(skip to bottom for TL;dr portion) Hi again, and welcome to another installment of VGC Trend Source.

I know it's been about 6 months since the last episode, but seeing as how another major trend is on the horizon I figured I'd write something out. Here I'll be posting some overview and analysis, as well as providing critique and strategies for the market to continue into the future.

Overview:
The core gaming industry is struggling. Don't act surprised, I've seen the numbers too...but while this generation had more revenue than the previous one, take a look at this:

-DLC is now standard.
-Your physical games now rarely include booklets or printed material of any kind. 
-Digital Downloads are mainstream, while passing on none of the savings.
-Consumers purchase passes to play used games online,
-an entire console was almost dedicated to the irrational idea that it could somehow make piracy obsolete.

It's obvious don't you think? I felt like this scavenging change from the couch cushions and hamper before rent was due. Or when I had to go to work but my black shirt had a hole in it so I just sharpied the skin underneath. While I got another month of cheap rooming and (on a good month) tepid showers, devs haven't been so lucky. Dozens upon dozens of shuttered companies....franchises getting axed or sold off to pay down bad debts....companies aren't even interested in renewing the trademarks on old characters....cats and dogs, living together.

And now we have a new generation out where costs will only be higher than before. Some in the industry have been calling for a collapse for a few years now, and certainly, this is it, right...? This is critical mass! Unfortunately, it's not even close. Things are just changing, in wonderful ways.
Like pubescence, for some that means feeling not so fresh, and for others it means major growth.

You see, it's much less a question of whether the core industry will collapse...it's a question of whether the core industry be absorbed. There is no collapse, because all we are doing as "analysts" is saying "mobile doesn't count". It's like when people were saying PC revenue was outperformed by consoles, so long as subscriptions like Warcraft weren't included
(What's really in trouble of collapsing from a surge in low-quality alternatives is the forum analyst industry. It doesn't even make any money, and the best one out there is Pachter! Now that's an industry in trouble)

Discussion:
Fortunately, it doesn't take Michael Pachter to see that the money is in mobile. In mobile, costs are low, and the average consumer seems to be either incredibly lacking in reason or responsibility or a combination of both that they are willing to spend literally hundreds of dollars a month on a single game. Nothing in the core industry (which we are defining here as console gaming) can touch the margins of successful mobile IPs.

Currently, core industry is trying to capitalize in a couple ways:
1. Brand IP conversion, which basically means making crappy mobile games with franchise characters.
2. Using indie and mini games to augment console sales.
3. Milking the independant studios through fees and licenses
4. renting out their franchises to indie devs

Basically, they're not doing a very good job.

The core industy has grown so fat it can't get out of bed. For the most part, the industry is being vastly outproduced and out-margined by the new gen developers. There are literally billions being lost in pure profit. Anyone can see that. So some core industry companies start allocating resources into mobile hoping for that golden banana (is that a term?) which means core gamers (you) are getting less content and likely paying the same you were before, because you trust brands. And for that reason, said dev can't understand why their brands aren't gaining massive success in mobile. Hey, maybe you should try looking at what is popular in mobile.

Here are a few keys points that really need to be addressed in my opinion.

1. Handhelds need to be equivalent to mobile phone platforms, either with their own Operating systems, or with established ones like Android.

2. Core industry could be augmented by investment in mobile and indie development with new franchises. No watering down of current franchises. Mobile success should be brought to consoles, not the opposite. Porting IPs to mobile only leads to a shrinking market, like posting a picture on both facebook and instagram. You have many of the same friends on both platforms, so wherever they see it first is wherever they're likely to click. Guess which one is at their fingertips 24/7? Putting your franchises on mobile is not a strategy, it's a lack of one. Putting franchises on mobile isn't going to bring new customers to your console franchises. Period.

3. Independant and mobile games should have a much bigger visible profile on consoles. It would be wise to bring many indies under one roof, sort of like how a mutual fund is investing in many companies.

4. Really, and I can't say this enough but exclusivity of AAA extremely important. Indie devs are now turning out AAA-looking games for a tenth of the price. What's their secret? The cloud The focus on content, rather than delivery. Many gamers today now own multiple generations of consoles, a phone and a PC. Spending time on coding for many systems might potentially be harmful in the long run, when a dev could be spending those resources improving the product..we saw this almost immediately with Battlefield 4 problems after it released on 5 platforms at the same time. One would argue that multiplat increases competition among platform designers, and competition grows the industry, but that's an ignorant statement.

 5. There are only 2 companies currently attacking the market correctly. Sega and Valve. Sega has made big waves in the mobile/indie market and is clearly positioning itself as a major software supplier, and Valve is ready to snap up one of the biggest markets available, by integrating the mobile/indie scene with the living room console. Without challenge, Steambox will dominate with the largest, most consumer friendly, genre-varied library of any console before it. Watch out.

Hopefully, I've been able to show you a bit of a clearer picture of the industry. The core is in trouble but there's potential available, and it needs to be harnessed....whereas for many developers, mobile and indie development is like the old west gold rush. If the current guard don't act, the new guys will build the railroads, create the caravans, discover the new lands. Core industry needs to change.

Well I hope you enjoyed it, feel free to comment below.
Hopefully I get more than 2 repies this time.

Tl;dr

In any case, consoles aren't doomed per se. However, if the current front-runners don't adjust, the Steam-box will outsell all of them. All hail Gabe-Newell.

Bumping for justice.
I know it's a long read guys but surely someone can get through it without dozing off.

totally

needs more cloud implementation tho

It was a good read and makes lots of sense in many ways.

Good thread, bold predictions, but I find that I can't agree with everything you say.

1. Don't underestimate the challenge posed by creating a viable mobile platform. Mobile devices are Microsoft's only move in mobile gaming right now, and even they're struggling so much to secure third place in the market that the biggest monopolist in tech is releasing software on rival platforms. Sony's attempts to harmonize gaming devices with smartphones have also fizzled, and Nintendo has been wise enough to know that mobile computing is not its forte.

2. I'm not sure this is true. Take 2 just ported its fourth GTA title to mobile, and seemed rather pleased with the performance of XCOM. Is it driving more sales of the latest console releases at $60? Perhaps not. But mobile does seem to be a viable way to extend the revenues of content previously released on other platforms.

3. Seems like all the major console manufacturers are trying to do this. Not clear yet on how successful they will be.

4. I'm inclined to agree. The strategy of major publishers has been to push production quality as a means of competition, trying to spend their rivals into the grave. But production quality doesn't translate into content quality, and the need to release on many platforms to pay for these production values leads to a lowest common denominator that neglects the advantages of different platforms. Diversity suffers and publishers starve to death one by one.

5. Not sure why Sega is singled out here. All the big third parties have a mobile strategy, but the one that seems to be most effective right now in terms of sheer revenue generation is EA. Of course, they got there through some huge acquisitions, so it's hard to know how well its really paying off for them.

As for Valve, I'll admit the Steambox has potential, but it's far from a sure bet. I view it as more of a defensive play: The only way for Valve to break out of the collapsing PC market.

Steam OS's two main challenges are up front cost and publisher support. Up front cost is a problem because none of the OEMs making Steamboxes are going to be able to compete with console manufacturers for scale, and none of them can count on back end revenues to subsidize the up front costs like console manufacturers do.

The content issue is even more serious. Despite having access to 90% of the same content as Xbox and Playstation, plus exclusive PC stuff, Valve needs to convince all those publishers to provide support for controllers and Linux drivers. They can count on the indies who rely on Steam to do that, but how willing is Bethesda going to be to make Elder Scrolls VI fully Steam Box compliant so they can earn $10 of revenue on a Steam sale to the few people willing to drop $600 on a Steam Box instead of $30-60 on a retail purchase for PS4?

I really want the steambox to do well. Not that I want one but it helps shake up the industry.
Hopefully they can sort the finances out.

This gen I will have s ps4 and steambox

Dat Steam Controller.

/thread :D

I think all that steambox is going to be is like a branding thing... Third parties will have their own PCs and then they will also have steambox which will basically be PC components approved by Valve's specifications...

But I don't think its going to sell much and people are over hyping this like they over hyped the OUYA... (Obviously they are not in the same league but the hype is just stupid imo)