It's been over six years since the current game console hardware generation began with the launch of Microsoft's Xbox 360 in November 2005. We have seen the console industry rise up to new highs in terms of sales of both hardware and software in the first few years of this cycle. At one point, the industry was bragging that revenues from the game industry was exceeding that of the US movie box office.
However, the console industry has hit a rough patch in the past couple of years. Overall, hardware and software sales, at least in retail stores, have been on the decline. In February 2012, the NPD Group claims it saw a 20 percent fall in overall game industry sales compared to a year ago.
What's to blame for this sales retreat? Certainly some of it is due to the poor worldwide economic situation that began over three years ago and which still hasn't fully recovered. However, we have also seen in the same time period a rise in interest in games played on the PC using the free-to-play model. Also, mobile games are becoming more and more sophisticated and are approaching the graphics of the current generation of consoles.
It's the smartphone and tablet market that should be making console hardware makers like Microsoft, Sony and Nintendo very worried. Companies like Apple, Samsung, LG, Motorola and more don't wait for years to release updated hardware like the game console companies do. They typically release new and much more powerful hardware products every year.
This week's launch of The new iPad is a prime example of this. Its predecessor, the iPad 2, had a dual core processor and a relatively low resolution screen. The new iPad has a quad core graphics processor and a much higher resolution display and it came out just a year after the iPad 2. Furthermore, despite its relatively high price, The new iPad will likely sell in the tens of millions of units this year.
Now imagine if Apple or another company with a high end tablet decided to offer an easy way to hook up the tablet to a big screen TV. Then imagine if that company offered up a game console-like wireless controller. Presto ... it's an instant game console that could more than easily replace that bulky Xbox 360, PS3 or even the relatively small Wii console in a gamer's living room.
It's not an unlikely scenario and we guarantee that Apple or some other tablet company is at least thinking about it. The key is that smartphone and tablet makers seem to embrace new and more powerful hardware and technology faster than the game console hardware companies and offer up new products at a much more rapid pace.
Game developers are certainly taking notice. Epic Games may have made a ton of money with the Xbox 360 exclusive Gears of War series but it has embraced the iOS platform and particularly the iPad tablet with its two Infinity Blade games and its upcoming Infinity Bade Dungeons. Those games can certainly match both the type of gameplay and the level of graphics that are currently available for the Xbox 360.
Epic Games president Mike Capps, in an interview for Reuters last week, said, "Apple is definitely building their devices as if they care a lot about 'triple-A' games." In fact, the article says that Capps has been trying to urge Microsoft and Sony to get their next generation consoles out as soon as possible due to the capabilities of tablets such as The new iPad.
Frank Gibeau, president of Electronic Arts, feels the same way about comparing tablets like the iPad versus current consoles. In the same Reuters article he states, "When the iPad gets to the processing power that's equal to an Xbox 360 and it connects to a television, that's no big deal to us. We'll put the game through the iPad and have it display through the television."
Of course, Nintendo does plan to release their own next generation console, the Wii U, sometime before the end of 2012. While we still don't know a lot about the console, it does appear that the Wii U, at least in terms of its graphics hardware, won't be a massive leap ahead of the Xbox 360 and the PS3 so Nintendo can sell it for as low of a price as possible.
Nintendo, as they usually do, marches to their own drum beat in the console industry but that can sometimes backfire on them as it did in 2011. The launch of the 3DS portable console was a disaster early on. No one bought it until the company cut its price drastically. We are also not sure if gamers will warm up to the tablet-like controller for the Wii U.
So basically, the ball is in Microsoft and Sony's court to get the next generation console race going. You would think that both companies would want to get the word out on the plans they have for their next console hardware as soon as possible. E3 2012 in June is the perfect place and time to make such announcements. At the very least, you would expect Microsoft and Sony would want to steal some of Nintendo's Wii U thunder at the show.
Yet it seems like both companies are downright lethargic in their marketing plans for their next consoles. In January, Sony's soon-to-be CEO Kaz Hirai said that the company won't be "making any announcements at E3" in terms of next generation console hardware. This week, Microsoft also said it won't be making any announcements or reveals about its Xbox 360 successor at E3 2012.
This really doesn't make a lot of sense. Microsoft and Sony know that their current console hardware specs are finally starting to show their age. They also know that the media and gaming fans will be laser focused on Nintendo's Wii U reveal at E3 2012. They know that overall, retail console game sales are dropping fast. Finally, the threat from smartphone and tablet gaming and hardware can't be ignored any longer.
However, the response to both companies to all of these factors is to maintain the status quo at E3. Microsoft and Sony will likely announce some new games and maybe reveal some new current generation hardware peripherals and services at their respective pre-E3 press conferences. But their next generation console hardware plans? Nope, nothing to see here ... move along, please.
This is not the time for Microsoft and Sony to be complacent. We are not expecting that one or both of them will launch next generation consoles by the end of this year. But we do think that if Sony or Microsoft, preferably both, were to make some kind of reveal about what their Xbox 360 or PS3 successors will be like at E3 2012, it would be a huge jump start for the entire game console industry.
It would also be a big wake up call to Nintendo, who will try their best to make the Wii U look as "next generation" as possible. If Microsoft and Sony were to offer a gameplay demo from one of their next generation games, we expect that it will blow away anything the Wii U will be able to produce.
Finally, it would also send a message to the smartphone and tablet makers who might have their eye on making more of a game-oriented device. If the demos are good enough from Microsoft or Sony, it would basically tell the mobile hardware makers, "Back off; this is our land."
We have a message of our own to give to Microsoft and Sony gaming executives who might be reading this: We are rooting for you guys. We really are. But it's hard sometimes when you don't seem to care about the many threats that are currently surrounding the console game industry.
It's been a long time since the Xbox 360 launch. We don't expect Nintendo to really fulfill our high end gaming needs like Microsoft and Sony can. All we are asking is some cool high end game demos to show that you really care about moving on to the next hardware cycle. Then you can go back into stealth mode, keep working on games and have your full reveals at E3 2013.
To paraphrase Captain Jimmy Wilder in the movie Independence Day, it's time for Microsoft and Sony to kick the tires and light the fires.
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