A game console is a high-tech gadget primarily designed for consumers to play computer games at home in contrast to home PCs or arcade machines. Sony’s PlayStation 4, Microsoft’s Xbox One and Nintendo’s Switch are recent notable examples of the current 8th generation consoles. They utilize high technologies, including Blu-ray, motion sensing, VR, 4K and HD quality video, and online functions. With the next generation of consoles set for release in 2020, it is time to pay attention to this market as technological advancements will also lead to a spike in sales.

Nintendo’s Successful Turnaround – Not Enough to Boost the Market

任天堂开关时大受欢迎了2017. It was a significant contributor to growth in the game console market, having sold about 15 million and 17 million consoles during 2017 and 2018, respectively. Despite its outstanding performance, however, the overall game console market has been sluggish in recent years. The key reason is that two most popular consoles, the PlayStation 4 and the Xbox One, have recently entered the last leg of the product life cycle, i.e., seven years. Further, some youngsters are more familiar with smartphones and tablets to play F2P (Free to Play) games. Therefore, a part of the reason for the sluggishness in demand for game consoles is also the technological advances in smartphones and tablets.

Game Console Market to Enter The Next Growth Cycle from 2020

However, Counterpoint Research expects that the game console market will rebound in 2020 and grow even more in 2021. This will be mainly due to the launch of the new generation products from Sony and Microsoft. Every time these two companies launch a new generation console, there is a massive spike in sales. Reportedly, Sony and Microsoft are preparing for a generational transition, scheduled for late next year. Moreover, we are not seeing any significant shift in demand among core gamers as most of them are not that satisfied with the specifications and features of smartphones and tablets to experience grand 3D video games.

Exhibit 1: Top Three Game Console Players – Sales Forecast (in million units)

* Includes Sony PlayStation®4/PlayStation®5, Microsoft Xbox One/Xbox Two and Nintendo 3DS/Switch/Switch Lite

Sony and Microsoft – Launch of the Next-Generation Products in 2020

The battle of the consoles is now on among Microsoft, Sony, and Nintendo. Although some second-tier players such as Sega, NVIDIA, Valve, Logitech, and local Chinese players have made efforts to get a foothold in the market, their presence has been weak, and they have failed to gain significant market shares. While the top three players have been competing offering differentiated products with multi-utility features for exceptional experiences, the achievement of Nintendo Switch has driven Nintendo to new heights. After a record-breaking comeback, we expect Nintendo to maintain its market position for a while after it releases the Nintendo Switch Lite later this month. Sony and Microsoft have ruled the game console market for a long time. Their strategies are to focus on hardcore gamers that are willing to spend a premium amount on high-performance game consoles. Along with strategic pricing and marketing, both companies will seek to regain their dominance in the game console market with new generation products to be released in 2020.

Exhibit 2: Nintendo Switch Lite to be launched Sep. 20, 2019

Tech Giants Joining the Gaming Industry

Outside the pure game console market, it is noteworthy that major tech giants are entering the gaming industry with different platforms. Facebook-owned Oculus released an all-in-one VR headset, Oculus Quest, last May and its expected sales volume for this year is close to one million units. Apple will launch a new video game subscription service, Apple Arcade, for US$4.99/month on September 19^th. Later this year, Google will also launch a high-performance cloud gaming service, Google Stadia. These services will enable gamers to play high-end games on the internet, without the need for expensive hardware. However, we believe that this concept of cloud gaming and VR gaming do not pose a threat to the game console market in the near future as the target customers will be different. In addition, VR/AR headsets will actually be a growth driver, as they will ultimately combine with game consoles.