In 2011, the market segment for home consoles (sales of software and equipment) could account for 42.5% of revenues in the overall video game market. Given the steady and linear growth of the online and mobile gaming market segment, the weight of the home console segment will be less significant in the coming years. As a reminder, it accounted for nearly 60% of global market revenues in 2004.
Despite the arrival of a new generation of machines, synonymous with double-digit growth in the industry for several years, the home console segment will represent “only” 39.1% of the world market by 2015. In the fixed console market segment, the first half of 2011 is marked by the following phenomena: This market segment is entering a transition period that will lead to the marketing of a new generation of machines from 2012. Nintendo will lead the way with its Wii U console. The challenge for Nintendo is to confirm its leadership in this highly competitive market segment. Microsoft intends to capitalize on the success of the Kinect accessory, which has sold more than 10 million units worldwide and allow its Xbox 360 console to continue to sell until 2015. Sony, neck, and neck with Microsoft, is hoping for at least as much for its PS3, which also benefits from a motion recognition accessory.
The latter has also been well received by gamers, with more than 8 million Moves sold worldwide since its commercial launch. The Japanese consoler, whose machine has long suffered from a price that is considered high by gamers, will want to benefit from a breather from the competition over the next two years. The next generation of machines will have to further enhance the gaming experience and offer new and immersive features and accessories. Nintendo is already building on the success of touch tablets by offering a Wii U console equipped with a gamepad that is a tablet. Its competitors could very well bet on a ubiquitous offer consisting of access to a catalog of games on mobile platforms (telephone + mobile console + touch tablet) and on fixed platforms (home console + computer).
Midway through the year, consoles continue to forge partnerships with media groups to make their machines the all-purpose set-top box for the connected digital home. Music publishers, VOD operators, TV channels, social network operators, IPTV providers, etc. make up a representative panel of the consoles’ partners. Digital distribution on fixed gaming platforms exceeds 10% of revenues generated by the sale of titles on these platforms. The stakes are high. It is a question of accompanying the market’s leading segment towards a change in its mode of distribution. This shift must be taken with caution by consoles and publishers insofar as it will eventually lead physical retailers to rethink their role in the value chain.
Equipment: a transition phase
Annual sales of lounge console
In terms of annual equipment sales volume, 2009 was the peak year in the life cycle of the latest generation consoles (Xbox 360, Nintendo Wii, Playstation 3). Regardless of the geographic region considered, the following years saw annual console sales decline to 30 million units in 2013. IDATE estimates that the marketing of Kinect (Microsoft) and Move (Sony Computer Entertainment) accessories has boosted sales and will extend the lifecycle of the Xbox360 and PS3 consoles by about a year and a half without halting the decline. According to Microsoft, the Kinect accessory, which has sold more than 10 million units worldwide (cumulative sales at the end of March 2011), is capable of extending this life cycle until 2015. That year will see the introduction of a new console signed by the American firm. The Xbox 360 will then celebrate its 10th anniversary. Playstation Move had sold more than 8 million units worldwide by the end of April 2011. One of the challenges for the next generation of home consoles will be to continue to expand their customer base in emerging markets in Eastern Europe, Latin America, and Asia/Pacific.
The next generation machine
The years 2012 and 2013 will mark a resurgence in sales of home consoles thanks to the marketing of Nintendo’s new machine, the Wii U. This announcement, in early 2011, could lead Nintendo’s competitors to reconsider the marketing schedule for their next machine. IDATE assumes the following schedule.
Installed base of living room consoles
By the end of 2011, the installed base of exhibition consoles worldwide will be around 432 million machines. This base includes the latest-generation consoles and the previous-generation consoles (PS2, Xbox, GameCube). Considering only the latest generation of machines, the worldwide installed base could reach nearly 230 million machines in homes. According to our estimate, the installed base of effectively connected consoles would amount to 148 million machines at the end of 2010, i.e. almost 80% of the connectable base at that time. By the end of 2011, 216 million consoles could be effectively connected, representing 95% of the connectable consoles. According to IDATE, by 2015, the Wii is expected to win this campaign, with 113 million homes equipped, compared with 92 million homes for the PS3 and 78 million homes for the Xbox 360.
Market and prices
The average price of a lounge console is 185.6 EUR in 2011. It is expected to reverse this decline and reach an average price of almost EUR 257.1 in 2015. In 2011 and 2012, the market for exhibition console equipment will continue its cyclical downturn with a combined downward effect : the volume of consoles sold and their price. It will be necessary to wait until 2013 to return to global growth, a growth that will begin in Asia/Pacific in 2012 with the launch of the Wii U. In any event, according to IDATE, Kinect and Move accessories will have generated additional console sales revenue of around EUR 5 billion between 2010 and 2011.
Software: waiting for the next generation
Volume of games sold
The sales cycle of game software for home consoles is correlated with that of the equipment. At the end of the lifecycle of home consoles, gamers build up their wallets to acquire new equipment and new games. Over the 2011-2015 period, the volume of video games sold for home consoles should see an average annual growth rate of -0.7%. The year 2012 is the most critical in this regard, as the volume of software sold falls by almost 10%. Recovery is expected in 2014, with a growth rate of 3.5%. In Asia/Pacific, the market for software for home consoles is picking up again, one year ahead of other continents due to the launch of the Wii U in 2012.
Market and prices
The end of a console’s cycle induces a drop in the price of affiliated games. The average price of a video game for home consoles is EUR 31.6 in 2011. In this context, it will continue to fall in 2012 and will increase again from 2013 to reach 40.2 EUR in 2015. In the end, the video game market for home consoles will amount to 15.1 billion EUR in 2011. It will gain EUR 3.6 billion by 2015, but will nevertheless go through a period of recession in 2012 (turnover down 18.7%). In no way are consolers fatalistic, and their efforts will obviously focus on a catalog of games using motion recognition accessories. Thus, the expected recession could be less severe than expected.
Dematerialized distribution via the consoles’ app stores
The market for dematerialized sales of video games on home consoles could reach EUR 1.9 billion in 2011, compared to EUR 1.2 billion in 2010, representing a growth of 56%. In 2011, 13% of revenues from the sale of games on home consoles will come from console app stores. This phenomenon will not diminish in the years to come, as more and more blockbusters will be sold in this way and more and more casual or independent games find their audience. By the end of 2015, IDATE estimates that one out of every two EURo in revenues collected by publishers and consoles will come from dematerialized sales.