New game consoles planned for cloud games
Mike Snider
There’s a cloud hovering over the future of video games. Not a cloud of impending doom, but more of uncertainty.
At the same time as Microsoft and Sony are prepping new video game consoles to go on sale in 2020, games delivered and stored online – in the cloud – are becoming all the rage.
Could the rise of cloud gaming mean that the next video game console system you buy may be the last?
Not necessarily. Even though we reliably stream music, TV and movies, for many reasons it will likely make sense to have a console, which is basically a powerful computer dedicated solely to games and entertainment, in your home.
Ten years from now, you may be still setting aside money for the latest PlayStation, Xbox or Nintendo system. “It’s likely that consoles will still be around, with more of a niche presence (like gaming PCs) for the hard core who wants the fastest and most graphically pure experience,” said Michael Pachter, analyst for Wedbush Securities.
However, he sees each generation of
“Gaming is going digital and this will continue to change how Microsoft, Sony and Nintendo manufacture consoles – it already has.” Alexis Macklin
video game consoles likely selling fewer units, with each likely only one-half to three-fourths as large as the previous generation. At the same time, the global addressable market for games will increase tenfold and game sales will double by 2030, Pachter said.
Games streamed from the cloud, as opposed to those sold on a physical disc or downloaded to a console, will see gains in acceptance. “Late adopters are far more likely to adopt streaming earlier in the cycle and to forgo the purchase of a console altogether,” Pachter said.
In fact, the console game system as we know it “is already dead,” said Alexis Macklin, research manager at market intelligence firm Greenlight Insights. Macklin joined Pachter and several other tech analysts in offering email responses to USA TODAY about the future of video games.
“Console gaming is in transition to on-demand gaming services, and this transition has already begun,” she said. “Gaming is going digital and this will continue to change how Microsoft, Sony and Nintendo manufacture consoles – it already has.”
Microsoft already has brought to market an Xbox One S console without a disc drive, available at a lower price to cater to online-only players. Its new high-powered Xbox Series X, due out ahead of the 2020 holiday season, includes a disc drive, but it may be accompanied by a lower-priced nextgeneration console that does not have one, according to a report from video game news site Kotaku.
Microsoft is also testing its Project xCloud game streaming service, which could be played on any Microsoft console and other devices.
The PlayStation 5, also scheduled to be released prior to the 2020 holiday season, will use physical discs and plays 4K Blu-ray Discs.
The new consoles from Microsoft and Sony “may very well be the last consoles in the traditional sense,” Macklin said. “The next wave of consoles may be closer to a streaming media device than a traditional console box, with the focus more on accessories.”
Digital dominates video games
Until a few years ago, most consumers paid $40 to $60 for games on discs or cartridges and played those games, then went to a store and bought a new one. In 2013, spending on physical console and PC games in the U.S. accounted for $6.3 billion, far surpassing the $4.7 billion spent on downloaded digital games and in-game microtransactions on consoles and PCs, according to PricewaterhouseCoopers.
But by 2016, the marketplace had flipped with digital spending on console and PC games amounting to about $6.8 billion, compared with $5.7 billion for physical game revenue, according to PwC.
The move to digital is expected to accelerate and projected to surpass $11 billion in 2022 in the U.S., compared with $3.8 billion on physical spending, PwC estimates.
During this time of transition, game developers will be creating new games that could drive changes, too. For instance, the free-to-play game “Fortnite,” which Epic Games released in 2017, generated $2.4 billion in revenue in 2018, research firm SuperData estimated. Since the game is free, all that revenue came from players buying content within the game, which can be played across the various consoles, computers and mobile devices.
There already are ways for gamers to experiment with cloud gaming. Microsoft’s Xbox Game Pass and Sony PlayStation Now are subscription services that, for a monthly fee, let you choose from hundreds of games stored in the cloud. Game publishers Electronic Arts and Ubisoft also have their own subscription services. Nintendo uses the cloud to offer classic NES games on the Nintendo Switch and, with some newer games, to save your progress and play with other players, too.
Cloud gaming will evolve
Despite additional competition, Microsoft and Sony will “thrive in a streaming world, as each has a large installed base of paying multiplayer customers (on Xbox Live and PlayStation Network) to support expansion into streaming,” Pachter said. “At the end of the day, streaming is an expensive service to provide, but Microsoft and Sony have a lot to lose if they cede this segment to Google, Apple or Amazon, so I expect each to offer a competitive platform and to thrive.”
With all the resources being focused on cloud games, “a decade from now console gaming will likely be known as television gaming or even large-screen gaming,” said Jesse Divnich, vice president of research and strategy at Interpret, a global consumer insights agency.
“Cloud streaming will almost undoubtedly reach a point where it can provide a seamless experience across any type of game,” Divnich said. “There will always be traditionalists that prefer a physical device in their house, but most consumers will adopt cloud streaming as a means of accessing games.”