5 Tactics for the Volatile PC/Console Market
Written by Adam Telfer, our razor-sharp Canadian co-host who doesn’t just play games—Adam both builds and dissects them.
As a badass product leader, Adam cuts through the noise with no-nonsense insights into what makes games tick and why some crash and burn. Whether it's tearing apart the latest market trends or calling out the next big thing, Adam brings a perspective that keeps our discussions brutally honest and ahead of the curve.
"Survive till 2025" seems to be the gaming industry's new mantra. The halcyon days of 2020-2021, fueled by a captive audience and disposable income, feel like a distant memory. Yet, hope emerges as we analyze forecasts and trends, seeking signs of revitalized player engagement and spending.
Recently, I had the privilege of discussing the latest market insights with Devan Brennan, Senior Consultant at Newzoo, dissecting their August 2024 market forecasts. This conversation painted a nuanced picture of the current market, particularly the PC/console segment, and offered a glimpse into its future trajectory.
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While familiar challenges persist, such as the triple threat facing console gaming (rising costs, declining subscriptions, and the risky transition to GaaS), the market shows signs of recovery and evolution. Major releases like GTA6 and the rumored Switch 2 are on the horizon, and breakout hits like Palworld and Helldivers 2 signal shifting player interests. This evolving landscape presents opportunities for agile developers to thrive, even as AAA studios grapple with extended development cycles and rising costs.
Overall, the key insights from the August 2024 re-forecasts:
Modest Market Growth: The gaming market is expected to see an uptick of 2.1% in growth for the year 2024. While this represents a recovery, it still falls short of the more robust pre-COVID growth rates, which were around 4.9%
Mobile Opening Up: mobile gaming is set to grow by 3%, driven by improving economic conditions, platforms opening up, and increasing the success of existing big hits. The market remains challenging for new games.
Console Gaming Stagnates: Console gaming is anticipated to decline by 1% due to a weaker slate, with the Xbox platform showing weakness. Console is expected to rebound to growth next year when GTA6 and Switch 2 releases.
PC Gaming Growth: PC gaming is fastest growing with 4% growth, propelled by the rising popularity of cross-platform releases of console exclusives
Let's delve into the key trends shaping the PC and console gaming landscape and explore strategic approaches for navigating these dynamic shifts.
In this episode of the Deconstructor of Fun podcast, host Adam Telfer engages with Devan Brennan, Senior Consultant at Newzoo, to delve into the profound shifts within the gaming industry reflected in Newzoo's latest August 2024 market forecast.
Brennan offers insights into the evolving trends across different gaming segments. PC gaming emerges as a key growth segment, fueled by cross-platform releases and a shift in player preferences. Conversely, the console market is experiencing temporary stagnation, primarily attributed to a weaker release slate compared to previous years. The impending release of highly anticipated titles like GTA6 is expected to significantly influence the console market's trajectory, potentially driving a resurgence in hardware sales and player engagement.
It also touches on the challenges and strategies for future growth in the PC Console Live Service sector. There is a need to break through market concentration, where a few dominant titles and companies command a significant share of player attention and spending. This necessitates a renewed focus on innovation and versatility in game development, with an emphasis on creating differentiated experiences that cater to evolving player preferences. This includes a shift towards right-sizing game experiences, focusing on delivering high-quality, engaging content without excessive bloat, and exploring innovative genres focused on the new generation of players.
5 Tactics to Navigate the PC/Console Market
Let's dive into three significant trends currently shaping the PC and console gaming markets and discuss tactical approaches that industry players can employ to navigate these changes effectively.
Trend: Weaker 9th Generation adoption, especially on Xbox
The console gaming market is currently navigating a period of stagnation. Newzoo's August 2024 forecast projects a decline of 1% year-over-year for console, primarily attributed to a weaker release slate in 2024 compared to the blockbuster lineup of 2023, which featured significant titles like Zelda, Diablo, and Baldur's Gate.
However, the underperformance of the console market extends beyond just a lacklustre release schedule.
Firstly, the adoption rate for the current generation of consoles has been slower than anticipated. A significant portion of the player base, roughly half for PlayStation and Xbox, remains on older generation consoles. This was less prevalent in the previous generation (PS4/XB1 era). This suggests a hesitance among players to upgrade to the newer hardware, potentially due to factors such as early cycle limited availability (especially during COVID), lower value proposition (only minor visual improvements), higher attach to cross-gen live service titles (why do you need a PS5 to play fortnite?), and a perceived lack of must-have exclusive next-gen titles.
Secondly, the console market faces increasing competition from other platforms, particularly PC. Sony and Xbox’s change of strategy to cross-release on PC has eroded the once-strong appeal of console exclusivity. Many games previously only available on consoles are now being released simultaneously on PC, often with enhanced features or performance benefits. This has led some players to opt for the flexibility and potential cost savings of PC gaming over console gaming.
Lastly, the economic climate is playing a role in the console market's stagnation. Inflationary pressures and financial uncertainty have made consumers more price-sensitive, leading to a reluctance to invest in expensive new hardware or software. Additionally, subscription services, which have been a critical driver of console revenue in recent years, are experiencing a slowdown in growth, further impacting the market's performance.
Tactic 1: PC isn’t just for Ports
PC gaming is the fastest-growing segment. Newzoo stipulates that developers should recoside the importance of PC as a target gaming platform.
It’s been a common news story for developers to deprioritize the PC version of their game for their console versions. PC Port versions commonly launch in a bug-ridden underperformant state. As the market continues to shift more and more of the playerbase to PC, these ports should focus on delivering high-quality, optimized PC experiences that cater to the platform's audience.
Tactic 2: Ride the GTA VI Next Gen Wave
The impending release of Grand Theft Auto 6 (GTA6) is poised to send shockwaves through the console gaming market. Anticipation for this blockbuster title is sky-high. The game's release will undoubtedly lead to a spike in player engagement, cannibalizing playtime from other titles as we saw during 2023. This could create a challenging environment for games launching in close proximity to GTA6. The sheer scale of GTA6's marketing and media coverage could make it difficult for other games to gain visibility during its launch window. Developers will need to find creative ways to cut through the noise and capture player attention.
While developers should do everything they can to get out of the “blast radius” of GTA6’s release and go-to-market, Newzoo stipulates that there will be a surge in next-gen sales presents an opportunity for developers on the platform. GTA6 is likely to trigger a wave of console upgrades as players seek to experience the game on the latest hardware. This could significantly boost sales for PlayStation 5 and Xbox Series X/S, benefiting the overall console market.
Trend: Single Player AAA Development Costs continue to Explode
Premium Single Player games have been a healthy but stagnating market. Throughout COVID, while engagement in the platform declined, box product games revenue and engagement share largely stayed flat. This is despite the rising costs of development (Spideman 2 doubling in cost from game to game). This means that studios are making far less profit on each game they release, even though the games are costing a lot more to make.
Escalating costs are fueled by rising development costs, longer development cycles, and player expectations being raised. Elden Ring was incredible - but few Western developers can create the scale and scope of this game with a similar budget. Baldur’s Gate was an incredible game with massive amounts of agency -- but Bethesda, a developer known for their agency-driven RPGs in the past, could not replicate this with the scale and scope of a game like Starfield.
The “default path” is assuming costs going up, pushing studios towards 'fewer, safer' franchise bets and away from new IPs. This creates opportunities for AA and Indie style budgets to find open release windows and overperform.
Tactic 3: Avoid Playtime Bloat
Not every game has to be Cyberpunk, Baldur’s Gate, or Elden Ring. 10 years ago, it was common for AAA developers to assume a strong causal relationship between the playtime of a game with commercial success: Skyrim, Witcher 3, GTAV, and Assassin’s Creed. This has led developers down a path of prioritizing playtime over quality. Newzoo argues that there is no causal relationship for premium boxed games and playtime, within reason. While players expect playtimes of 20h+ for single player games, expanding beyond this reaches diminishing returns. Players are focused on a strong golden path experience to get their money’s worth.
The tradeoff of this tactic is lower active player base, lower DLC and MTX sales. However, with development costs rising quicker than DLC revenue -- this tradeoff can make sense. Overall average selling price (ASP) isn’t impacted by playtime -- 80h experiences are discounted at similar rates to 20h experiences -- discount and sales performance is dictated more by player response to the game.
Trend: New Live Services are struggling with Retention and Conversion
As we discussed previously, new live services on PC and console have found it challenging to establish a foothold, particularly with retaining players and converting them into paying customers.
The golden age that saw the rise of Apex, Fortnite, Overwatch, Valorant is over -- with Newzoo seeing in data that pre-2021 titles had strong retention and strong conversion out the gate, whereas new titles post-2021 are struggling with both.
Tactic 4: Find Your Blue Ocean
The reason titles are likely struggling with retention isn’t all execution or lack of live content. Games like THE FINALS came out with strong scope and quality of content, strong review scores and critical praise, and solid core gameplay. Players are just stuck to their existing shooter live services. The cost to pull players away from their existing shooter platforms is higher than before. So developers that are going head to head for existing playerbases should beware of the escalating costs to convince players.
A better strategy is to find your ‘blue ocean’ -- genres that remain unexplored or underserved by current live service offerings. Focusing on creating enough differentiation that it offers something that a niche of the market will stick to, allowing you to grow.
Tactic 5: Look to the next generation
To find that blue ocean, its important to be future facing rather than leaning back on decades old play patterns and genre definitions.
The next genres are more likely to be found in ROBLOX or UEFN over a AAA console release. Tapping into how the next-generation play patterns are changing is imperative for future franchises to be created.
The challenge with this approach has been tying this to a viable scaled content model. Auto-chess exploded in popularity, but with hindsight the model struggled to scale to a level that could sustain a massive live service to compete with a DOTA. ROBLOX’s top games are massive for driving engagement -- but ‘Adopt Me’ is not likely going to scale to a live service or even a AA premium game scale. Games like “Lethal Company” are strong upfront experiences, but offer no long term hooks for a live service.
Overall: Outmaneuver the Market
PC/Console has always been a highly competitive market with entrenched leaders in each genre. The way PC/Console games have broken out is finding significant differentiation that leans into what players value.
Baldur’s Gate went up against the tried-and-true “Skyrim” model and offered what players truly want -- deep agency in their narrative choices. Not thousands of environments to walk around in, if the agency within is thin and trivial. Elden Ring went up against the tried-and-true “Assassin’s Creed” Open World trope and threw away the book. Said players care more about deep combat and true exploration.
The market has real challenges moving forward -- we likely are not going back to pre-pandemic growth rates anytime soon. GTA VI will eat all our lunches next year. Switch 2 is unlikely to meaningfully grow the market like Switch and Wii did. But player growth remains healthy at +3.6%, and players are showing that their tastes are changing. With change comes opportunity.
