Are Gamers Leaving Consoles for Mobile?

Sony and Microsoft should both be troubled by a new study that shows the number of core gamers is declining.

May 15, 2014 at 6:21AM

In a week in which Microsoft (NASDAQ:MSFT) lowered the price of a new Kinect-free version of Xbox One to match the $399 Sony (NYSE:SNE) charges for its PlayStation 4, a new report suggests that the overall market for their products may have diminished. 

While the overall dollars expected to be spent on gaming in the coming years are forecast to increase, the number of core gamers -- people who play video games for five or more hours a week on PlayStation 3, PlayStation 4, Xbox 360, Xbox One, PC, or Apple Mac computers -- has decreased about 3 million from last year, according to a report from NPD Group. (Nintendo's (NASDAQOTH: NTDOY) consoles were not covered in the survey).

The report shows that there are 34 million core gamers in the United States who spend an average of 22 hours a week playing video games, GeekWire reported. 

"Core gamers are really the lifeblood of the industry, spending tremendous amounts of time on their hobby of choice," NPD analyst Liam Callahan said in a statement. "With the new console generation off to a great start, we can expect the amount of time spent gaming to increase as more core gamers adopt them."

Fleeing to phones, tablets, and other devices

The biggest problem facing the console makers is that games are readily available at low prices on tablets and phones. This certainly affects the decision for families and casual game players when they decide whether to buy a console. That decision has become even more tilted against the high-end (and high-price) consoles by devices like Amazon's $99 Fire TV, which offers many of the ancillary features that PS4 and Xbox One do.

Fire TV even offers an optional game controller (for an extra $39), which lets families offer their kids a gaming solution for a combined $140 with individual games costing much less than the $59.99 that has become standard for major console titles. The games on Fire TV are not as elaborate as most console titles nor are they as impressive looking, but they often cost just a buck or two. 

As the number of core games decreases Microsoft and Sony's market to sell consoles becomes increasingly dependent upon convincing casual users that a game console is about more than just gaming.

On the positive side the Entertainment Software Association's 2013 Essential Facts About the Computer and Video Game Industry survey shows that people who own dedicated game consoles do use them for things besides playing games -- 42% use their consoles to watch movies, 22% use them to listen to music, 18% watch TV shows, and 5% use the devices to watch live content.

That's good news for Sony and Microsoft -- it shows that gaming is not the only attraction -- but it's also a little troubling. If you throw out gaming, everything on the above list can be done using a $35 Google (NASDAQ: GOOG) Chromecast. 

Core gamers are using other devices too

While the experience on consoles -- even the older PS3 and Xbox 360 -- remains vastly superior to the one offered on phones, tablets, and set-top devices like Fire TV, the difference is not so great that core gamers aren't playing across multiple platforms. NPD found that two-thirds of the core gamers group also enjoys playing games on mobile devices.

The biggest threat to the console makers is comparable gaming experiences on other devices. That may seem inconceivable but there are iPad games that rival those offered on Xbox 360 and PS3, and some Fire TV games are in that league as well. Tablets and set-top boxes might not offer everything a console can, but if the gap continues to shrink, then the need to own a console drops even for core gamers.

The gaming market is growing

Console makers must figure out how to appeal to a broader group of users -- a group that is driving up spending on video games. Gartner, which tracks the video game industry, estimates that worldwide consumers spent $93 billion in 2013, a number that will rise to $101 billion this year and $111 billion in 2015. That growth is not good news for Microsoft and Sony, as Gartner sees it being fueled by casual gamers.

"As mobile devices (smartphones and tablets) continue to grow, the mobile game category will show the biggest growth due to the entertainment value provided by games compared with other app categories," said Brian Blau, research director at Gartner. "This growth is fueled by healthy premium mobile device sales globally and a desire by consumers to play games on these multifunction devices that are capable of displaying increasingly sophisticated game content." 

To attract a crowd beyond the dwindling audience of core gamers Microsoft and Sony need to innovate and find a way to offer an experience that differentiates the consoles from what is offered on other, cheaper platforms. Consoles offer better graphics and a better gaming experience than other devices, but in many cases they are not better enough to justify the expense. Microsoft specifically tried to make its Kinect motion sensor that "wow" feature that drives people to the console, but the public has not taken to that device, and it's since been dropped from the newly announced $399 version of the console.

Microsoft and Sony face fairly bleak prospects on the console side as their core audience gets smaller and options for casual users increase. The console sales market is not limited to the core gaming crowd, but both companies need to demonstrate a better value to potential users who are not core gamers if they hope to get anywhere close to the sales figures reached by the previous generation of consoles.

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Daniel Kline is long Microsoft. The $399 price has him considering buying an Xbox One and pretending it's for his 10-year-old son. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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