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Mobile Gaming May Not Be Killing the Console, But is Sure is Hurting it

You may remember a lot of hyperbole a few years ago about how the mobile market was killing the traditional console and PC space by being cheaper to produce, cheaper to buy, and having a much larger install base. Since then, many have considered those paranoid “chicken little-esque” thoughts to be misjudgements based on knee-jerk reactions. While the industry does indeed have a knack for jumping any chance they get, there is a lot of data that’s proving our early assumptions to not be entirely wrong.

For context, let’s look at the state of Japan’s console gaming industry. It’s no secret that the small island nation’s once strong console market has been struggling as of late. In the middle of the last console generation the market’s total revenue was around 21 billion yen. Around half of that was inside the retail market, where most traditional games are sold. Thriving, the industry pumped out numerous titles and created landmark partnerships with the west, like Square-Enix’s deal with Microsoft that eventually produced The Last RemnantInfinite Undiscovery, and Star Ocean: The Last Hope for the Xbox 360. Fast-forward to the end of the console’s life-cycle in 2013 and the retail market was cut in half, taking in only 4.5 billion yen in revenue. The online market however rose to almost 10 billion yen, a massive growth of over 150%. This strong growth, as you might have guessed, was mostly due to the country’s rapidly growing mobile market.

So the question is, if Japan’s industry-wide revenue is so strong why is there still a conception of it being in a rough shape? An article from GameRant last year claimed that the Japanese market was at an incredible 24-year-low, citing a report from famed Japanese gaming publication Famitsu which showed the country’s staggering physical sales as evidence. Industry analyst Serkan Toto made an important distinction, stating that Famitsu reports on stats differently than many in the West by  defining “online games” as “smartphones, tablets, feature phones, and the PC”. It’s irrefutable proof (and well-known at this point) that Japan’s gaming industry is dominated by the mobile market.

“A recent article from The Wall Street Journal claims that international mobile game revenue will, for the first time ever, overtake traditional games this year”

So what does that mean for the West? Headlines show almost every month the constantly record-breaking numbers of new franchises, sequels, and console sales. We must still have a strong traditional games market, right? By many accounts, we do. However that is not without its stipulations. The retail market is the largest point of income for both Europe and the United States. The domestic US market alone makes up $15 billion on the $17 billion made at large, while Europe makes an equally impressive 20 billion in total revenue. However, just as Serkan Toto has pointed out before, the West does not distinguish which games are “online games” and which are bought physically, so there is no clear metric to track at large (at least when looking at numbers given out by the NPD).

The game industry is also in a particularly tough situation at the moment. Development costs have ballooned over the years forcing practices like season passes and free-to-play models to help recoup the costs of second-hand game sales and the insufficient base prices. A higher standard from gamers is also causing Sony and Microsoft to look towards half-step console upgrades as both companies have been rumored to be working on new skews of their existing machines. An interesting article from VentureBeat also claims that consoles sales have actually been causing revenue to drop in recent years, despite record-breaking PS4 sales. The article claims that the fierce competition between Microsoft and Sony have forced both manufacturers to lower their prices so heavily that they’re no longer maintaining the high profit margins that they’re expected. Coupling this with an ever-increasing mobile market in the West and how it will always have a higher instal base than traditional consoles and PCs, you have a potential for a drastic drop in market share. It provides reasoning for both Microsoft and Sony’s recent rumored consoles, which are both unprecedented in the console space.

Angry Birds 1-min

Things don’t end there, however. A recent article from The Wall Street Journal claims that international mobile game revenue will, for the first time ever, overtake traditional games this year. The article claims that of the reported almost $100 billion in total software sales expected internationally this year, that 32% and 31% will be made up of PC and console games respectively, while the remaining 37% will be made up of mobile. It’s a drastic and unforeseen concession of our Western-focused industry.

If you ask any kid today under ten if they play games, they’d most likely say yes. The same was most likely true a generation ago when I was growing up on GameBoys and Segas. If you ask any kid today under ten what they play them on however, they’ll most likely tell you they play them on a phone or a tablet. As anecdotal as that may sound it may be the most damning piece of evidence to point towards the eventual mobile conquering of the industry. It’s so much easier for a parent to buy a family tablet or phone that their children can use playing games you bought for only a few dollars than buying big space-consuming boxes for hundreds of dollars that they’ll have to replace in a few years. The children of today aren’t learning how to play games from Mario or Sonic. They’re learning from games like Angry Birds and Candy Crush.

“The children of today aren’t learning how to play games from Mario or Sonic. They’re learning from games like Angry Birds and Candy Crush

A different breed of gamer is being created today, and while games like Minecraft still hold gigantic sales figures among young kids they’re not crossing over to any other games in the PC space. Meanwhile when they get on Mom and Dad’s tablet they can play any number of games that they’ll grow up playing on their own phones in their teens. The Pokemon of this day and age is played by tapping on a screen, not on a button.

While it’s impossible to tell the future of such a quickly changing industry as ours, the biggest thing to remember is that the unexpected is always the likeliest answer. The disregard of mobile gaming in the West due to “cash-grab” games have made many to underestimate the growing mobile market. Though technologies like VR and AR may be able to push high-end gaming forward for the average aged gamer, the younger generation are the ones who will dictate the trends of ten, fifteen, and twenty years from now. Undoubtedly the landscape will change between then and now and it’s impossible to tell exactly how. Furthermore, it’s clear that mobile isn’t killing the console anytime soon. What I know for certain is that mobile isn’t shrinking, and the possibility of a non-console or PC dominated industry seems more likely than ever.