The longer console cycle

In the middle of last year, Microsoft’s game software boss Phil Spencer offered a telling quote about the direction of the games industry to MCV.

It wasn’t about motion controllers or new online services – it was about the market forces that are allowing those things to appear: Do we need a new console? I don’t think we need one right now.”

While the industry saw a relatively quick switch from Xbox, GameCube and PS2 to 360, Wii and PS3, this generation is shaping up to be quite different. The other format-holders agree with Microsoft: we don’t need new consoles, even through traditionally this is the point in the cycle when they start to talk about them and spec them out to developers.

And with more diverse interface technology on the way – Project Natal, Wii Vitality Sensor and PS3’s motion controller – this all makes complete sense: the longer cycle is needed to make these new add-ons commercially viable for all.

But hold on a minute – without the introduction of new consoles the entire value chain misses out on a traditional money-making highlight, doesn’t it?

Retailers lose out on the midnight launch and ‘coming soon’ tease that whips a core of consumers into action around a set date – most software launches pale in comparison.

Developers miss out on the generational merry-go-round of courting from the format-holders and publishers, when independents for one are often roped in to provide launch titles and pitch all kinds of prototypes.

Publishers don’t feel the benefit, either; there’s no new wave of marketing support from the first-parties which whips up excitement to sell third-party software.

Meanwhile format-holders have lost that useful crutch to re-engage consumers and the industry with something new to talk about.

And consumers suffer, because as hardware generations increase game content arguably gets more familiar – new IP is scarcer and more populist titles prevalent.

At least, that’s the thinking when it comes to the downside of a longer cycle. Format-holders reject that idea, however. It’s not a challenge at all, they say – it’s an opportunity.

The games industry has moved on significantly and as a result does not rely so much on new hardware launches,” says Michael Denny, VP of Sony Worldwide Studios. Of course new hardware causes a large spike in consumer interest, but so does the launch of new, exciting games. Modern Warfare 2 didn’t need new hardware to break all the records.”

While there is some curiosity as to what ‘next-gen’ might mean now that we have what was once considered next generation so freely around us, Denny argues that the extension of the cycle builds more creative potential.

Of course people want to see what next generation games look like, but history shows that games improve the further into a lifecycle you go – and with growing installed bases, demand and excitement grows as well,” he says.

2009 was a great year for games, especially in the home console market where there were no new hardware launches. 2010 is shaping up to be an equally exciting year for games with both new and innovative experiences coming to the market and the expansion of a number of existing franchises.”

Expansion is a key thing for all three format-holders, especially when it comes to pushing our seemingly long-in-the-tooth current platforms to new audiences.

Our continuous challenge is to expand the gaming audience and increase the social acceptance of video games to a level that is currently enjoyed by the likes of television and film – this is a long term goal and we will probably go through various hardware lifecycles before Nintendo, and the wider industry, gain that
level of acceptance,” explains Rob Lowe, Nintendo’s senior product manager for Wii.

Having said that: we strongly believe that there is still huge potential for both Wii and DS to continue to bring in new gamers and change rejecters’ perceptions, and that this will continue to help grow the UK gaming industry in 2010. In the past some areas of the industry have waited for, and almost expected, a change of cycle every five years as a way of re-energising the industry and restarting interest in it. This current life cycle appears to be shaping up differently – and what has gone before shouldn’t be expected to be repeated again.

The benefit of hardware remaining relevant for longer is the fact that it gives more developers a chance to get the very best and most out of current generation systems, rather than the cycle changing just as people have become used to maximising a console’s performance and abilities.

For retail, new hardware obviously drives people into stores and without new hardware it will be up to developers and publishers to create interesting, new and disruptive titles to drive people to store instead – and of course retail needs to fully support them in order to realise this.”

Microsoft also says the longer generation is a good thing for retailers, publishers and developers.

We are always looking for ways to enhance our current generation hardware offerings, and the extended console lifecycle gives us and our partners tremendous opportunities to be more creative, whether through software, cutting-edge services over Xbox Live or innovations like Project Natal,” says Chris Lewis, European Xbox boss.

This brings huge opportunities for developers and publishers alike.”

The longer console cycle creates a bigger market for big software hits – levelling the field between platform and publisher, say the format-holders. Lewis, Denny and Lowe all point to recent big sellers they think were only been possible with the focus and stability a longer cycle provides.

Launches such as Wii Fit, Professor Layton, Mario & Sonic at the Olympic Winter Games and of course Modern Warfare 2 all show that a software launch can sometimes eclipse even a hardware launch in terms of scale and money generated at the tills,” says Lowe.

Therefore there really isn’t any way that publishers are missing out when they are driving the industry forward as much as the platform holders.”

Lewis agrees: New console launches and add-on hardware can certainly generate interest and excitement, but we are seeing that software is an equal draw for consumers. As the blockbuster launch of Modern Warfare 2 demonstrated, software is getting to the point where it can almost match the launch of a new console for sheer excitement.”

Adds Denny: The success we saw with Uncharted 2: Among Thieves shows that if you bring out a great game, it will generate excitement and revenue.”

So as the generational cycle extends and consoles consolidate their places in the home – rather than live on borrowed time until the next model comes out – the pressure on format-holders eases up.

And instead the impetus for them is in delivering innovations that provide new reasons to interact with a console – rather than bleed it for all its quick worth and move onto the next.

On 360, Lewis doesn’t just point to things like Natal, but also extra services on Xbox such as the recent additions of Facebook, Twitter and Zune video services as well as the upcoming launch of Game Room – which effectively repackages retro games for a new audience – as key examples of this.

On PS3, Sony is similarly looking to new territories – and Denny says the firm sees it as its duty to seek them out for the rest of the industry: It is up to us to keep pushing the boundaries, whether by creating new experiences, reinventing existing franchises or offering new technology such as motion controlled games and 3D titles.”

All of which creat