Will PS4 and Xbox One Sales Suffer Due to Lack of Games?

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Sony's  (NYSE: SNE  ) PlayStation 4 has sold more units than Microsoft's  (NASDAQ: MSFT  ) Xbox One, but both companies may be in the same boat when it comes to a lack of developer interest in making games for the new consoles. The third player in the game, Nintendo (NasdaqOTH: NTDOF) may be in even more dire straits as interest in creating games for its WiiU platform is almost nonexistent.

According to a poll conducted by the Game Developers Conference, only 20% of developers surveyed said they intend to release their next game on Sony's PlayStation 4. That tops Xbox One's 17% and Wii U's anemic 4%; 14% reported they are currently developing games for PlayStation 4, versus 12% for Xbox One and 4% for Wii U.

With the Xbox One and Playstation 4 being on the market since November 2013 the consoles are both still relatively new. As the products mature, however, the release of highly anticipated games can be important in keeping up sales momentum. Without new games, potential customers wavering on whether to buy a new console may elect not to.

Where are the developers going?
Whereas the potential financial rewards of developing console games was once enticing for developers, the high cost and risk of failure are scaring some away. The GDC poll shows that lower costs and less risk are leading developers to PC and mobile platforms. 

"When it comes to developer intent, it's still lower-barrier PC and smartphone/tablet development that attracts most developers surveyed -- 51% plan to make their next game for smartphone/tablet, while 52% anticipate releasing their next game on PC/Mac," the survey said. Meanwhile 53% of respondents are currently working on PC or Mac titles and 52% are creating titles for tablet/smartphones.

(The numbers add up to more than 100% because some developers are working on games for release across multiple platforms).

Console games are expensive to make
Analyst group M2 research estimated that the average AAA game in 2010 cost $28 million to make, with flagship series like "Call of Duty" venturing into $50 million territory. Just 10 years ago, budgets hovered closer to the $5 million to $10 million range," TechnewsDaily reported. 

Game manufacturers do not generally share their costs, but it's safe to assume that those numbers have climbed with the better graphics and more impressive processors offered on the new consoles. 

Big video game companies are failing
The past few years have been hard for companies that exist primarily to make games for consoles. Major player THQ was liquidated after bankruptcy. Disney (NYSE: DIS  ) shut down both Junction Studios (which made its Epic Mickey Wii game) and LucasArts (which made Star Wars games). Even Sony laid off a quarter of its game development staff.

Irrational Games, the Boston-based company behind the wildly successful "Bioshock" and "Bioshock Infinite" console games, also closed its doors. The reason its founder Ken Levine gave on the company's blog for the closure may be telling for the future of the whole industry. 

"To meet the challenge ahead, I need to refocus my energy on a smaller team with a flatter structure and a more direct relationship with gamers. In many ways, it will be a return to how we started: a small team making games for the core gaming audience. I am winding down Irrational Games as you know it. I'll be starting a smaller, more entrepreneurial endeavor at Take-Two.... In time we will announce a new endeavor with a new goal: To make narrative-driven games for the core gamer that are highly replayable. To foster the most direct relationship with our fans possible, we will focus exclusively on content delivered digitally."

Notice he mentions digital delivery and says nothing about making games for consoles. In the video game world, small may be the new big.

Being small comes with smaller risks
The GDC survey shows that developers are not only putting their efforts into lower-risk games from mobile and computer platforms, they are also self-funding and self-releasing projects.

"Developers polled expressed an overwhelming preference toward self-publishing their projects, with 64% of respondents not working with a publisher on their current project, versus 19% who are (17% said they work at a publisher)," according to the survey.  

And while crowdfunding receives plenty of media attention, self-funding (raising no money from outside investors be they venture capitalists or individuals) is the most popular choice. "Fifty-two percent said that at least part of their funding comes from their company's existing funds, and 46% of respondents said they contribute their own personal funds toward the creation of their projects." Only 11% are using crowdfunding, the report said.   

Self-funding makes a lot more sense when the financial outlay is smaller, as it is for most mobile or PC-based games compared to console games. 

Less games will mean less console sales
"The industry has condensed games development to focus on blockbuster titles – likely because of the rising costs of development requiring a commensurately sizable pay-off at the end — and even those blockbusters are diminishing in quantity," TechCrucnh reported. "It's now a couple of big titles per company per year – titles that are also mostly sequels or proven formula games, rather than something new."

This is devastatingly bad news for the console industry. If fewer companies make big-ticket console games, then there are fewer chances for a title to emerge that gets customers to pay $399 for a PS4 or $499 for an Xbox One. As developers focus on mobile and PCs, it's also less likely that the next craze will be console-based. Whether it's "Angry Birds," "Flappy Bird," "Words with Friends," or countless other titles, the innovation in the game world has shifted to mobile. 

Microsoft, which has deeper pockets than Sony, might be able to pay some developers to make blockbuster exclusive titles for Xbox (like the just-released "Titanfall"), but the company can't force innovation.

Lack of games may not doom the current consoles since they are more than just game-players, but it dramatically hampers their growth. If "Super Mario" had not been released, the original Nintendo Entertainment System would not have been as big a hit as quickly as it was. The same can be said of "Halo" for the Xbox and "Sonic the Hedgehog" and "Madden Football" for Sega Genesis.

If the next generation of groundbreaking titles like those are released for phones, tablets, and PCs, this generation of consoles will have a hard time competing. 

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Read/Post Comments (11) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 12, 2014, at 1:50 PM, targeyone wrote:

    The multi-million budget triple AAA game model was never sustainable to begin with. I think we're already seeing the decline, it won't be too much longer before it's extinct.

    However, the GDC poll isn't indicative of anything more than what developers attending, and polled at, the conference are intending to release. That's all.

    It resulted in 1.9% intent to develop for 3DS, and almost 4 times that for the Vita, yet the 3DS is anything but game-starved right now, or in the near future. (even if it did suffer a game drought shortly after launch, as all consoles tend to do)

    If you poll a group made up of 50% cellphone game makers, then yes, your resulting intent to develop for results will not show strong support for consoles.

  • Report this Comment On March 12, 2014, at 5:20 PM, dankusDLK wrote:

    Mobile vs. Core. Different gamers, different developers, different skill sets. The new Next Gen systems are already outpacing their predecessors sales. As long as financial websites keep confusing these two separate industries (they are not substitute products) then they will keep being wrong in their analysis.

    Ken Levine's comments about digital delivery don't mean he's making tablet games. Anyone who has played any of his games understands- he means Steam, and for console, he means download only.

  • Report this Comment On March 12, 2014, at 5:58 PM, Bogle wrote:

    With respect, I just can't agree with this article. Console sales are through the roof. That one fact alone completely negates this entire article. Obviously building the base takes time. It would make more sense for a company to make a game with a larger installed base sure, but at the moment, there's also precious few choices for next gen gaming. Make a game for the previous generation and you're lost in the crowd. The sales have gone far above what was expected. Console gaming is alive and well. While mobile will doubtless always do well, it doesn't even have a controller 99.999% of the time (the remaining fraction for those who buy one for it to work know...6 games). You don't have a network specifically for members all playing games on the same hardware. Angry birds...will away with Battlefield, cod, gta, mario anything, zelda, bioshock, destiny, etc. It just won't. People won't be calling each other up after work in the hope that everyone has the same game and will fire it up on their phone so everyone can play The logistics of it is just silly. I play games on my phone. Simple ones. When I'm on a toilet, in a waiting room, or about to sleep sometimes. But when I want to game with friends or would spend hours playing a game, it's just not going to be on my flipping cell phone. Games on your cell can be fun, but by no stretch of a vivid imagination will they ever provide the fun to be had on a powerhouse console like a p4 with a killer controller and a blistering fast network where friends galore meet up wearing high dollar headsets. I think the degree to which cell gaming takes a piece of the pie will level off completely in the next year or two....who knows exactly...but most of what it will do has already been done. Console gaming is alive and well. It may be cheaper to make a game for a cell or a pc, but so is the payoff isn't it? There is SIGNIFICANTLY greater opportunity for massive profit with a successful console game. Those that can make such games, will continue to do them where the most money will be made. And we will continue to enjoy them there, far away from a glorified gameboy with calling features and apps.

    Saying console sales may be in trouble is to ignore both history and sales reports from this very month and each prior. PS4's in particular can't stay on the shelves and analysts have stated we haven't yet seen just how strong demand is for them as Sony has yet to be able to manufacture enough to meet demand. They sell each and every single unit made and they do it quickly. Perhaps your article should be reevaluated based on what's actually happening?

    Having said that, it seems both Sony and MS rushed out of the gate to gain console sales as titles are limited in the 18 or so weeks since launch. But games, especially high tech games, take more than a minute to make. Rest assured a great many are well on their way. The percentage of people planning to make console games will doubtless rise significantly over the next year as the market gets bigger and bigger. Especially as the systems are very new and there is little competition. The greatest money to be made and the gaming community in general will always be console and phones will always be limited in so many ways. We carry our phones or we wouldn't bother with them. But it's laughable to think they could make gamers wish to drop their controllers to play on their cell instead.

  • Report this Comment On March 12, 2014, at 8:50 PM, spinod wrote:

    Where does this even come from? PS4 can't be found on a shelf at all and already has over 6 million units sold, but hey no games will make it not sell right?

    To top it off, do people not realize what a beginning of a generation brings? Anyone that paid attention to past generations knows that it takes a year for an abundance of games to come. Hell look at this years lineup of games coming. Destiny and all the others.

    They are not going anywhere. Publishers are fine.

    This whole "mobile games are the future!!!" articles are getting old. I remember when the SAME people were saying social games were killing the industry. Yeah Farmville was ruining console games.... then a year later that whole industry went bankrupt.... same will happen to mobile.

  • Report this Comment On March 13, 2014, at 1:23 AM, Bunnyking77 wrote:

    All this is a repeat of every console launch in history.

    Does anyone do any research?

  • Report this Comment On March 13, 2014, at 2:13 AM, JaredM80 wrote:

    there are plenty of good looking games coming for both systems but they're just tooooo damn far away and apart. at least i'll have infamous, south park, and FFX/X2 remaster to keep me company. plus the other like 10 games i have yet to beat. speaking of infamous second son, anybody know if it'll be wise to play infamous 2 before second son? started reading about second son but looked as if spoilers for the ending of infamous 2 were going to be revealed so i stopped reading.

  • Report this Comment On March 13, 2014, at 7:55 AM, BlasterJohnX wrote:

    Smartphones games are never going to beat PC and console games. Today smartphones are 100x more powerful than before, and since touchscreen smartphones are introduced, a lot of games and apps were made for these devices. You can already have quad/8 core processors and 3GB of RAM (i.e. Galaxy Note 3) in these, but yet still you see so many cartoon games and only a few high-quality 3D games. Smartphone games have very short lives, usually gets boring in 1 week - 1 month (except for these where friends drag you to play on Facebook). Why the smartphone market works is because they are everywhere with you and when you are bored somewhere you can instantly play that, but it never will be a great playing experience, with the small screen and small speakers.

    The article stated the PC and smartphone games will rise but in reality the PC suffers more and more, just look at Dell, Lenovo, Acer, Asus and more, the continue struggling, and most of those casual internet people who played web games already went to smartphones, and the core PC gamers don't change a lot, since they are expensive for playing those graphic intensive games.

  • Report this Comment On March 13, 2014, at 11:09 AM, BHGamer wrote:

    it's the same crap every generation since when? NES days? Launch line ups have historically never been that great, and the first year gets little in the way of blockbusters until the developers get more familiar with the architecture of the machines. I don't know what relevance this article has with 4 month old machines, let's put this on the back burner and in July 2015, if we are having this conversation, then yes, then I would agree with this article.

  • Report this Comment On March 13, 2014, at 11:35 AM, Bogle wrote:

    "Hey guys, I've loved playing Assassins Creed with you for the last hour, but let's take it to the next level. Let's take off our headsets, sign out of the network, turn off our consoles, pull our phones out of our of you only...and let's play scrabble." said no one ever.

    The Wii sold incredibly well because a bunch of non-gamers realized they could just move their arm and didn't have to try their inexperienced hand at a controller. Games on cells are right there and you've always got it on you. How much of the actual gaming market (and indeed gaming culture!) do cells take away from consoles? Pretty much none. The Wii took nothing as well but simply added to what was. Cell gaming is the same. It's nothing short of ludicrous to think cells could compete or anyone anywhere would drop their console for a gaming experience on their little phone. It's just adding. Don't get confused. I like my bicycle and when I can, I like to get around on it...but I wouldn't trade my flippin car for it.

  • Report this Comment On March 13, 2014, at 12:09 PM, MarCUZ10 wrote:

    These articles are disheartening. The other day I read one that said 'Why Sony's PS4 win is really a loss' because the console market is dying. Fact is I hate playing games on my phone. At first it was great and the novelty of playing a game on my phone was awesome. However, I have not bought a game or played one on my phone since Angry Birds. Games are short , entertaining, but also not compelling. After about two days of a game on my phone, I move on to something else and forget about it. I hate the fact that analyst are saying smartphones are the future. To prove my point I will never buy a game on my phone/tablet. Now if only I can get my friends to stop spending money on Clash of Clans. Damn enablers.

  • Report this Comment On March 13, 2014, at 1:28 PM, anuebis wrote:

    All, it's time to boycott Motley Fool. I am so tired of seeing these stupid articles with no research that spam my Yahoo page. the reason they are there is because Motley Fool makes inflamatory articles so people read them. So in order to stop this crap, we need to stop reading these articles. Sam Mattera is the absolute worst and should be jobless.

    So we are all part of the problem, the solution is to stop reading this rubbish. I am done with Motley Fool.

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Daniel B. Kline

Daniel B. Kline is an accomplished writer and editor who has worked for the Microsoft's Finance app and The Boston Globe, where he wrote for the paper and ran the business desk. His latest book "Worst Ideas Ever" (Skyhorse) can be purchased at bookstores everywhere.

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