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When The Consoles Die, What Comes Next?

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  • Full Name Full Name Comment goes here.
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  • The audio and video are out of sync. Can this be fixed?
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  • Fantastic presentation - easily one of the best I've seen on this subject.
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  • Great presentation, thanks.
    For me the reasons behind this inevitable change can be summarized by the following point:
    Today, Gaming as an activity has to fight with a lot of other activities to get on top of people's attention (Social Network obviously, but also just the internet in itself, real life social activities).
    ==> The growing segment in gaming is Casual gaming where you play to keep busy during some downtime or just to change your mind and disconnect from the world for a few minutes: you do it with the device that you always have with you (i.e. mobile phones, smartphone...)
    ==> new generation of gamers (5 years old of today), are discovering gaming through their parents phones, smartphones and tablets. And they do it essentially for free (Their parents devices + there is enough free games in the respective mobile platforms to find a few games you want to try...)
    - With Smartphones Games can also mix with the real world (leveraging your own context through various sensors: gps, accelerometer, compass...) which is adding a new dimension but in reality was more likely demonstrated best by the Nintendo Wii and Microsoft Kinnect now
    A possible more rosy future for the consoles may come from that direction: Where console equiments are hacked for other purpose and start to become something else (Cf Kinnect hacks and Microsoft release APIs...)


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  • Online and mobile gaming will overtake console and software by the end of this year. They will likely account for 1/2 of all industry revenues by 2014. And, the largest growth is coming in China, South East Asia and similar digital emerging market territories. It's amazing to me how many senior execs at traditional console and games companies fail to have a real sense of dire urgency about this tectonic shift.
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  • Really interesting piece and while a little skewed by a bias towards mobile platforms (the differences between home console screen sizes and controls vs their arcade counterparts are worlds apart from home console screen sizes and controls vs their smartphone/tablet counterparts) I think you would have to be incredibly naive to believe the computergames market will carry on as it is in it’s current form. I would argue however, that many gamers will still want to play major releases on larger screens and with dedicated controllers (a touch screen just won’t cut it for most AAA games) and what I foresee is a situation where companies such as MS, Sony and Nintendo will begin to stream their content through devices such as Google and Apple TV whilst producing dedicated game controllers for their content. Of course this shift would likely take several years to come into play - most likely at the end of the next generation of consoles (PS4, Wii U and Durango).

    As such the market for physical gaming consoles will eventually die as suggested but the home experience will remain largely in-tact. The handheld market is an entirely different matter however and difficult to know how it will pan out - likely any content that would be streamed on Google & Apple TV devices would be transferable onto mobile counterparts but likely some sort of dedicated game-control add on would be needed for the majority of console-style releases to be anywhere near playable. Whether companies like Nintendo will produce controllers that stream content at home but become dedicated handhelds when away from the house (the Wii U is pointing in this direction) remains to be seen.

    As a final note I would like to point out that most major innovations and shifts in the gaming industry have come not from the consoles themselves but from their controllers: D-Pads, Analogue Sticks, Shoulder-Buttons, Motion Control, Touch Screens being just a few examples. With this in mind leaving the ’old world’ gaming companies to concentrate their R&D on game controllers rather than console hardware could lead to an interesting shift in the industry all over again.
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When The Consoles Die, What Comes Next? Presentation Transcript

  • 1. WHEN THE CONSOLES DIE, WHAT COMES NEXT? BEN COUSINS (ALL MARKET INFORMATION CORRECT ON 7TH MARCH 2012)
  • 2. WHO IS THIS GUY ANYWAY?
  • 3. WHO IS THIS GUY ANYWAY?
  • 4. WHO IS THIS GUY ANYWAY?
  • 5. WHO IS THIS GUY ANYWAY?
  • 6. WHO IS THIS GUY ANYWAY?
  • 7. WHO IS THIS GUY ANYWAY?
  • 8. SOME DEFINITIONS
  • 9. WHEN THE CONSOLES DIE, WHAT COMES NEXT?
  • 10. WHEN THE CONSOLES DIE, WHAT COMES NEXT? Die, for the purpose of this talk means ‘Significantly smaller market share with no sign of return’
  • 11. WHEN THE CONSOLES DIE, WHAT COMES NEXT?Sales drop in absolute terms, often because customers move to a new solution for their need
  • 12. WHEN THE CONSOLES DIE, WHAT COMES NEXT?Sales drop in absolute terms, often because customers move to a new solution for their need
  • 13. WHEN THE CONSOLES DIE, WHAT COMES NEXT?Sales drop in absolute terms, often because customers move to a new solution for their need
  • 14. WHEN THE CONSOLES DIE, WHAT COMES NEXT?Market share drops in relative terms, often because a new product massively expands the overall market
  • 15. WHEN THE CONSOLES DIE, WHAT COMES NEXT? Die, for the purpose of this talk DOES NOT mean ‘The product is never used by anyone ever again’
  • 16. WHEN THE CONSOLES DIE, WHAT COMES NEXT?
  • 17. WHEN THE CONSOLES DIE, WHAT COMES NEXT?
  • 18. WHEN THE CONSOLES DIE, WHAT COMES NEXT?
  • 19. THE WEDDING THEORY
  • 20. THE WEDDING THEORY
  • 21. THE STATE OF THE INDUSTRY The Old World
  • 22. THE OLD WORLDNASDAQ +25.78% EA -61.77%
  • 23. THE OLD WORLDNASDAQ +25.78% ATVI -33.34%
  • 24. THE OLD WORLDNASDAQ +25.78% MSFT +24.39%
  • 25. THE OLD WORLD‘Consumer Software, Services & Devices’,‘Entertainment & Devices’ Division Profit/Loss Lifetime results for this division = $7.807B loss
  • 26. THE OLD WORLDNASDAQ +25.78% SNE -46.42%
  • 27. THE OLD WORLD‘Games’, ‘Networked Products & Services’,‘Consumer Products & Services’ Results for this division since 2000 = ¥252.9B loss (around $3.1B)
  • 28. THE OLD WORLDNASDAQ +25.78%NTDOY -71.28%
  • 29. THE OLD WORLDUS Annual sales (hardware and software) 1997-2011 (NPD, billions USD)
  • 30. THE OLD WORLDUK Annual sales (hardware and software, billions GBP)
  • 31. THE OLD WORLD
  • 32. THE OLD WORLD
  • 33. THE OLD WORLD
  • 34. THE OLD WORLD
  • 35. THE OLD WORLD IS LARGE BUT SHRINKING FAST• In summary; • Investors are not showing confidence in the future of large traditional publishers • Sony, Microsoft showing losses for console divisions over the last 10 years • Nintendo in ‘disarray’ • Retail sales dropping year on year since 2009 • Major European retailer Game in serious trouble • Casual & kids games on console and handhelds hit by an unseen force
  • 36. THE DEATH OF DEDICATED ELECTRONICS HARDWARE Down 17% Down 42.5% Down 32.6% Down 20.5% Down 20.8%
  • 37. THE STATE OF THE INDUSTRY The New World
  • 38. THE NEW WORLDTop 5 dedicated gaming companies by market cap, August 2008 (millions USD) 123 33 30 26 43
  • 39. THE NEW WORLDTop 5 dedicated gaming companies by market cap, March 2012 (millions USD) 123 33 5 8 18
  • 40. THE NEW WORLD Audience sizes for games25 million sales 500 million downloads
  • 41. THE NEW WORLD ‘100’20 19 Market caps of platform companies (billions USD) 267 495 198
  • 42. THE NEW WORLD Combined market caps of platform companies (billions USD) 793306
  • 43. THE NEW WORLDGrowth rates of platforms (assumes 70% of iOS are gamers, 50% of FB are gamers, excludes iPod touch sales)
  • 44. THE NEW WORLD The Japanese revolution
  • 45. THE NEW WORLD IS GROWING VERY FAST• In summary; • Now 3 out of 5 of the world’s largest gaming companies distribute digitally, are freemium focussed • The audience sizes for a hit game has increased 20x on new platforms like FB, iOS and Android • New Mobile/Social platforms are driven by huge companies • In Japan freemium social mobile has already overtaken the traditional business
  • 46. THE LAST BIG CHANGE When The Arcades Died, What Came Next?
  • 47. THE LAST BIG CHANGEPer Capita Spending on Video Games in the United States by Revenue Model (2010 dollars) Copyright © 2012 SuperData Research The 1980’s Traditional Retail revenue hovers between 3% and 35% of Arcade
  • 48. THE LAST BIG CHANGEPer Capita Spending on Video Games in the United States by Revenue Model (2010 dollars) Copyright © 2012 SuperData Research The 1990’s Traditional Retail revenue grows steadily from 38% to 166% of Arcade
  • 49. THE LAST BIG CHANGEPer Capita Spending on Video Games in the United States by Revenue Model (2010 dollars) Copyright © 2012 SuperData Research The 2000’s Traditional Retail revenue grows sharply, ending up 17x the size of (declining) Arcade
  • 50. THE LAST BIG CHANGEPer Capita Spending on Video Games in the United States by Revenue Model (2010 dollars) Copyright © 2012 SuperData Research What happened here? The Tipping Point What killed the arcade?
  • 51. THE LAST BIG CHANGE The 1980’s •Arcades dominated home experience •Better graphics •Bigger screens •Better controllers
  • 52. THE LAST BIG CHANGE The 1980’s •Arcades dominated home experience •Better graphics •Bigger screens •Better controllers
  • 53. THE LAST BIG CHANGE The 1980’s •Arcades dominated home experience •Better graphics •Bigger screens •Better controllers
  • 54. THE LAST BIG CHANGE The 1990’s • Arcades start much more powerful than home consoles • Mid 90’s consoles and PC start competing with textured 3D arcade games • Sony’s entry into the business - a company 3.7x bigger than Nintendo • 1998 Dreamcast launched, same as Naomi system board, less memory
  • 55. THE LAST BIG CHANGE The 1990’s • Arcades start much more powerful than home consoles • Mid 90’s consoles and PC start competing with textured 3D arcade games • Sony’s entry into the business - a company 3.7x bigger than Nintendo • 1998 Dreamcast launched, same as Naomi system board, less memory
  • 56. THE LAST BIG CHANGE The 1990’s • Arcades start much more powerful than home consoles • Mid 90’s consoles and PC start competing with textured 3D arcade games • Sony’s entry into the business - a company 3.7x bigger than Nintendo • 1998 Dreamcast launched, same as Naomi system board, less memory
  • 57. THE LAST BIG CHANGE The 2000’s • Home consoles now in parity or above arcades in power • Arcade still have better controllers, bigger screens • Microsoft’s entry into the business - a company 6x Sony, 12.7x Nintendo • Dead arcades - novelty controllers/cabinets, 2D fighters
  • 58. THE LAST BIG CHANGE The 2000’s • Home consoles now in parity or above arcades in power • Arcade still have better controllers, bigger screens • Microsoft’s entry into the business - a company 6x Sony, 12.7x Nintendo • Dead arcades - novelty controllers/cabinets, 2D fighters
  • 59. THE LAST BIG CHANGE The 2000’s • Home consoles now in parity or above arcades in power • Arcade still have better controllers, bigger screens • Microsoft’s entry into the business - a company 6x Sony, 12.7x Nintendo • Dead arcades - novelty controllers/cabinets, 2D fighters
  • 60. THE TIPPING POINT• Two big things happened;1.Bigger companies entered the games business • More marketing clout, grow the overall business2.Chips got cheap enough and lower power enough • Creating an ‘arcade experience’ in the home, that pulled in the arcade gamers• Home consoles had always been cheaper and more convenient, but these advantages now really mattered• Worth noting arcades still often had bigger screens & always better controllers
  • 61. THE NEXT BIG CHANGE ? When The Consoles Die, What Comes Next?
  • 62. THE NEXT BIG CHANGE When The Consoles Die, What Comes Next?
  • 63. THE DEATH OF DEDICATED ELECTRONICS HARDWARE Down 17% Down 42.5% Down 32.6% Down 20.5% Down 20.8%
  • 64. DISRUPTIVE TECHNOLOGY
  • 65. • ’Sustaining Technologies’ dominate• Disruptive tech enters the market• Incumbents don’t take it seriously• It rapidly increases in performance• Disruptive tech replaces all usages
  • 66. • ’Sustaining Technologies’ dominateLarge scale businesses computing • Disruptive tech enters the Scientific market computing Personal • Incumbents don’t take it Computer seriously Small business computing • It rapidly increases in performanceHobby computing • Disruptive tech replaces all usages
  • 67. • ’Sustaining Technologies’ dominate AAAConsole Games • Disruptive tech enters the marketHandheld Games iOS/Android • Incumbents don’t take it devices seriously • It rapidly increases in Kids Games performance Casual Phone Games • Disruptive tech replaces all usages
  • 68. We are here • ’Sustaining Technologies’ dominate AAAConsole Games • Disruptive tech enters the marketHandheld Games iOS/Android • Incumbents don’t take it devices seriously • It rapidly increases in Kids Games performance Casual Phone Games • Disruptive tech replaces all usages
  • 69. DISRUPTIVE TECH MOVES FASTER My Little Tank (2005)
  • 70. DISRUPTIVE TECH MOVES FASTERGran Turismo 4 (Polyphony Digital 2005) God of War (Sony Santa Monica 2005)
  • 71. DISRUPTIVE TECH MOVES FASTER Infinity Blade Dungeons (Epic 2012)
  • 72. DISRUPTIVE TECH MOVES FASTER Modern Warfare 3 (Activision 2011)
  • 73. WHAT’S HAPPENING RIGHT NOW?• Two big things are happening;1.Bigger companies have entered the games business • More marketing clout grows the overall business2.Chips are getting cheap enough and lower power enough • Creating a ‘console experience’ on the move, pulling in the console gamers• Mobile games have always been cheaper and more convenient, but these advantages now really matter• Worth noting that consoles will still often had bigger screens & always better controllers
  • 74. WHAT A STRANGE, MARGINALIZED OPINION!
  • 75. JOHN CARMACK “platform wise, you could certainly imagine a future where, instead of having your console, you have your mobile device”
  • 76. PHIL HARRISON “If they carry on unrestrained in their growth, then there’s a pretty good chance that Apple will be the games industry”
  • 77. MIKE CAPPS
  • 78. HIDEO KOJIMA “Gamers should be able to take the experience with them in their living rooms, on the go, when they travel -- wherever they are and whenever they want to play. It should be the same software and the same experience,”
  • 79. GABE NEWELL “I suspect Apple will launch a living room product that redefines peoples expectations really strongly and the notion of a separate console platform will disappear”
  • 80. KOTAKU ‘Tim Cook holds the future of gaming in his hands.’
  • 81. CONSOLES WONT DIE - CINEMA WASNT KILLED BY TV!
  • 82. CONSOLES WONT DIE - CINEMA WASNT KILLED BY TV!% of the US population who visited the cinema on a weekly basis (Michelle Pautz, Elon University, 2002)
  • 83. CONSOLES WONT DIE - CINEMA WASNT KILLED BY TV!Total UK cinema attendance (British Film Institute, Cinema Advertising Association & Rentrack EDI)
  • 84. CONSOLES WONT DIE - CINEMA WASNT KILLED BY TV! UK box office cinema revenue as a % of GDP (Bakker 2008 and ONS)
  • 85. CINEMA WAS CRUSHED BY TV• The ‘platform holder’ (cinema) didn’t do ok - thousands of cinemas closed down• The ‘content people’ (movie studios/distributors) did ok • Made movies available on the lower-res ‘free to watch’ TV and ‘for hire’ VHS platforms• Games content developers need to do the same - move content to new low-res platforms - or we will suffer the same fate as the cinema
  • 86. FOX THEATRESAN FRANCISCO
  • 87. TWITTER: @BENJAMINCOUSINS