There’s a battle underway for your eyes, ears and attention. It’s not the latest Victoria Secret parade, but a battle between two of the biggest heavyweights in technology.
This is set to be bigger than VHS vs Beta, Cassette vs CD or PC vs Mac.
For an industry that’s over $66 billion in size there’s a fair bit at stake here. And this battle might spell the end for the loser…
It all kicked off yesterday and is set to intensify this coming Friday. This is just the beginning too, as this is set to drag on for at least the next five years.
It will see new companies achieve unheard of success and will definitely see the end of others. What’s more important than anything though is which side will you be on? Because you’ll side with one of these two.
If you don’t you’re simply missing out on the biggest change to your home entertainment since you got your first TV set.
We’re talking about the much-anticipated video game consoles from Sony [NYSE:SNY] and Microsoft [NASDAQ:MSFT].
This isn’t some play to get video games into kids Christmas stockings. This is serious business.
Yesterday Sony officially launched their new PlayStation 4 (PS4). This coming Friday Microsoft will release their Xbox One.
The last time Microsoft launched a games console was 2005. It was the Xbox 360 and it went on to sell 79.4 million units worldwide. Considering it’s still for sale, that number is only going to go up. In fact, add a couple million more as prices fall when the Xbox One goes live.
The first generation Microsoft game console was the Xbox. Launched in 2001, it set Sony and the PlayStation right in its sights.
Xbox sold over 24 million units worldwide. Their investment into gaming paid off. Microsoft had created a highly profitable business.
So they decided to invest more into the Xbox division. It turned into one of their most successful divisions as each generation of Xbox came to market.
Sony had been making money off console gaming for years before Microsoft entered the ring. Sony’s first serious gaming console was the (much-loved) PlayStation (PS). The first generation of PS launched in 1994 sold 102.45 million units.
Sony knew they were onto something and in 2000 they launched the biggest selling games console of all time. The PlayStation 2 (PS2). PS2 applied technology that most supercomputers (at the time) would be jealous of.
The PS2 sold over 155 million units worldwide. It is, hands down, the godfather of video gaming.
But not one to sit still, Sony launched the PlayStation 3 (PS3) in 2006. Not the resounding success of the PS2, the PS3 (only) sold 80 million units worldwide.
And now it’s time for the next battle. These two technology giants are going head to head with what they both claim to be a revolution in gaming.
They both want control of your living room. Because the next generation consoles, the PS3 and Xbox One, are more than just a gaming console. They’re entire multimedia systems.
This is serious business, with literally billions of dollars at stake. And it’s not just the actual consoles that are so important to this industry.
Hollywood is Dead. Long Live The Video Game
There’s no point having the world’s most advanced gaming console if you’ve got nothing to play on it. The games that go with each system are equally as important to Sony and Microsoft as the consoles they’re making.
Years in advance Sony and Microsoft approach game designers. They make them sign confidentiality agreements, and more than likely dump big hessian sacks filled with cash on their desks.
The whole point is to have games completely ready to go when the new consoles go live. And there’s big profits at stake if a game can be secured as an ‘exclusive’ title.
Because one successful game can make or break a company. It’s not just the game design company that put their business on the line; the console maker has a lot to lose also.
Take for instance Microsoft’s first console, the Xbox. There is absolutely no way it would have been the success it was if not for one particular game.
The game was Halo. Halo launched with the Xbox. It received praise from critics that most major films would be jealous of.
It broke sales records and hit one million units within a few months of release. If it wasn’t for that game it’s possible Xbox wouldn’t have had the success it’s had to date.
Success Comes at One Billion Dollars
If you think there’s big money in movies and Hollywood, you’d be wrong. Hollywood has taken a back seat. In fact ‘movie stars’ are playing video game characters. There’s better money in it. The new entertainment industry is all about gaming. Gaming is now a multi-billion dollar market.
Here’s why.
A few weeks ago a new video game, Grand Theft Auto V (GTAV) launched to market. Within 24 hours of release it reached $800 million in sales. It only took three days to reach $1 billion in sales. GTAV technically now holds the title of fastest selling, highest single day grossing game of all time.
Put this in comparison to one of 2013′s biggest Hollywood movies, Thor: The Dark World. In the space of a week Thor has grossed about $342 million in sales.
That’s about one third of GTAV.
Then last Tuesday another game, Call of Duty: Ghosts (CODG) launched. Within one day it’s maker, Activision [NASDAQ:ATVI] had shipped $1 billion worth of units into shops.
Every major video game title released now sets the bar at that mark. Success comes at one billion dollars; anything less is a waste of time.
This is all warming up to the next two weeks and the madness that is Christmas time. These game and console makers aren’t stupid. They know this is the prime time to launch their headline titles as people spend up big.
But don’t think that these video games or video game consoles are for the kids. The average age of your typical ‘gamer’ is 34. In fact the average age of gamers has steadily increased over the last few decades. Seems the older we get the more we like to play video games.
What it means is that companies like Sony, Microsoft and Activision are now aiming their products at a different demographic.
A ‘young professional’ will happily spend $549 on a new console. Then probably add a few accessories. Of course there’ll be accessories…and a few $90 games also. About $1,000 later they’re good to go. I should know. That’s how it went when I bought my PS3.
We’ll see how it pans out over the next two weeks. Failure of either one could kill the name PlayStation or Xbox for good. But success could mean massive profits, and a corresponding bump in the share price. Console releases only come around every seven years or so. So if you know whom to back there’s a small window to cash in on the huge profits available.
Between the game companies and console makers this year is going be huge for gaming. It’s a fickle business and there are new competitors wanting a slice of it. But for now the battle is between Sony and Microsoft. It’s a war in your living room where you get the enjoyment and these technology giants – and their investors – get the profits.
Sam Volkering+
Technology Analyst, Revolutionary Tech Investor
