As tech companies seek to limit losses, a reminder of how far some have to go.
In response to “a difficult environment caused by challenging macroeconomic conditions and the strong dollar”, Apple announced that it will be spending $1 billion in order to keep prices low. Similarly, EA announced that they are slashing the number of games being released this year from 40-50 games down to 10-15 games in order to lower risk.
Neither company is alone in this effort. Both Amazon and Google are also cutting their budgets in the face of a difficult market. And while they were both profitable companies last year, they are now engaged in a long term effort to become cash cows.
While the gaming industry has always been one of the markets that was most impacted by the internet, I think it has never been quite this bad before.
Over the last decade the gaming market has become an enormous industry, with Microsoft and Sony leading by profit margins of over 60% and greater than 90% respectively. At its height in 2014, the gaming segment in the industry was made up of roughly $77 billion (mediafigures) globally. The bulk of this comes from console sales, where Microsoft had a staggering 70% market share, while Sony had 13%. It is here that real money is lost.
So what happened? The rise of mobile gaming has definitely impacted the console market, but I do not believe it is limited to that. I think part of the reason for the decline in gaming sales is also because of changing tastes. This might be wrong, but my belief is that for most people gaming has become more of an entertainment industry than a tech industry. Most people who game today are engaging in mobile games, not console games. Mobile games have become a different kind of game than you see on consoles. What they are is something that can be picked up, enjoyed and put back down.
A look at the most popular games today will show you why this isn’t surprising. Candy Crush, Clash of Clans, Clash Royale and many others are single player games that do not require much commitment to play or complete. While they might be addicting to play once in a while it won’t really make your life worse if you don’t play them. And most people I know who play games do so in order to relax, not to make their life better.
On the other hand, console games are not really like that. They require a higher degree of commitment and a greater amount of time given to playing them in order for one to enjoy them. The more serious gamer is likely going to be spending around 30 hours per week gaming at home and another 20-30 at work, depending on job intensity (and your boss’s tolerance for games). This is not something that is going to help you relax and it might even make your life worse.
The rise of mobile gaming has impacted how people view the gaming industry, with many believing it to be an area for casual players only. In reality though, I think that gaming in general is a much more intense area than most recognize. It is just that console games take a lot more time and commitment than you realize. Thus, I feel that people are avoiding console games for this reason, even if they are lost revenue to companies.
In the long term, improvements to technology and the increase in mobile gaming will probably allow console gaming to regain its popularity. But in the short term it might not be a good sign that so many of the largest companies are being so aggressive with their actions instead of just focusing on their own businesses. As someone who has been in this industry for over 30 years I can tell you that when you first start out practically everything is a gamble.
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