[E3 2016] How Will Iterative Consoles Change Market Share?

2016-06-13 (2)

As long as there have been rumors of the amount of horsepower Microsoft’s Project Scorpio boasts, I’ve seen interpretations that it is a response to the power gap that exists between the Xbox One and Sony’s PlayStation 4. This sentiment seems to have intensified since Microsoft pretty much confirmed everything about Scorpio at E3. I’m not completely sure if addressing that power discrepancy is actually going to solve all Microsoft’s problems. Furthermore, if console manufacturers move towards the iterative upgrade model Scorpio is trying to initiate, then it might change the way market share shifts in the console industry.

The thing is, I’m not even sure that power discrepancy is a main reason the PS4 is outselling the Xbox One the way it is. People on Reddit and NeoGAF are all about how multiplatform games routinely run better on PS4 than on Xbox One, but I don’t think your average guy in Wal-Mart or Best Buy cares or even notices. I don’t think they’re gonna obsess over the difference between 900p and 1080p unless the difference is being pushed by marketers, which it isn’t. They’re also probably not gonna refuse to get an Xbox One because it has less RAM than the PS4.

I think what really happened is somewhat more simple: Microsoft ruined its marketing message going in, Sony didn’t.

Microsoft planned out an ambitious rethinking of the way console game ownership works as well as a new way to interface with cable TV, then had to backpedal and pretty much abandon all that after it left a sour taste in people’s mouths. Nintendo didn’t really manage to get any message out to people about the Wii U — too many still don’t know what it is. Sony on the other hand has always gone with a pretty straightforward message: we’re releasing a console, it will play video games. Sony just stuck to that simple goal and did everything it could to not mess it up.

In light of this, I’m not convinced Scorpio will shift things back over in Microsoft’s favor. Maybe if Microsoft goes all-in on rebranding Scorpio as a relaunch, but at that point they’ll want it to feel like a new console generation. Every new console generation has been an attempt to reshuffle the deck of market share because the console manufacturers have historically always started over with completely new platforms… except Microsoft isn’t doing that this time. Scorpio will be a continuation of the same platform as Xbox One, and if the eventual upgraded PS4 is a continuation of that platform, then I think most people currently on PS4 will just upgrade to that.

A major potential advantage to the iterative model where games are backwards and forwards compatible is that a manufacturer probably doesn’t lose its install base because users can keep their software libraries. A potential disadvantage though is that it makes it that much harder to win over the other guy’s install base. Basically, I don’t think an Xbox One that’s simply far more powerful is going to convince a whole bunch of PS4 owners to switch over, especially if Sony also launches a more powerful PS4 with the same software library — even if that new PS4 isn’t quite as powerful as Scorpio. It would be like asking people to switch from iOS to Android just because a more powerful Android phone appears.

I don’t think people often switch from Windows to Mac or vice versa because of more powerful hardware or anything. They usually switch because of something they don’t like about the operating system or service of one of them (like people being upgraded to Windows 10 against their will for instance). So, if Sony and Microsoft just maintain the same software libraries and everything for the foreseeable future, users who are already bought into one of them I think will be less likely to switch, at least less likely to switch because of hardware. The differences between the two in the future might become even more about their services and operating systems — the differences between PlayStation Network and Xbox Live. I still think that was the Xbox 360’s main advantage compared to the PlayStation 3, more so than the hardware or content.

That word “content” brings me to Nintendo and NOA president Reggie Fils-Aime’s comments to Bloomberg this week. At around 32 minutes into this video he seems to kind of play off the upcoming PS4 Neo/Scorpio battle by saying it’s not about specs for Nintendo, but rather content. Technically, I think he’s right — it is about content. Nintendo’s problem is that in order to get that content, they need to have good relations with developers. Part of that is making hardware that not only sells, but can also handle what the developers cook up.

That hasn’t been a problem for Sony or Microsoft lately because all the most important third party games are on both of their consoles now. Reaching that point of parity, or at least getting support from some broad group of developers, needs to be Nintendo’s top priority for the project code named NX. Making its operating system and other services feel competitive with those of Sony and Microsoft is a whole other long struggle. And if Nintendo doesn’t think it’s competing with those two, then in just what sector is it competing? The problem with the Wii U is that no one, not even really Nintendo, knew what sector it was targeting.

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