The Landgrab era in Gaming is Over

[Impulse]

This thread is an attempt at describing what I currently see in the gaming market, and trying to anticipate where we're going next. This was going to be much longer and go much deeper, but I've decided that simply dropping a gargantuan essay is not conducive to what we're all here for: Quality discussions of the gaming hobby. I will be splitting up my original idea into multiple parts to keep things concise and digestible, and try to include your kind feedback and the products of our discussions into the rest of it.

This is part one of what is currently a ongoing analysis of where gaming is, how it got where it is, and where it's heading. I hope you enjoy it, and I look forward to the discussions we can have in this thread.

I think no matter what angle you're coming from, the notion that the gaming scene is undergoing a major shift is inescapable:

• Xbox hardware is largely getting rejected from the largest markets, despite focusing a lot of efforts and money on new customer acquisition (lower entry price point than PS, high focus on social media messaging and Gamepass being a massive loss-leader for at least 5-6 years now), and with almost nothing working for them, their mother division (Microsoft Gaming) is actively pivoting away from trying to grow through Xbox hardware sales as a result.
• Sony is mostly sticking to its lane and focusing on hoovering up as much market share from Xbox as possible, while attempting to boost profits and margins across the board via PC ports and entering the GAAS arena, with mixed results.
• By most credible reports, Nintendo is on the cusp of transitioning the Switch ecosystem into a unified platform for all its software offerings, including Switch 1 back compatibility, in a way that largely emulates what Sony and Xbox did this gen.
• Both Sony and Xbox have committed to some sort of porting grand plan on PC.
• Steam is toying with console-like integration of their store, but to limited success so far.
• This is the 1st "gaming generation" with zero permanent price drops on devices: The Switch won't drop in price even as Switch 2 rumors gather pace, even things that have clearly largely failed, like the PSVR2 or the Series consoles, aren't getting permanent price cuts, we're instead getting temp discounts of varying depths here and there.
• Despite the common consensus in the 2010's, Mobile consumer gaming spend has begun to hit its limits and is now declining.
• Steam continues to grow its MAU and concurrent numbers, but consumer spend is also declining in the PC gaming segment too.

One thing is certain, the earth is moving under the feet of everyone in the space. Whether you are an enthusiast consumer, a developer, a publisher, or a platform holder.. We can all feel the tectonic shift that is happening, and we're all scrambling to figure out what's happening.

I will take a shot and attempt to describe what I feel is going on, and in short, The Landgrab era in Gaming is over.

What do I mean by "Landgrab" in this context? In short, everyone arrived on a fresh new continent of a market called gaming, with swathes of brand-new consumers that no one knew existed. In short, until the beginnings of last gen, you can always farm for and acquire new consumers for your new gaming device and accompanying software.

Furthermore, every generation presented a new opportunity to correct errors made in past gens. So if you lose a generation, you could try again next gen and maybe you will win, new entrants have a chance to build up market share over time if they play their cards right (like Xbox did in its 1st two gens), and you could always find some sort of way to grow, whether that's by creating new addressable markets ala the Nintendo NES, Gameboy or Wii, presenting new technological breakthroughs like the Playstation 1/2 or N64, or simply capitalizing on your opponents weaknesses ala the Xbox 360 or Sega Genesis.

The focus was always on customer acquisition, either from your competitors, or through finding brand new people that never gamed before and attracting them to gaming.

In short, there was always some sort of "land" to reach out for and grab, there was always some sort of consumer that wasn't ever presented with the choice to buy a certain gaming product at a price they're comfortable with. My thesis is that this doesn't exist anymore.

The idea that %30-50 of the consumers will suddenly switch to you in a single stroke of genius like the PS4 did, or that there are millions of new consumers that were locked out of joining the gaming space for whatever reasons, is largely over and done with for reasons I plan to cover in a part of its own.

Almost all of the lands have been conquered by some sort of tech corporation and are now part of their "fiefdom". Furthermore, there are almost no new lands you can find on your own and plant a flag on, and if you want to make money on any given "parcel of land", you have to ask permission and kiss someone's ring so they can allow you to make money on their fiefdom.

e.g. You want penetration in handhelds? You have to ask Nintendo nicely. You want to make money on mobile? Ask Apple and Google. You want penetration in the traditional console market? Talk to Sony, and maybe Xbox if you want to go a little wider. You need to be on PC? You basically can't do anything big without the help of Valve. etc etc.

Even the incumbent big players in the field have to do things that are/were outside of their wheelhouse to grow: Nintendo had to go mobile and give %30 to Apple/Google. Sony is porting to Steam/Epic/GOG and now includes Switch as a platform they can release on. Steam is toying around with dedicated console-like hardware. Microsoft is playing ball with all the other major players and is going full or near-full 3P..etc.

As a result, if you are a platform holder, apart from the basic strategy of launching a big profitable 1st Party game (very risky, and for some like Xbox, almost not possible at this point), there are now only 3 ways to financially grow in the gaming industry:

• Siphon new money and playtime out of other platforms and industries, either via mergers and acquisitions, developing film/tv adaptations, or via adopting some strategy of launching multiplatform games on there (Quick Option #1).
• Juice existing locked-in consumers, via price increases on software/hardware/subs (Quick Option #2).
• Try and slowly creep into some sort of position on someone else's turf (The Slow Option).

I think if you sit down, and really think about the 3 options I've just laid out, you will find that every strategy that's being enacted today by every single big platform holder has to fall into at least one option of the above 3.

Thoughts?

 

[mibu no ookami]

I'm not sure that I agree entirely.

I think what we've seen for a long time is largely status quo, but that isn't new.

Nintendo dominated with the NES and largely with the SNES, albeit not as dominant, and then fumbled the bag with the N64. That shows us how quickly the status quo can change.

You can see the same thing with the Gameboy, followed by the Gameboy Advance, and then all of a sudden comes the PSP selling 80 million units. Not enough to unseat Nintendo, but certainly eat into market share on a first attempt.

Same thing with Sony's most dominant console the PS2 followed up by their least performative console in the PS3.

You look across industries and giants simply don't always remain giants despite having nearly complete monopolies in their markets.

The fundamentals for monopolies doesn't really exist in gaming and things move way too much to assume they'll stay that way.

NBA Live was the most popular basketball franchise on the market. It ran from 1994 to 2018. It's been entirely supplanted by NBA 2K which only came onto the scene in 1999 and was exclusive to the Dreamcast until 2002. EA had an 8 year headstart on NBA 2K and still fumbled the bag.

Medal of Honor Allied Assault came out in 1999 and defined the genre, especially with 2002's Allied Assault. Call of Duty didn't come out until 2003 and wasn't this massive property until 2007... 8 years after the launch of MoH and 5 years after allied assault.

CoD has been dominant for the last 17 years, but like I mentioned PSP released 16 years after Gameboy and it took a massive chunk out of Nintendo's marketshare. Shit changes.

 

[Vertigo]

Don’t think so. Growing Asian competition will hurt western companies and their creative wasteland on top of other forces.

Ubisoft is getting obliterated. I don’t see what options they have for instance. Some of these companies aren’t done downsizing and bleeding money.

This could still be the beginning.

 

[Yurinka]

During the 50 years of gaming, the gaming market kept growing. After the covid peak, it kept aprox. flat for a couple years. Some thought that maybe it peaked, but I think it makes more thing that without the covid peak it would have continued growing, and that's why after the peak, when going back to normality instead of decreasing it kept basically flat.

Regarding consoles: they grew particularly with NES & GB, later with PS1/PS2/Wii/DS. Since then the userbase is pretty much the same. But Sony kept growing the market share of the home consoles, while Nintendo did the same in portables.

Mobile kept growing until changes in related regulations plus Apple and Google policies related to ads basically destroyed the traditional and main user acquisition techniques. So that is what temporally negatively affected their growth. Now, around a year or two later they are starting to show results after some time trying to figure out how to solve it and improve their user acquisition.

PC kept growing in userbase and revenue, now it's in size somewhat similar to the console market.

During the last decade or so we saw the hardware technologies, software technologies (game engines etc), catalogs, business model/game type, etc of PC, console and mobile converging more and more, even more with cloud gaming, cloud saves, crossplay, etc.

We saw many AAA publishers from console needing to grow to pay the current budgets, so have been expanding to PC and mobile. The PC ones also expanded to console and mobile. The ones from mobile also expanded to PC and in less extent console.

I think we're still in the early steps but I think the convergence of the console, PC and mobile will continue in the next decade and I think we'll end in a hardware agnostic age where you'll be able to buy/get a game and play it on PC, console, mobile, or even the tv without a dedicated gaming box attached to it.

I think in the past the platforms were an ecosystem attached and limited to a single device. In the future, they will be a platform agnostic digital store, catalog and launcher that will allow you to play the games you bought there pretty much anywhere you want to play.

This will help platform holders and devs reach players anywhere they are. Including players in hardware where that company didn't tradionally work, or also to reach new growing markets in emerging countries like China, India, Latam, MENA, SEA etc.

 

[arvfab]

During the 50 years of gaming, the gaming market kept growing. After the covid peak, it kept aprox. flat for a couple years. Some thought that maybe it peaked, but I think it makes more thing that without the covid peak it would have continued growing, and that's why after the peak, when going back to normality instead of decreasing it kept basically flat.

Regarding consoles: they grew particularly with NES & GB, later with PS1/PS2/Wii/DS. Since then the userbase is pretty much the same. But Sony kept growing the market share of the home consoles, while Nintendo did the same in portables.

Mobile kept growing until changes in related regulations plus Apple and Google policies related to ads basically destroyed the traditional and main user acquisition techniques. So that is what temporally negatively affected their growth. Now, around a year or two later they are starting to show results after some time trying to figure out how to solve it and improve their user acquisition.

PC kept growing in userbase and revenue, now it's in size somewhat similar to the console market.

During the last decade or so we saw the hardware technologies, software technologies (game engines etc), catalogs, business model/game type, etc of PC, console and mobile converging more and more, even more with cloud gaming, cloud saves, crossplay, etc.

We saw many AAA publishers from console needing to grow to pay the current budgets, so have been expanding to PC and mobile. The PC ones also expanded to console and mobile. The ones from mobile also expanded to PC and in less extent console.

I think we're still in the early steps but I think the convergence of the console, PC and mobile will continue in the next decade and I think we'll end in a hardware agnostic age where you'll be able to buy/get a game and play it on PC, console, mobile, or even the tv without a dedicated gaming box attached to it.

I think in the past the platforms were an ecosystem attached and limited to a single device. In the future, they will be a platform agnostic digital store, catalog and launcher that will allow you to play the games you bought there pretty much anywhere you want to play.

This will help platform holders and devs reach players anywhere they are. Including players in hardware where that company didn't tradionally work, or also to reach new growing markets in emerging countries like China, India, Latam, MENA, SEA etc.

This post should be moved to the Doom&Gloom thread. It basically depicts the apocalypse of gaming.

 

[Systemshock2023]

This post should be moved to the Doom&Gloom thread. It basically depicts the apocalypse of gaming.

Just the apocalypse of an archaic business model we have seen since kids, thats why still a lot of old ass people (mainly old milennials and Gen X) cling to it. More to do with feelings/football like tribalism than facts. Almost everyone has ridiculous computing power at the palm of their hands, convergence is bound to happen.

Single purpose boxes have stagnated since the 7th generation. PS will steal xbox share but not grow the pie. Nintendo had to kill home consoles to survive and the repeated sucess of the Switch is not guaranteed, as the Switch rode on the Wii U back catalogue for a long while.

 

[Impulse]

I'm not sure that I agree entirely.

That's why I posted this, disagreement can be v. enlightening.

I think what we've seen for a long time is largely status quo, but that isn't new.

Nintendo dominated with the NES and largely with the SNES, albeit not as dominant, and then fumbled the bag with the N64. That shows us how quickly the status quo can change.

You can see the same thing with the Gameboy, followed by the Gameboy Advance, and then all of a sudden comes the PSP selling 80 million units. Not enough to unseat Nintendo, but certainly eat into market share on a first attempt.

Same thing with Sony's most dominant console the PS2 followed up by their least performative console in the PS3.

All of these examples you mentioned are indeed correct, but they come from an era where physical was dominant, if not the only way to consume games.

Physical games you buy were also acting as kind of assets in your portfolio: If you don't like the N64, you can sell your SNES and SNES game collection and go on to buy a Saturn or PS1. This goes a long way towards defraying switching costs for consumers.

That's not what's happening anymore, digital has entered the chat, and activated digital game licenses are largely unsellable from the consumer POV (accounts as a whole are, but that's more of a shadow-y thing and I don't have much understanding of that realm and how prevalent it is).

You definitely remember the Kinda Funny interview with Phil Spencer, one of the key things he complained about were that even if Starfield was a 10/10 game, nobody would sell their Playstation and buy an Xbox. Of course we know that Starfield didn't turn out to be a 10/10, but his words would have likely held true even if it did. People are locked in via digital marketplaces, which along with the rise in chip costs, made switching costs almost impossible to justify for an ordinary consumer (more well-to-do people can afford to build positions in multiple ecosystems tho).

This gen, Xbox has generally bet on the idea that a mass consumer switch like the one they were at the other end of in 2013 is still possible, their thesis for the Series devices worked on the presumption that if you lower the entry barrier through offering a low-cost alternative and Gamepass, you will get people that are maybe more willing to switch. They worked on getting the media to eat from the palm of their hand to amplify any error Sony makes.. And they have nothing to show for it.

The rise of backcompat also created a huge entry barrier for any new entrant to the traditional/pc gaming space. If Meta decides to make a new console ecosystem, they're not only facing the newest Mario games, they're also facing basically every Mario game that ever existed. This is part of why they're focusing on VR instead, it's a smaller, yet still unconquered land. Cloud is also another one of those.

You look across industries and giants simply don't always remain giants despite having nearly complete monopolies in their markets.

Very true, my thinking is that the platform scene is gonna be a bit calcified at the moment, but technological innovation always finds a way.

I think cloud is the frontrunner to be the new frontier for platforms, but that will take time and buy-in for it to get there. It's also not guaranteed that disruption of existing old businesses will bring about a replacement business with equivalent returns (See the TV/Film and their struggles in transitioning to streaming).

The fundamentals for monopolies doesn't really exist in gaming and things move way too much to assume they'll stay that way.

NBA Live was the most popular basketball franchise on the market. It ran from 1994 to 2018. It's been entirely supplanted by NBA 2K which only came onto the scene in 1999 and was exclusive to the Dreamcast until 2002. EA had an 8 year headstart on NBA 2K and still fumbled the bag.

Medal of Honor Allied Assault came out in 1999 and defined the genre, especially with 2002's Allied Assault. Call of Duty didn't come out until 2003 and wasn't this massive property until 2007... 8 years after the launch of MoH and 5 years after allied assault.

CoD has been dominant for the last 17 years, but like I mentioned PSP released 16 years after Gameboy and it took a massive chunk out of Nintendo's marketshare. Shit changes.

This part I fully agree with. I have a feeling that COD's dominance will start to erode over the next decade (COD itself was built on Kotick poaching the key Medal of Honor devs and forming Infinity Ward), I'm paying attention to Battlefield in particular as it could have an opportunity to grow while MS retools COD to fit their strategic direction.

But keep in mind that the software scene primarily has to adapt to what happens on the platforms. PC has introduced the option to have a launcher that gets you %100 of all your revenue, and Cloud taking off will introduce the likelihood that an EA or Ubisoft will become a complete platform onto themselves.

Don’t think so. Growing Asian competition will hurt western companies and their creative wasteland on top of other forces.

Ubisoft is getting obliterated. I don’t see what options they have for instance. Some of these companies aren’t done downsizing and bleeding money.

This could still be the beginning.

Asian competition is notable for sure, but the majority of new big IP is coming from places that aren't Japan.

Like Capcom has been good from a quality perspective, but almost all their big content is remakes, re-release collections and sequels.

Their original IP work has actually been flopping very hard (Kunitsu-Gami and Exoprimal are the only two original Capcom IPs since 2020, and both flopped hard), but no one talks about it for some reason.

During the 50 years of gaming, the gaming market kept growing. After the covid peak, it kept aprox. flat for a couple years. Some thought that maybe it peaked, but I think it makes more thing that without the covid peak it would have continued growing, and that's why after the peak, when going back to normality instead of decreasing it kept basically flat.

It always can grow, but my argument is that growth won't be through the current addressable market since, it's basically all been addressed already.

Regarding consoles: they grew particularly with NES & GB, later with PS1/PS2/Wii/DS. Since then the userbase is pretty much the same. But Sony kept growing the market share of the home consoles, while Nintendo did the same in portables.

I think we will see Nintendo get challenged in portables next gen, they have a moat of sorts, but I think MS and Sony will adapt their content to get things that are more handheld-friendly.

Mobile kept growing until changes in related regulations plus Apple and Google policies related to ads basically destroyed the traditional and main user acquisition techniques. So that is what temporally negatively affected their growth. Now, around a year or two later they are starting to show results after some time trying to figure out how to solve it and improve their user acquisition.

True, but what are the chances of anyone entering that field? Almost zero.

MS tried then gave up too quick, maybe Meta or Amazon can do it, but it's a very risky play at this point, and the leaders are firmly entrenched.

Xbox is trying to penetrate there using legislation as a cudgel, and so are Epic Games, but I think their efforts won't come to much, at best they get profitable smaller businesses in the short-medium term.

PC kept growing in userbase and revenue, now it's in size somewhat similar to the console market.

It's currently facing a decline in consumer spend, no doubt driven by the death of Moore's law being a major impediment to affordability of hardware.

During the last decade or so we saw the hardware technologies, software technologies (game engines etc), catalogs, business model/game type, etc of PC, console and mobile converging more and more, even more with cloud gaming, cloud saves, crossplay, etc.

We saw many AAA publishers from console needing to grow to pay the current budgets, so have been expanding to PC and mobile. The PC ones also expanded to console and mobile. The ones from mobile also expanded to PC and in less extent console.

I think we're still in the early steps but I think the convergence of the console, PC and mobile will continue in the next decade and I think we'll end in a hardware agnostic age where you'll be able to buy/get a game and play it on PC, console, mobile, or even the tv without a dedicated gaming box attached to it.

I think in the past the platforms were an ecosystem attached and limited to a single device. In the future, they will be a platform agnostic digital store, catalog and launcher that will allow you to play the games you bought there pretty much anywhere you want to play.

I agree with that. Platform holders will have to meet future players on their own hardware and preferred form factors.

This will help platform holders and devs reach players anywhere they are. Including players in hardware where that company didn't tradionally work, or also to reach new growing markets in emerging countries like China, India, Latam, MENA, SEA etc.

I think this part will be hard to do for certain regions that are less financially fortunate without major breakthroughs in chip technology.

Moore's law dying and TSMC's monopoly on high-quality chip processes has really ruined a lot of the chip pricing for everyone.

Just the apocalypse of an archaic business model we have seen since kids, thats why still a lot of old ass people (mainly old milennials and Gen X) cling to it. More to do with feelings/football like tribalism than facts. Almost everyone has ridiculous computing power at the palm of their hands, convergence is bound to happen.

Part of why I made this thread is to try and understand where this convergence is taking us.

You watch a lot of the platform warrior podcasts that produce all the dumb takes, and almost all the hosts are either Gen X or Millenial. No Gen Z or younger.

 

[arvfab]

Just the apocalypse of an archaic business model we have seen since kids, thats why still a lot of old ass people (mainly old milennials and Gen X) cling to it. More to do with feelings/football like tribalism than facts. Almost everyone has ridiculous computing power at the palm of their hands, convergence is bound to happen.

Single purpose boxes have stagnated since the 7th generation. PS will steal xbox share but not grow the pie. Nintendo had to kill home consoles to survive and the repeated sucess of the Switch is not guaranteed, as the Switch rode on the Wii U back catalogue for a long while.

Oh I know it's bound to happen, that's why I'm keeping all my physical games and consoles, so that I gan go full retro when that time comes.

Have fun in the future paying for different subs, one for each publisher you care for. Hey but at least you will only need a TV and a controller.