Shadow1980 said:
The annual decline over the last few years is normal. The market is cyclical, like the tides. Low tide is at the transition between generations, while high tide is towards the middle of the generation. For example, here's global console shipments for the 5th, 6th, & 7th generations:
And here's U.S. sales for the 6th, 7th, & 8th generations:
Up and down, up and down. Tide goes in, tide goes out. Sales will likely start to grow again this year and continue growing for about two or three years before peaking and declining again, then another generation comes out to start the cycle all over again.
Now, as to whether the market shrinks in total generational sales, that remains to be seen. Here's generational sales both globally and regionally:
As we see, in North America, each generation was considerably larger than the previous, and Europe has experienced similar growth. Japan has declined over the last couple of generations, though it is worth pointing out that nearly all the losses were on Sega's end, and they were always relatively niche there. If you ignore Sega, total hardware sales from the fifth to seventh generation are only slightly down. Assuming the Wii U only sells 5 million units in Japan and the XBO only 1 million, the PS4 will have to sell at least 18 million units for the eighth generation to match the seventh in Japan, and that's kind of a tall order. I personally think it'll sell less than that, but likekly a good bit better than the PS3, maybe 12 million at minimum at 15 million at maximum. The PS3 will likely end at around 10.5M, thus putting seventh-gen sales at just shy of 25 million, while even at 15 million plus 5 million for the Wii U and 1 million for the XBO only comes out to 21 million, a generation-over-generation decline of 4 million units. While that's a good bit relative to the size of the Japanese market, it's small beans for the total global market.
Of course, we shouldn't expect sales in NA and Europe, and thus total global sales (NA and EU combined make up about 80% of the global market), to continue to grow at the same rate. There's only so many households that are both willing and capable of buying a console at any given time, and eventually that percentage will reach a saturation point. The number of households in the U.S. owning whatever is a current-gen console at the time has roughly doubled since the 8-bit era. Assuming a negligible number of U.S. homes owned more than one NES and the U.S. accounted for 90% of North American NES sales, that amounts to about 30 million NES-owning homes, plus a couple of million homes with a Sega Master System. According to a Nielsen report from a couple of years ago, at the end of 2011 about 56% of U.S. households owned a game system, which is over 65 million homes based on Census Bureau data on the number of households, and that number has likely increased a bit in the two years since that report. Now, there may have been a couple of million non-gamer households that got a Wii (though some core gamers swear up and down that the vast majority of of Wii sales were due to "soccer moms and grandparents," but I don't agree with that one bit), but likely the number of U.S. households consisting of traditional core gamers that own at least one console still exceeded 60 million. Now, whether we've reached saturation or not remains to be seen. The average age of gamers continues to rise as Gen X-ers, Millenials, and others who grew up with games age and start to comprise an ever-greater percentage of the population. But there will always be non-gamers of various stripes as well as people who just can't afford to buy game consoles. So, we might continue to see growth in the number of households that own current-gen consoles, but that percentage will probably never be 100%. (Note: Sorry for the focus on the U.S. market. I can't find similar studies to the Nielsen one for Europe.)
Of course, total number of households isn't the only thing we need to factor in. Many households own more than one system, so the ratio of consoles per console-owning household is another thing we need to take into account. Considering that sales of the 360, Wii, and PS3 totaled about 91.6 million units at the end of 2011, that's about 1.41 consoles per console-owning household at that point going by the Nielsen report. But is 1.41 normal, or is the norm lower? The Wii was a low-cost and fundamentally different console and thus probably increased the number of multi-system households by a good bit, so the market in terms of total hardware sales may have grown more than the actual market as defined by number of console-owning households. With the Wii U being a relative flop and the PS4 and XBO being so similar, the consoles-to-households ratio may decline, so even if the same amount of households buy a system we still may only see total hardware sales remain relatively flat or even decline. Had the ratio in the U.S. at the end of 2011 been 1.2 systems/household that would have resulted in only about 78 million hardware units sold. If it was 1.1, then only 71.5. Considering the small user base of the Wii U and the fact that the PS4 and XBO are so similar in functionality and game libraries, I think the ratio will be rather low. Let's say that by 2019 there's about 70 million households owning at least one eighth-gen system. With a systems/household ratio of 1.1, that amounts to about 77 million systems (say, 37 million PS4s, 28M XBOs, and 12M Wii U's, just to throw out some probable estimates). Now, the number of households went up slighthly from over a generation previously, but the total number of hardware sales dipped a good bit due to a decline in multi-system households.
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