30 Years of Consoles, Abridged: Who’s Next?

In Parts 1 and 2, I talked about what makes a console successful, past and present. To sum up, the most successful consoles had any combination of these 4 attributes:

  • Convenience (apps, portability, etc.)
  • Power (an attribute not seen before the current gen)
  • Games (whether for first-party polish or third-party volume)
  • Cost/Value (as it turns out, most people are apprehensive about spending a lot of money)

Nintendo took the portability of a Nintendo DS, gave it console hardware, a sandbox style Zelda game and a new mainline Super Mario game in the same vein as Super Mario 64 and Super Mario Sunshine. They hit that convenience/first-party sweet spot and I have faith it will take them far.

Sony has built up a reputation with developers throughout the years and that those relationships have followed them all the way to the current year. They are sitting on a treasure trove of IPs that they can utilize if they wanted, and that is something most competitors should fear.

Microsoft started off strong with the Xbox and the Xbox 360, but dropped the ball with the mixed message of the Xbox One. The Xbox Live experience was great for two generations, but focusing too much on its multimedia capabilities hurt the console. With the Xbox One X selling as much in 1 week as the PS4 Pro did in 4, it looks like it might find its niche as a premium multimedia machine after all.

Nintendo, Sony and Microsoft are all doing something right this generation. But they didn’t start off as games companies. Nintendo sold trading cards for 50 years before even stepping their toe into games. Sony was a top-tier hardware company, making everything from DVD players to portable CD players to TVs. Microsoft made the Windows operating system you may have heard of once or twice.

Each of these companies stepped into the gaming market and made something successful. They took huge risks and succeeded. There aren’t many game companies who could take a risk like that and succeed. That isn’t to say there aren’t those with the finances to make a game console, however. Newzoo, a market research company that specifically analyzes “global games, esports, and mobile markets” posted a list of The Top 25 Companies By Games Revenue.

Surprisingly (or unsurprisingly, depending on who you ask), Nintendo doesn’t make it into the top 10. But everyone above them has some serious money to make a dedicated gaming machine happen.

Let’s start with #10 and work our way up. The total numbers are from the first 6 months of the calendar year and are represented in USD.

 

#10 is Nexon. Perhaps best known for making the Fantasy MMO Maplestory and free-to-play FPS Combat Arms, the South Korean company brought in roughly 1.04 billion dollars, mostly due to in-game transactions.

#9 is Bandai Namco. A Japanese company, Bandai Namco is now known as “the company that publishes all the anime games, and also Dark Souls,” but was once more closely associated with Pac-Man and arcades. With a staggering number of anime games under their belt and pulling in 1.14 billion dollars, they’re a big player in the Japanese gaming industry.

#8 is Google. Yes, that Google. The advertising company that also makes apps, Google raked in a whopping 2.06 billion dollars on Google Play sales alone. While it may be pocket change for Google, it’s double what Nintendo pulled in during that same time period.

#7 is NetEase. NetEase makes online PC games such as Fantasy Westward Journey II and New Westward Journey Online II, but they also operate some of Blizzard Entertainment’s games in China, such as World of Warcraft and Overwatch. With the intention to bring Minecraft to China, it’s no surprise they brought in 2.90 billion dollars.

#6 is EA. One of the biggest names in the Western gaming industry, EA has developed and published games for 35 years, with the help of dozens of acquired studios. One wonders how a company can turn a profit when they close an acquired studio every 8 months on average, but lo and behold, EA pulled in 2.98 billion dollars.

#5 is Apple. Much like Google, they don’t publish their own games but rather, have created their own store for others to upload their games. Due to a large install base and the longevity of the App Store, Apple brought in 3 billion dollars.

#4 is Microsoft. I won’t harp on this too much, there are 2 other posts you can read where you can see me wax on about their success. Suffice it to say, it’s not surprising that they made 3.23 billion dollars.

#3 is Activision Blizzard. While publishing both the Call of Duty franchise and the World of Warcraft, Activision Blizzard also acquired King, the company who made the ridiculously popular Candy Crush Saga. Game revenues for the company were at 3.35 billion dollars.

#2 is Sony. Again, I won’t harp on this too much, Sony is one of the Big 3 console manufacturers, but it is worth noting that Sony pulled in 4.27 billion dollars, almost a billion more than the 3-pronged titan that is Activision Blizzard.

#1 is Tencent. If you’re not familiar with Tencent, the simplest explanation is that they are the Google of China. With their hands in everything, from creating China’s leading web browser, social networks and chat apps, their own online payment platform, and the largest gaming community in the country, they have raked in a staggering 7.97 billion dollars in game revenue alone.

 

There are some things we can take away from that chart. For one, while Sony and Microsoft manufacture and distribute their own consoles (although technically, Foxconn manufactures them), they only have one avenue for game distribution. Two, if you include Microsoft’s PC gaming platform… but most wouldn’t.

Google and Apple made 2 and 3 billion (respectively) on their platforms alone, while Activision Blizzard and EA are both enormous publishing companies with PC-based distribution platforms (Blizzard Battle.net and Origin, respectively) and top-tier franchises under their belts. Both Nexon and NetEase’s games are available on their respective websites, whereas Bandai Namco games are much less selective about where their games get published.

But Tencent is something else entirely.

Making more than double what Activision Blizzard made in 6 months, Tencent is a tech Goliath. Topping the charts in games revenue for the last 3 and a half years, they’ve dominated the gaming industry in China.

Due to a video game console ban back in the year 2000, companies like Nintendo and Sony were limited with what they could do in the country. 15 years later, the ban was lifted and Nintendo, Sony and Microsoft could finally branch out into the mysterious market that was Chinese gaming. But will they?

Tencent had more games revenue in 6 months than Activision Blizzard and Sony combined. The market is there. However, while they may find success in China, they will have significant trouble toppling the Chinese behemoth. It may not even be worth the time of the Big 3 to try and compete with Tencent; towering over the competition, the Big 3 might have to concede to small victories in China. With the console ban lifted, however, Tencent could create their own console and achieve worldwide success.

In fact…

The TGP Box (Tencent Games Platform Box) is a compact PC that runs on Windows 10, but can open up into a “TGP Box Game Mode,” akin to Steam’s Big Picture Mode. Aside from being a League of Legends machine (fun fact: Tencent owns Riot Games), they have an almost 50% stake in Epic Games, which means there is a slight possibility of seeing some Epic Games… games on the TGP Box. This isn’t even taking into account the fact that Epic Games owns the Unreal Engine, one of the most used video game engines¬†(if not, the #1 most used) on the market.

Essentially, the TGP Box is a Steam Machine that runs on Windows, instead of a new OS that no game developers support. Sorry, was that too snarky? Okay, moving on.

If Tencent has done one thing right, it’s amalgamation. Remember the 4 attributes I listed right at the start of this post? Tencent created the ultimate “convenience” in the form of the app, WeChat. An all-in-one app, where you can talk with your friends, go shopping, blog, get your news, pay your bills (including traffic fines) and more. If they can apply those all-in-one sensibilities to a games machine, it may be–as the cool kids say–“game over” for the competition.

So, we may see Tencent make a big move in the Western gaming industry yet. As one of the biggest Internet-based companies in the world, I’d be surprised if they didn’t. But what about North American tech giants? Tencent is monstrous in China, but we have some tech juggernauts ourselves.

We need not look any farther than the financial investment term, FAANG:

Facebook
Amazon
Apple
Netflix
Google

These 5 companies are the best performing tech stocks on the market, constantly impressing investors. But could they succeed in making a gaming-oriented push? Long story short: no. They probably wouldn’t succeed and/or wouldn’t want to try.

But it’s fun to think about.

Let’s take a look at FAANG, starting with the already mentioned Apple and Google.

Apple and Google have a lot of similarities. They both offer user-friendly products and services and try and keep people in their ecosystem. Apple has the jump on Google with this, creating their own OS and hardware to compete with Microsoft. At the end of the 2016 fiscal year, they were the biggest tech company in the world.

If there’s one thing that people like, it’s convenience. If Tencent wasn’t enough proof of this, you need not look further than your pocket, your computer desk or even the palm of your hand at this very moment. Smartphones are the quintessential example of “convenience”; with a smartphone, almost everything you would ever need is–quite literally–in the palm of your hand.

Apple is the master of convenience, with their user-friendly ecosystem brewing for over a decade. It’s the reason why people line up for days, sometimes even weeks, to buy the latest iPhone or other Apple product. But they didn’t start off that way. Macs were initially created as an alternative to standard PCs, but Apple blossomed and created more disruptive products, like iPods and iPads. With all of these products under their belt, they created an ecosystem, where everything works with everything else. There is a reason Apple has more market capitalization than Alphabet, Microsoft and yes, even Tencent.

But where Apple has built a reputation on user-friendliness, Google has built a reputation as the website. Being the primary search engine since 1996, Google is the website to go to when you want something. If Apple is synonymous with user-friendliness, “Googling” is synonymous with “search” and “information,” so much so that the verb made it into the Oxford Dictionary (despite actually being a word, albeit with different spelling).

Directions to the nearest GameStop? Google Maps. Want to read about politics? Google News. Need to bring some files with you wherever you go, but don’t have the storage for them on your device? Google Drive. All of which, you can access via Google’s own ecosystem. If that wasn’t enough, Google gathers literal gigabytes of your data, aiming to out-think the user by suggesting things the user hasn’t thought about searching yet. They are one of few Gatekeepers of the Internet, for better or worse.

In addition to all of this, they created the mobile OS, Android. The biggest competitor to Apple’s mobile iOS (and with Google Play bringing in slightly more revenue than the App Store), Android is open-source, so it can theoretically be customized to the user’s liking. Not only that, but the majority of Android devices aren’t Google products at all, but third-party devices with a customized version of Android running on them.

Google and Apple‘s yearly revenues are staggering, each dwarfing Tencent in annual revenue. Clearly, they have the financial power to create a dedicated gaming console. But what would a console like that look like?

In terms of hardware, Apple could pull off something spectacular. Looking at the 4K ready Mac Pro, it’s clear Apple can create a powerful machine in a small form factor. With the Apple ecosystem and MacOS in a powerful box (or tube), the pieces are already there. All Apple needs to do it put them together. 2+ million apps on the App Store, roughly half of those apps being games, it could be a one-stop-shop for everything Apple.

Google has that potential, as well. With a search engine that knows nearly everything about you, Google could theoretically make a console that suggests games to you, uploads your saved game data to Google Drive, gets you news on games you’re playing, and load up YouTube videos of games to watch trailers of upcoming games.

It sounds crazy, doesn’t it? That’s probably because it is. Apple and Google each brought in over 100 billion dollars in annual revenue in 2016, through their various products and services. In that same year, Tencent brought in 20 billion (12 billion of that being specifically video game revenue). It wouldn’t be worth it for Apple or Google to heavily invest in the console gaming industry (a risky industry, dominated by 3 or 4 companies) when they already have a steady stream of cash. This isn’t even including the fact that more people would rather buy App Store/Google Play games on their smartphones or tablets.

It might work in theory. Perhaps Google or Apple could heavily invest in game publishing, financing first-party games you can only get on their devices. But considering the millions of apps on their services, mediation of that size just isn’t worth it.

If Apple or Google wouldn’t create a gaming console, maybe Facebook could?

With gaming communities becoming increasingly relevant and with some people even getting their news from Facebook rather than dedicated sources, it’s possible that Facebook could be a “social gaming console.” The install base is there: 2 billion people have Facebook accounts, so a Facebook Box (FaceBox?) wouldn’t be outside the realm of possibility. Facebook also owns Oculus, the company that Kickstarted a virtual reality headset, the Oculus Rift.

Imagine, a future where you access Facebook through your virtual reality headset, play games, read the news, everything. I’m getting some Ready: Player One vibes thinking about it. This too is very unlikely. Facebook, while huge, has little to no experience in the gaming industry. Their experience reaches about as far as casual and social games like Farmville. While these games make up a decent portion of the industry, the convenience of having Facebook on a device separate from your TV is too great to ignore.

So, Facebook doesn’t seem likely to dip into the console gaming market either. If anything, Facebook might be better off making a phone; the most financially successful platforms to make games for are smartphones and tablets according to financial numbers from 2017. In general, casual games tend to do better on smartphones as well, so this wouldn’t be outside the realm of possibility.

Rising in popularity alongside casual games, watching live-streamed games on sites like Twitch is becoming closer and closer to the norm. Which is very convenient for Amazon.

Back in 2014, Amazon acquired Twitch for almost 1 billion dollars and became the owner of the biggest live streaming platform for gaming. In early 2017, Twitch announced that you could purchase games via the website, with Ubisoft, Telltale Games and Paradox Interactive onboard. In theory, you could watch someone play the latest Assassin’s Creed game on Twitch, then buy it without ever having to leave the website. Then in June of this year, Twitch signed a two year deal with Blizzard, giving Twitch “third-party streaming rights to select Blizzard esports content, as well as offering game content to users who are Twitch Prime subscribers.”

Twitch does offer “IRL” streaming, where you can watch real people do things instead of fantasy characters, but the real draw of Twitch is the games streaming. Considering Amazon also makes a media streaming device, it would be a surprise if they didn’t implement that in creating a TwitchBox. With Amazon’s e-Commerce capabilities, a gaming-oriented platform in Twitch and the multimedia capabilities of an Amazon Fire TV, Amazon has the greatest chance at creating a gaming console than any of the other 4.

The only thing that stands in their way are the exclusive games. It may have the “value” and the “convenience” boxes ticked off, but games ultimately make the machine. Amazon isn’t a games publisher; while they do create and distribute their own content, no FAANG company is better at it than Netflix.

Netflix seems like an odd choice. After all, they create visual media of all sorts, not interactive media like games. But much like Apple, Netflix has that name recognition. Netflix has published original content in many different genres; comedy, documentary, drama, animated.

As one of the better performing tech stocks in the market, Netflix could potentially finance a game publishing branch, where for a monthly fee, you could stream Netflix Original Games. Their name recognition might also encourage big publishers like Ubisoft and EA to bring their games over to the service for a small cut. All they would need is a box to do it with.

Game streaming is tricky, though. To get the best possible experience, it requires a fast and steady Internet connection, something that is up to the Internet Service Provider. If history is any indication, ISPs usually aren’t looking out for your best interests. To rely on them to provide a primary service would be a foolish choice.

So, to sum up: Apple and Google make more than enough money without a game industry focus, Facebook has too big a pool of casual games for a home console (perhaps not for a phone), game streaming is too unreliable for a Netflix Gaming service to succeed, but Amazon could very well bring something new to the table. Except for maybe the latter, none of the members of FAANG could feasibly create a games machine as successful as the current competitors. But there may be other tech companies who could… just not in the way you think.

We touched upon convenience, games and value. Tencent’s game machine would be the ultimate convenience, Apple and Google’s services host millions of games between them, while Netflix could finance their own, and an Amazon box could feasibly have the overall best value. But we didn’t talk about power.

As mentioned in the last post, the Xbox One X is selling surprisingly well, due mostly to it marketing itself as “the world’s most powerful gaming console.” It’s no surprise: tech enthusiasts always want to be on the cutting edge of tech. The sharper the edge, the better the games look, and there is no company with a sharper blade than NVIDIA.

Known as the company that makes absurdly expensive graphics cards, NVIDIA is the market leader in GPU manufacturing. Yes, GPUs are only one part of a PC, but NVIDIA has one thing over all the members of FAANG: they already have a truly premium digital streaming box. The NVIDIA Shield Android TV can stream games and movies in 4K at 60fps. It may not have nearly the amount of apps the Roku line has, but it has more AAA games than its media box competitors (as in, more than zero). The Witcher III, Street Fighter IV, Borderlands 2 and more, are all on the NVIDIA Shield.

Having some high-tier games already puts the NVIDIA Shield above its media box competitors, but not nearly as high as the Big 3 console manufacturers. If it beefs up its console with some hard-hitting hardware, NVIDIA could very well become the Big 4th. Its biggest issue then, becomes games publishing. As it stands, there is not a single game on the NVIDIA shield that you cannot find on any other platform. So while they may have the hardware, they will have to actually start getting some exclusive deals to make a dent in the mainstream console market.

I’ve spent a lot of time talking about tech companies and what they can offer. If they focused their efforts, they could definitely offer a lot. With hands in everything, companies like Apple and Google could make polished machines that offer much more than the current console offerings. A Tencent gaming console might succeed in the West, but chances are good that they won’t bring it over and stay as the kings of the Chinese gaming market. A Facebook phone doesn’t sound too far off, and maybe if Netflix partnered with Google and Google Fiber for blazing fast Internet, we could perhaps see a Netflix game console or service. Amazon and NVIDIA seem like the two likeliest tech companies that could break into the console market.

Maybe they could even pool their efforts: Netflix-style gaming service, with NVIDIA hardware, Apple software, Google’s all-in-one services and app library, and Amazon/Twitch distribution and streaming. Together, in one unholy gaming machine. If any of these companies were to make a game console alone, it’s likely it would just feel like a PC in a console’s clothing.

Looking at what’s out there in terms of games, companies making services instead of games makes the most sense. Apple and Google are killing it in game revenue alone, and they don’t financially support any games. They offer a service for people to upload their games and they take a cut. Most game enthusiasts will notice this is how Valve makes their money (as opposed to actually making and finishing games). But they’re not wrong in doing so: the numbers speak for themselves. So as interesting as it would be to see a Google console, it’s more financially reasonable for Google and Apple to host a service and skim a little off the top.

But as much as I’ve been talking about tech companies, I haven’t even mentioned who would be the most likely to create a game console: other gaming companies.

Most game companies would have the lowest barrier to entry when it comes to making a games console. Activision Blizzard is halfway there with Blizzard Battle.Net. Through Battle.Net, users can log onto the service and play all of their favourite Blizzard games, whether that be World of Warcraft or Overwatch. But Activision Blizzard is a huge publisher. They don’t have to restrict themselves to PCs; they could leverage their well known IPs (Call of Duty, Destiny, Warcraft, Hearthstone) and create a box where you know you’ll get the best experience for all of the best games of the year.

As the game publisher with the highest revenue and stock price, they certainly have the finances to do it. Plus, they have been publishing games as long as Nintendo; it wouldn’t be farfetched to say that they have enough resources and/or experience to finance smaller development teams and have them create exclusive games for the console. There is one main issue though, being that most of Blizzard’s games are PC-oriented. The switch from mouse & keyboard to a controller might put off some. Currently, there is no real “middle ground” for those sorts of controller inputs (except for maybe the Steam controller), so research into some hardware would be necessary.

But it may still be within the realm of possibility. Razer is a very well known “gamer brand,” known for making loud keyboards and louder looking headsets. While many wouldn’t choose Razer controllers over something like an Xbox One Elite controller or even a PS4 controller, they certainly do the trick.

EA is in a similar situation as Activision Blizzard. EA’s online service, Origin, is only available on PCs. Where Activision Blizzard has some big franchises that are supported for years, EA has a steady stream of annual franchises. Where owners of an Activision Blizzard console would have to wait a few years for a new AAA game to hit the console, there would be a new selection of first-parties for an EA console every single year. But it’s not all sports and racing games they have. EA is sitting on a treasure trove of franchises that they could bring back and make exclusive to the console.

EA “is the third-largest gaming company in the Americas and Europe by revenue and market capitalization” as of September 2017, so they could very well port their games to a dedicated Origin box. Comparing them to Activision Blizzard once again, they have the resources and the experience to finance development teams to make some exclusives.

Having EA publish one of your games is the deal of a lifetime for most developers. But considering EA’s track record, I can’t see many core game enthusiasts supporting it, and I can’t picture somebody buying a game console exclusively for the annual franchises EA offers.

Where EA owns their annual franchises and can pump them out like clockwork, Bandai Namco publishes a wide range of games, some of which are developed by 3rd party companies, but most of which are developed by Bandai Namco themselves. A big player in the early arcade scene, Namco developed over a dozen different franchises, including the legendary Pac-Man. Fast forward to 2017 and Bandai Namco has almost as many franchises as Nintendo. Maybe even more.

With a concentrated effort on developing games and their own box to play them on, it sounds reasonable. Despite being not being as big as Activision Blizzard, EA or even Nintendo, they’re still a relatively big company. The only issue then, is the online services. Bandai Namco doesn’t have the same brand appeal in gaming as something like PlayStation or Xbox, at least not in the Americas; it would be difficult for them to acquire the apps the Roku has, or even the Xbox One.

With their close relationship with anime companies, however, perhaps they could create an online store where you can buy the latest episodes of your favourite anime series, or a free subscription to the anime-style Netflix app, Crunchyroll, with a subscription to Bandai Namco’s service. An anime machine, of sorts. It might not achieve worldwide success, but it does have a niche appeal.

 

Tencent, FAANG, big publishers. There are quite a few theoretical competitors in the console market. Will they make big plays soon? My gut tells me “maybe.” For companies like Google and Apple, it’s hardly worth it. The amount of money they’re sitting on is so high, their execs are getting altitude sickness; a gaming console would be superfluous. For a company like Bandai Namco however, it might be worth looking into. Tencent is a mysterious player, the single ruler of their own market. But will they leave their empire and try to overthrow the Three Kings of the console gaming industry?

The trilogy is over, but I’m not quite done. I’ve talked about past, present and future, but I’ve got one final post to close everything off. I hope you’ll enjoy it.

Stay tuned!

sph3re

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