Next-Gen Consoles to Struggle?

The game industry is going to continue to grow and expand, but according to Wedbush Morgan Securities, it’s not going to come from the next generation consoles … at least, for another 3 – 4 years.

In their exhaustive annual report, they see the gaming industry growing at a steady 10% per year through 2010, but the next generation of consoles will see very slow growth, because of longer development times (which are predicted to be upwards of 4 years per game), as well as having a very slow rate of adoption has the current generation platforms have an install base of 84 million users in the US and Europe.

“Unlike most industry observers, we do not believe that the industry has reached the end of a ‘console cycle’ that is winding down with slow or even negative growth. Rather, we believe that the current consoles (at least the PS2 and the GameCube) will continue to be the systems of choice for several more years, and expect a transition to the next generation consoles to occur gradually. As a result, we expect sales of interactive entertainment software to continue to grow at approximately 10 percent per year through 2010.”

“We expect the average next generation console game to take at least two full years to complete (with some efforts likely taking three to four years) compared with the average 20-month completion time for current generation games,” the report states. “We think that limited time made available to third parties to develop launch titles for both the Xbox 360 and the PS3 will limit the degree of game play improvement in early next generation games.”

They also raised concerns that publishers who are seeking other methods of generating revenue via in-game advertising or micropayments (for bonus content) may be very disappointed. They also warn that MMORPGs may not be holy grail for publishers because it goes against the mindless entertainment most of the US audience seeks.

“We believe that most people play video games for a form of mindless escape,” the report states. “The most popular video games are almost all single-player games, player vs. console, and allow the player to remove himself from a social environment. In these games, the player can act out fantasies of power (in shooter games), often playing the ‘bad’ guy and playing to win. MMORPGs are just the opposite, a highly social interactive experience. … The level of social interaction involved in MMORPGs is inconsistent with the goal of mindless escape sought by most of the U.S. audience.”

While it all sounds horrible, there is one up side: the next generation of games will be driven by teenagers (as always) who will probably seek out content that is not family friendly, and a bit more edgier. So, we will see a huge spike in “edgy” content, as well as extreme sports.

I have to agree with their report on MMORPGs not being the godsend most companies try to make them out to be: monthly payments to play a game does not sit well with consumers, as a vast majority of people end up canceling their accounts after the first free month (unless, of course you bought Guild Wars, which doesn’t have a monthly subscription fee).

The only thing I disagree with them, however, is the painfully slow growth of the next generation consoles. With HDTV becoming increasingly popular, and with Xbox 360 and Playstation 3 both supporting and encouraging HDTV content, I believe you’ll see a much faster rate of adoption than what Wedbush Morgan Securities is predicting.

Provided by Geekstreak