A few years ago, at the height of the PS2 generation, I was at an industry conference in London. The speaker asked the audience for a show of hands as to whether the PS2 to PS3 transition would be as commercially damaging as the PS1 to PS2 transition had been. The vast majority of the room thought it would be as bad, I (obviously!) was one of only a small handful who thought that it wouldn’t be.
Platform transitions can be very difficult times. There is only a small installed base of the new platform so there are not many customers. Your technical staff are struggling to learn the new platform’s architecture (especially if it is a Sony) so the games aren’t that good. The old generation games become a lot cheaper at retail so it is difficult to get revenue out of them. And so on.
The PS1 to PS2 transition was especially difficult for two reasons. Firstly because Sony was the only show in town (except for a bit of PC stuff) so you were nearly totally reliant on a single income stream. Secondly because piracy became massive over a very short period of time, catching the industry unawares and totally cannibalising the PS1 market. These had a terrible commercial effect on the industry and most companies went through very difficult times. Some didn’t survive. So you can understand why the audience at that London conference were so nervous.
It turns out that the PS2 to PS3 transition was a whole lot easier. Mainly because the PS2 market kept working and wasn’t destroyed by piracy like the PS1 market was. Also because Microsoft went early, staggering the transition. And also because there were far more diversified platforms and income streams for the industry to make money out of. MMOs, casual games, telephones etc.
This trend will continue in the next transition to the point where the change will be hardly noticeable. Both Microsoft and Nintendo look set to emulate Sony by running two home platforms each. The old generation platform at a low price point with cheap games as an entry level machine and the new platform as a premier product with prices to match. So we will look at new platforms being introduced by a manufacturer every 5 years or so but those platforms having a manufacturing life of around 10 years, just as the PS1 did, to give us overlapping generations. Also there will be much more stagger between the manufacturers when they introduce their next generation. Nintendo will go a lot earlier than the other two because the Wii will obsolesce earlier. Sony could go second this time just to escape the disaster that is PS3 and they saw how Microsoft gained advantage by going first with the 360. We will see.
So we are looking at a huge and increasing diversity of platforms for the industry to live from. At any given time there will be two each of home consoles from Nintendo, Sony and Microsoft. There is the traditional PC market, MMOs and the recent explosion in casual gaming. Then there is the DS and new handhelds from Nintendo, the next generation PSP needs to be better and Microsoft cannot leave mobile gaming alone for ever. So son of Zune should be interesting. And then there is Apple, each generation of iPod is more game capable. It may be a game of softly, softly but one day Apple will go for the gaming market in a big way. And then there is the potential of social networking, this will involve more and more gaming till it just merges with the games industry. Also the humble telephone will integrate with some, or maybe all, of the above.
And the platform transitions will be looked back on as a historic oddity. The huge danger, however, is always piracy. Once it gets a hold it can destroy the commercial viability of a platform very, very quickly.
So were you wiped out by the PS1 to PS2 transition? How many different platforms provide your income now?