Mobile Gaming Will Disappear Well Before Console Gaming

History tends to repeat itself, and it feels like 2004 all over again. In 2004, both analysts and gamers alike predicted the end was near for consoles due to lagging sales, new games lacking innovation, and the rise of free Internet gaming websites. This was also right before the seventh-generation console debuts of Microsoft's (NASDAQ: MSFT  ) Xbox 360 in 2005 and both Sony's (NYSE: SNE  ) PlayStation 3 and Nintendo's Wii in 2006.

The same doomsday story has resurfaced, despite the recent eighth generation console releases and the success of both Activision Blizzard (NASDAQ: ATVI  ) and Take-Two Interactive (NASDAQ: TTWO  ) , all while mobile developers like Zynga (NASDAQ: ZNGA  ) have struggled. In the end, mobile gaming will disappear well before console gaming ever will.

Console gaming life cycle is misinterpreted
Many analysts misinterpret declining sales of hardware and games as a sign of declining interest in video games overall. The video game industry generates an all-time high of $66 billion worldwide, and that is expected to grow to nearly $80 billion by 2017. Other analysts believe that mobile gaming on smartphones and tablets will replace console gaming, given that the global mobile gaming market is expected to more than double in five years to $29.6 billion.

The fact is that over half of the households in America own a dedicated gaming console, and many of those that do own two. Historically, console gaming has followed a predictable product life cycle for each console generation. Sales peak in the first couple of years for both the hardware and software. Product maturity actually occurs when rumors of the next generation of consoles surface – which is often several years away. This is the point when sales start "plunging" because gamers stop investing in their current consoles in anticipation for the next ones.

Gamers proved naysayers wrong again
So far this year, hardware sales have seen a 30% + year-over-year drop. The trend should reverse given that both Sony's PlayStation 4  and Microsoft's Xbox One  each sold over 1 million units on release day alone. In fact, both companies stated that demand surpassed records set by their previous generations of consoles.

By Marco Verch, via Wikimedia Commons

Mobile gaming is volatile, fragmented, limited, and unsustainable
It doesn't matter if more people play games on smartphones than ever before. Mobile gaming is a lose-lose situation for gamers and developers alike.

In 2012, Zynga was on top of the mobile gaming world. The company's stock peaked in March after its December 2011 IPO. It had six of the top 10 games  on Facebook, with titles like Farmville and Texas Hold'em Poker. Now, Zynga has just three titles in the top 10 and the company's third quarter 2013 earnings showed revenue fell 36% YOY.

Newcomers like Rovio, which is known for Angry Birds, and King's Candy Crush, are now seeing success. But even Rovio's run looks short-lived since every new game has the words "Angry Birds" in the title; this leads many to believe that  the company is just trying to extend their 15 minutes of fame.

The financial environment across mobile gaming is unsustainable. Apple currently pays $5 billion across its 235,000 iOS app developers. This means the average developer makes $21,276 per year. Because the industry is extremely top heavy, with just a few games making nearly all the money, many developers disappear because good programmers are expensive and no one works for free.

"Free" means you still pay in some way
Mobile gaming continues to nickel and dime players. More and more users are becoming turned off by the fees within "free" games to either level-up, acquire new abilities, or to just beat the game. Other mobile game developers punish gamers with non-stop ads during gameplay until gamers shell out the money to stop them.

Despite complaints by gamers regarding the increased costs of games through expansion packs, multiplayer add-ons, membership fees, and peripheral costs, console games are still selling at huge quantities. Activision Blizzard's Call of Duty: Ghosts  didn't outsell the previous "Call of Duty" installment, but it is currently the best-selling PlayStation 4 game.

By Evan-Amos, via Wikimedia Commons

Take-Two Interactive's Grand Theft Auto V took the top spot for the second month in a row in October, selling 1.1 million copies. The game also exceeded $1 billion in sales  in just three days. Given the fact that King's Candy Crush Saga  is estimated to be making nearly $900,000 per day in revenue, the comparison still heavily favors console gaming.

Bottom line
Console gaming isn't going anywhere. Mobile gaming is an industry of one-hit wonders where success is temporary and the vast majority of game creators try to avoid bankruptcy. If anything, console gaming is just getting started again. The eighth generation is here and consoles have more features and are more advanced than ever before. Look for trends to shift as mobile gamers spend more time on their PlayStation 4 and Xbox One consoles, and less time being nickel and dimed on their smartphones and tablets.

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Read/Post Comments (7) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On December 09, 2013, at 1:04 PM, speculawyer wrote:

    Neither one will disappear. Why would either one disappear? Who thinks up such silly things! But, yes, consoles are the much bigger and stable industry. It is very hard to make a living on 99 cent games and freemium nickel & diming. The King IPO valuation is silly. Why should they be valued almost as much as video gaming titan EA? (And much more valued than GTA maker and NBA 2Kn maker Take-Two.)

  • Report this Comment On December 09, 2013, at 4:00 PM, Vitabrits wrote:

    If the article said: "Motley Fool" will disappear before mobile gaming, I'd agree.

  • Report this Comment On December 09, 2013, at 4:30 PM, peteysatx wrote:

    As a consumer of Console, mobile, and PC gaming, each one will survive as they all serve their niche. Its not very easy to take a console with you while you are traveling, however its pretty easy to take a tablet and phone to play the latest birds, minecraft, or deer hunting. PC gaming is for those people who prefer to not use consoles.

    The drop in game sales seem to be the spreading traditional console spend over both consoles and mobile.

    As the hardware evolves options will change. I could see tablets being the engine while gaming with a bluetooth controller broadcasting the display to your TV.

    Personally I believe the consoles are most at risk as they are not as hardware agile. New tablets and phones come out constantly. Even Apple releases hardware updates more than consoles.

  • Report this Comment On December 09, 2013, at 10:55 PM, RiddleofSteel wrote:

    You have got to be kidding me! Motley Fool has been the single biggest creator of articles on the internet that have been saying Console/PC gaming is going to die because the rise of Mobile Gaming. They have published so many articles in fact, I did an entire write up on my blog explaining why they are so wrong, and where their motivations are coming from.

    Now that the new Consoles have come out and sales are booming, they do a complete about face. In fact, all of the points in this article could have been ripped right out of the comments section from those previous negative articles. Call this the Monday Morning Article; all predictions are 100% correct, 100% of the time, the morning after...

  • Report this Comment On December 10, 2013, at 1:31 PM, mikecart1 wrote:

    speculawyer,

    Thanks for reply. IMO I just believe the mobile gaming will only last as long as those that make the games will tolerate mediocre pay or nearly none at all. There are programmers behind each of these apps and the best outcome I believe is that all the best programmers will move to the mobile developers that have hits creating an even more top heavy industry. It occurred somewhat in console gaming since household names like Activision and EA Sports dominate the business. There was a time when NFL football games, for example, had a lot more competitors in the 90s.

  • Report this Comment On December 10, 2013, at 1:33 PM, mikecart1 wrote:

    peteysatx,

    Thanks for reply. I am not sure if hardware update frequency is a + or - for Apple. I am pro Apple but lets get back to a time when consoles weren't even connected to the internet. The early Playstations, Dreamcasts, and Nintendos. There was no need to update the software because consumers for the most part got a finished product.

  • Report this Comment On December 10, 2013, at 1:36 PM, mikecart1 wrote:

    RiddleofSteel,

    Thanks for reply. Everyone on Motley Fool has their own opinions on certain topics so that is why you might see opposing opinions. I personally never felt that console gaming was dead. I have been a gamer since the first Gameboy lol and was in line to get the first Playstation. IMO it is all about console cycles and in 4-5 years (maybe even less), the current generation will be obsolete and gaming sales will drop again to the horror of analysts citing that console gaming is dead. I personally believe that console gaming has plenty of room to improve - much more than mobile gaming can.

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