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.

Are you ready to profit from this $14.4 trillion revolution?

Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers