Will PlayStation 4 be the Last Game Console?
What will become of the game industry after PlayStation 4, Xbox 720 and Wii U arrive?
Many think that this is the end of the line for consoles. With the rise of Android and iOS gaming, some argue that we no longer need a game-specific device. Never mind the fact that mobile gaming is nowhere near the quality of a console (or PS Vita, for that matter). Some still believe that home gaming devices will go the way of the dinosaur.
Brian Sozzi, the Chief Equities Analyst for Nothing But Gold Productions, begs to differ. "I don't think consoles are going to disappear just because you're always going to need a place to get this content from -- some kind of hub," he told Benzinga. "Can you get it from a Netflix-style (NASDAQ: NFLX) service? I don't know the specs behind it, but I don't know if [streaming] can support those types of graphics on the games they're putting out."
Regardless of what may happen long-term, Sozzi said that for the next five to ten years, consumers will still need "some form of home entertainment hub."
"And that's what Xbox 360 and PlayStation 3 have become in this cycle -- entertainment hubs where you can do other things on them besides play video games," said Sozzi. "I don't think they're going to go away."
"And I think the publishers have done a really good job even though their stock prices [haven't] indicated that this past cycle," he said.
Wii U: A Failure in the Making?
"I don't follow Nintendo (NTDOY) that closely," Sozzi told Benzinga when asked about Nintendo's forthcoming console, Wii U. "But I will say this: I'm not that excited for Wii U, and I never liked the Nintendo 3DS. You go to the store, you try this thing out, you get dizzy. The numerous people I've polled got dizzy looking at this thing. From day one at the stores it was just, almost (in my opinion) an unplayable product in the 3D capacity. I need to see the sales for Wii U to get excited that maybe they can improve the overall industry sentiment, which pretty much has been quite bad for six or seven months."
While Nintendo hopes to re-create the magic of the original Wii (which used a motion controller) with Wii U (which uses a touch screen controller), Sozzi has some doubts.
"When the Wii launched, the whole catch was how you interacted with the TV," he said. "But now you have similar offerings from PlayStation 3 and Xbox 360, plus the fact that the graphics are far superior, and you could argue that the game selection is far superior. The graphics are horrible on most Nintendo products. Again, almost like World of Warcraft, [the original Wii] launched at the right time. If you would have launched that a little bit later, it may not have done as well."
Next-Gen Costs Will Rise
If you thought the current generation of consoles was expensive to develop for, Sozzi has some bad news.
"It's hard for me to believe that the [next-gen consoles] will be significantly more technologically advanced than PlayStation 3 and Xbox 360," he said. "But the reality is that I think they have to be. I don't know what they could possibly have, but either way you slice it, it's going to [cost more] to develop for these [next-gen] consoles than it did for the current gen."
"The publishing industry was hit very hard last time with the development costs," Sozzi added. "We saw a rapid decrease in software sales. It's much different this time because, again, the industry is less reliant on packaged goods. They have a buffer there, sort of, where they can invest the proceeds, like Electronic Arts (NASDAQ: EA) is doing for mobile and other digital initiatives, into some of these [more expensive projects], because the digital universe has grown that big."
The Future of Boxed Games
While Sozzi has faith in the future of game consoles, he expects games to move away from retail as they work their way into the digital realm.
"I think packaged goods, five years from now, are just going to be, maybe, half of what they were in terms of what you see in the stores," said Sozzi. "There is no need to be selling discs in the stores, especially with the cost to develop games. It's just not a realistic model to be doing it anymore."
Genres That Won't Survive the Next Generation
There's no denying that World of Warcraft has lost its "WoW" factor. But what does this mean for the MMO (massively multiplayer online) genre as a whole?
"I think MMOs were so five years ago," said Sozzi. "I think World of Warcraft launched at a good time. Interest in the category was very high and they were able to capitalize on that globally. I'm not playing an MMO on my iPhone. Sitting in front of a computer all day is not where the eyeballs are at. It's just not where everyone is at these days. It's almost an unrealistic thing. You have to think that going over the next five years, World of Warcraft continues lose subscribers, even if they do put out new content. It's just how the industry is going."
More of the Same At E3 2012?
When asked if publishers would come to this year's Electronic Entertainment Expo with another batch of familiar sequels, Sozzi didn't have any good news. "That's what they're all doing," he said. "They'll try to wow everybody. But for all these video games, they're trying to execute on these big franchises. They try to take their most important franchises, such as a Madden, and try to take those things across different platforms and maybe cut back on the amount of innovation.
"Look at how many games Electronic Arts has cut from packaged goods. Now everything is around these big, bankable franchises. They have to do it because the development costs are so out of whack, and they're only going to get higher on these next-gen consoles."
Follow me @LouisBedigianBZ
Latest Ratings for NFLX
|Jan 2017||Loop Capital||Maintains||Buy||Buy|
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.