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.
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.
Yep, keeping the pace would unsustainable and unhealthy so at some point since revenue will stabilize the cost will have to as well either by devs becoming more efficient or the progression of graphics and etc being slower based on maturity of process without pushing much the envelope (can't say it is unhealthy, but well it is a change).
On SW sales, PS4 probably already overtook PS2. And profit wise it have done years ago =p
duduspace11 "Well, since we are estimating costs, Pokemon Red/Blue did cost Nintendo about $50m to make back in 1996"
Mr Puggsly: "Hehe, I said good profit. You said big profit. Frankly, not losing money is what I meant by good. Don't get hung up on semantics"
Azzanation: "PS5 wouldn't sold out at launch without scalpers."