Why the Next Consoles Will Be the Last

It’s kind of like in the Matrix when the black cat walks by twice and Neo says “huh”.  Déjà vu might be caused by glitches in the Matrix or in delays between visual and cognitive recognition, but when it comes to the releasing of new consoles, you’re right to think we’ve seen this before.  When the industry decided to release new DVD players (remember HD vs Blueray), many pundits spoke out at the obvious money grab by the hardware makers. Everybody knew the movie rental business was on its way out as more and more content was moving to digital distribution but that didn’t stop those hardware makers from having one more kick at the cat.

And now we’re in another familiar situation where console makers are left with one more swing at the gamer’s pocket-books. Whether its Sony’s Orbis or Microsoft’s SmartGlass, you can bet this next push will be a big one. And as it should be as it will be their last. While thanks to the Xbox Kinect, Microsoft only saw a 2% decline from 2010 to 2011, the Wii dropped over 28% and Nintendo is down almost 50% over the previous year. The entertainment hardware market is still strong at $18B a year but 11% of that was tablets and that’s expected to double next year. 

We all see the industry shifting: some of it back to PC and Mac but most of it over to tablets and TV. In the same way as the movie market had to shift from physical disk to streamed content, so will the gaming industry. Companies like Onlive and Gaikai will continue to make inroads with Telcos and Cablecos and the very thought of playing a game off a disk will be as ridiculous as going out to your movie rental store to pick up a blueray.

Chris Hennebery

June 9, 2012