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Appliances and Electronics Our insights capture shifts in consumer lifestyles and themes impacting the global consumer appliances, electronics, and toys and games markets. Themes include new business models, sustainability, innovation and the future home.

X Marks the Spot for Change in Console Gaming

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Video games account for a large part of the play industry, with the category valued at just over US $71 billion globally in 2012. While global sales growth remained more or less static at 1% in value terms in 2012, a further US$30 billion is set to be added to this over 2012-2017. Some US$15 billion of this forecast revenue is expected to come from digital gaming, highlighting this as the most exciting area for investment going forward.

The cyclical industry now faces fresh challenges from the popularity of digital games, which can be played on other devices such as smartphones and tablets. In order for console manufacturers to succeed in this new competitive environment, they must capitalise on the growth of digital gaming whilst also differentiating their products from others in the marketplace.

World Video Games Hardware, Software and Digital Games, Value Size versus Growth Rate 1998-2012

ScreenHunter_25 Jul. 03 11.02

Source: Euromonitor International

The video games hardware and software markets have seen a steady decline since 2007 when the Xbox 360, Wii and Sony PlayStation 3 were released. When looking at this market historically, we can see that with the release of each set of consoles, the market enjoyed a peak and then a steady decline, until the next release. However, 2011 and 2012 saw the release of the Wii U, PlayStation Vita and Nintendo 3DS, all of which have failed to lift the console market out of its steady decline. This new trend in the market can be attributed to the increase in digital gaming which has allowed cheaper games to be played on multiple devices, thus taking market share away from the larger players.

With the recent unveiling of the new Xbox One, Microsoft is now looking to reposition the console as an all-in-one home entertainment system, complete with live television, web browsing, social networking and a whole host of other multimedia functionalities. This repositioning will have various impacts. With the new console now widening its appeal across a broader demographic, some critics have suggested the focus has been taken away from the gaming component, leaving hard-core gamers disenchanted with the product. However, the wider range of services that the new console offers could, if successful, help boost other Microsoft products, integrating them together on one platform which may become the foundation for in-home entertainment. This move, however, will put Microsoft in direct competition with the likes of Apple, which is working on a similar multimedia system, Apple TV.

Microsoft Xbox One Games Console


Is the future digital gaming?

The new direction that Microsoft is adopting for gaming consoles may prove a success as it does address the issues that the industry has faced in the past. However, whether or not the success of this console will come from capitalising on the US$15 billion which is forecast to come from digital gaming over 2012-2017 remains to be seen. The gaming community that is driving the growth of this industry is not necessarily looking for a home entertainment system, especially one that Amazon has let slip may cost around £600, with a note stating “Order now and you will be charged the lowest price on release”. Digital gaming is a conduit for cheaper, easy to use and technologically advanced games. This mantra is what has brought such strong growth to digital gaming, with the category boasting a 2007-2012 CAGR of 22% globally.

By diluting the offering of the Xbox One, gamers may look elsewhere for their gaming experience. While catering for one and all, Microsoft could potentially end up alienating not only its core consumer base but also the entire hard-core gaming population.

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