrari said:

I guess the discussion is market growth being almost zero, still having steady revenue stream, but increasing cost. How long will that be healthy?

Nothing can grow forever. Real development costs are slowing in growth and will plateau. The current average appears to be around $60-80M, only three or four times of what the nominal average was just two generations ago. Meanwhile, from what I've read, the average nominal development costs grew upwards of 10- to 20-fold from Gen 5 to Gen 7. If budgets kept ballooning at the same pace they did prior to Gen 7, we'd be staring down the barrel of a billion dollars per game on average by next generation. To break even on just the development costs (to say nothing about marketing, etc.), a billion-dollar game would have to sell over 14M copies at $70 per copy. Clearly, developers and publishers are not going to throw that much money at the average AAA game.

There are some obvious limiting factors. The biggest contributors to the increase in production budgets over time appear to be A) the increase in the size of development teams, and B) games taking longer to make. In the 8-bit era, a team of a dozen or less people could create a quality title in just a few months. Now it takes teams of several hundred people working on a title for around 2-4 years. But team sizes and development times can't grow forever. It's unrealistic to think that a next-gen game would have to have a dev team 5000 strong working six years just to make the average AAA game. At some point, things will have to stop growing. A steady-state industry like the console market isn't just going to keep letting expenditures grow at an unsustainable rate.

SvennoJ said:

@Shadow1980 I'm talking about software revenues. The hardware cycle will still reset, yet gaming revenues is where the real money comes from. The hardware doesn't make much profit, especially not with the R&D costs that need to be payed back.

Yeah. I know I've been going back and forth between software and hardware. But software sales are doing fine.

On Nintendo's end, I mentioned that they are posting some of their best figures ever. Sure, they're not where they were back in 2007-2010 when combined Wii & DS software sales were at their peak, but those years were clearly anomalies, and the past two fiscal years still ranked 5th & 6th places for Nintendo software shipments for all years going back to at least 1992. While I still doubt the Switch will become the new #1 system ever, it is still on track to sell more software than any single Nintendo system ever and has an absolutely outstanding software tie ratio, one that stands a good shot at beating the GameCube's tie ratio, which is the highest of any Nintendo system to date. Clearly, the unification of their handheld and home console efforts into a single unified hybrid system has not hurt them any.

As for Sony, the PS4 has sold over 1.4B software units as of last count, more than any other system besides the PS2, and their own first-party software sales were better on the PS4 than on any prior PlayStation console. So, they're clearly doing fine for now.

And on MS's end, apparently Xbox software revenues have been highest over the past few years than ever before. Not sure if that includes XBL and GP subs or not.

Yes, newer revenue streams like premium DLC and subscriptions have helped a lot, and the increased popularity of digital has increased the per-copy profitability of specific titles, but it's clear that the console industry is not struggling or otherwise showing signs of being unhealthy, either in terms of hardware or software sales. Just because the market isn't growing doesn't mean it's dying.

It was more than 1.5 Billion units at the end of 2021, so it's pretty much guaranteed the number now is over 1.6 Billion units.