Will Traditional Video Game Consoles Thrive in the Future?

Tricia Duryee, in a post for AllThingsD.com:

In January, Nintendo slashed its sales outlook after holiday sales of the Wii U failed to hit expectations. The poor turnout does not provide a lot of support for the theory that consumers were just holding back spending for the release of the new hardware. The Japanese game company was hoping to rekindle consumer excitement by launching the Wii U with a controller that had a six-inch touchscreen display and acted much like Appleā€™s iPad. It also enabled consumers to interact with their TVs, by allowing owners to comment on programming within a closed social network. But the console was mostly trying to extend the life of the traditional videogame business, which relies on selling packaged software at $60 apiece.

There has been quite a bit written about the supposed impending demise of the traditional video game console typified by the products available from Nintendo, Sony, and Microsoft. There are pundits that point to the rise of mobile gaming on smartphones and tablets and the freemium culture as the major culprits in accelerating this demise. Likewise, there are other pundits pointing to new console competitors such as the OUYA that will be encroaching on the incumbents' retail space. To the pundits, Nintendo, Sony, and Microsoft are dinosaurs that have not kept up with the changes in the market. Does this analysis hold up? In a word, no.

Let's start with the premise that consoles are declining. The problem with that view of the world is that it fails to take into account the fact that this console generation has gotten long in the tooth. Very, very, very long in the tooth. The fact of the matter is that Nintendo, Sony, and Microsoft have let this console generation extend beyond the traditional 5 years of life before introducing successor consoles. Gamers eventually want to see something new, no matter how much they love their current console. Some have pointed to the Nintendo WiiU's struggles as portending a rough future for new consoles from Sony and Microsoft. The WiiU should not be seen as the standard bearer for the next console generation. According to those who have analyzed the hardware, including a developer for a WiiU launch title, the WiiU is a system that is underpowered compared to what should be expected for a new console. Remember, the Wii/PS3/Xbox 360 group are six years old in terms of technology. Nintendo made a terrible mistake in making the WiiU only 'somewhat better' than current consoles. The technological leap just isn't there. Nintendo also exacerbated the problem by releasing the console without ensuring that a premier title such as a new Mario game accompanied the launch. New Super Mario Bros. U, which could have been released on the Nintendo 3DS, just doesn't cut it as a launch title.

What then, of the rise of mobile gaming? To those who say the console is in trouble, the success of devices like the iPhone and iPad as well as the success of titles such as Angry Birds point to a future where consoles aren't relevant. This is a narrow view of the world that doesn't take into account what is happening in the industry. Mobile gaming isn't taking gamers away from traditional consoles...it is expanding the term 'gamer' beyond its traditional form. Just as the Nintendo Wii helped to bring games into the mainstream by making games more accessible to non-traditional gamers (e.g. the elderly), mobile games have further expanded the gaming market. And that's what it is, an expansion of the overall gaming market, not a reduction of the market for consoles.

How will non-traditional consoles such as the OUYA impact traditional consoles? Probably not much, in all honesty. Despite what some are saying about consoles needing to provide an inexpensive outlet for indie game devs (including, famously, one of the founders of the Xbox project), it doesn't seem at all as though this is an issue holding back traditional consoles. As a developer and a gamer, I am of course interested in the possibilities that more 'open' consoles such as the OUYA offer. I'm just not deluding myself into believing that this is going to take over the industry. Gamers don't really care if those games come from major dev shops or indie dev shops, they want good games, period. The challenge for indie devs will be for them to push Nintendo, Sony, and Microsoft into understanding that there is enough benefit to be gained by offering an outlet for indie games.

In short, we should expect that the release of new consoles from Sony and Microsoft will stir interest from gamers. Assuming that they hold up their end of the bargain by releasing much more powerful consoles with decent launch title lineups, Sony and Microsoft will revitalize the sagging console industry.