Although the gaming console market is small and about ‘entertainment’, there are a number of issues it can help us with when trying to work out what’s going on in other, larger and more important areas of the IT and communications industry. As always my statistics published here are from the ITCcandor market model, which is used by executive in the industry to make better business plans.
My Figure shows the revenues and unit shipments of dedicated gaming consoles (wired and mobile) of the 3 suppliers by year from 2005 to 2017. The market was affected badly from the Credit Crunch in 2008 and, arguable, is only just recovering now. Despite the tremendous growth of the market in 2017, we’re still some way short of the 91m $40b market peak in 2018.
The unit shipment numbers for each of the 3 suppliers is shown in this Figure. Nintendo’s decline from 2008 was due to it’s failure to produce a popular success to the Wii until the introduction of the Switch in 2016 as well as the negative effect smart phone games have had on its 3DS and other mobile products. Sony and Microsoft’s shipments have been less volatile, with annual totals of around 20 million and 10 million respectively. You can see the temporary increase in business in the years in which the xBox One and PlayStation 4 were introduced.
The challenge for the gaming platform vendors is to balance the balance of new technology in new platforms, while maintaining some level of backwards compatibility with the existing ones. They also have to predict which advances (such as 4k graphics) they will be able to incorporate within the current platform.
Software is to gaming console suppliers what ink cartridges are to printer ones; in both markets proprietary hardware enables a highly controlled aftermarket. I show my estimates for the gaming software market in the Figure opposite with estimates for the total PC/mobile gaming market, where the software vendors do not have to pay license fees to the hardware vendor.
Brand loyalty is an important feature of the console market, which is illustrated by Nintendo’s performance; despite the fall of it its hardware shipments, it maintained a good software business during the barren years and has experienced a strong increase following the introduction of the Switch.
So what are the lessons this market has for suppliers in other ITC sub-markets? There are a number:
- Proprietary hardware allows you to control the aftermarket.
- Brand loyalty can be sustained despite periods of declining hardware sales.
- Creating a positive customer experience is essential to success.
- Open system ecosystems are very different to proprietary ones.
As always the data I show here is only part of the model I update every quarter – don’t forget to contact me if you’d like something more specific for your business planning activities.