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The Future of Console Cycles: A Mid-Life Assessment of the Seventh Generation of Gaming Hardware

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By historical standards, the current, seventh generation of console hardware would be nearing its midpoint. However, the “Wii Effect” on gaming audience expansion, widespread consumer adoption of expensive and innovative gaming peripherals, and console makers’ increased focus on online gaming features, digital delivery of games, and multimedia content all suggest that this generation of hardware will significantly outlast the previous generation.

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									                                                 PC/CONSOLE/MOBILE
                                                 GAMES
                                                 The Future of Console Cycles:
                                                 A Mid-Life Assessment of the Seventh Generation of
                                                 Gaming Hardware




                                                 Lead Analyst
                                                 Benton Lyle

                                                 Contributing Analysts
                                                 Michael Gartenberg
                                                 Michael Cai




An Interpret Syndicated Research Service subscription is $10,000 per year and includes twelve research reports and unlimited analyst inquiry.
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use of clients. All opinions and projections are based on Interpret’s judgment at the time of publication and are subject to change.
Published June 2009. © 2009 Interpret, LLC
The Future of Console Cycles:
A Mid-Life Assessment of the Seventh Generation of Gaming Hardware


Core Questions

   • Where are we in the game console cycle? Is this generation almost over, halfway
     through, or something else?

   • Has the video game industry really broadened its scope beyond the “core” male
     audience? What impact will this have on the console life cycles?

   • How can developers and console manufacturers be successful over the next
     generational transition?

Interpret Insight:

By historical standards, the current, seventh generation of console hardware would be
nearing its midpoint. However, the “Wii Effect” on gaming audience expansion,
widespread consumer adoption of expensive and innovative gaming peripherals, and
console makers’ increased focus on online gaming features, digital delivery of games,
and multimedia content all suggest that this generation of hardware will significantly
outlast the previous generation.




Seventh Generation Console Cycle

Historical trends suggest that the seventh generation of game consoles is at its
midpoint. The third (8-bit), fourth (16-bit), and fifth (Sony PlayStation, Nintendo 64)
generations each lasted approximately one decade. The sixth generation (PlayStation 2,
Microsoft Xbox, Nintendo GameCube)—excluding the PS2—lasted seven years.
Including the PS2, it will have been ten years in 2010. What makes the PS2 unique in
the history of gaming consoles, however, is not its longevity—other consoles have
enjoyed ten-year lifespans—but how robust and successful the console has been, even
alongside its vastly more powerful successor system, the PlayStation 3.

The PS2’s continued presence in the marketplace has been astounding, with hardware
sales that easily outpaced its successor system for a full year after the PS3’s
introduction. Although the percentage of gamers using their PS2s the most often
decreased from 40% in Q4 2007 to 14.5% in Q4 2008, the PS2 remains the second-most
popular console in terms of usage, trailing only the Nintendo Wii: 27% of gamers
reported using a PS2 in the last three months, the same figure as used a Wii. The
unprecedented library of high-quality late-generation PS2 games, including both
exclusives (God of War) and popular franchise iterations like the Guitar Hero and Call of
Duty series, hints towards an extended lifespan, beyond that enjoyed by any previous
hardware.

    Sixth/Seventh Generation Console Hardware: Ownership, Usage, Preference
 45.0%
 40.0%
 35.0%
 30.0%
 25.0%
 20.0%
 15.0%
 10.0%
  5.0%
  0.0%
         Microsoft   Microsoft Nintendo Nintendo    Sony        Sony
          Xbox       Xbox 360 GameCube     Wii   PlayStation PlayStation
                                                   2 (PS2)     3 (PS3)

               Own system            Use system in last 3 months           Use system most

[Source: New Media Measure, Q4 2008]


What of the seventh generation of consoles, then? Based on our analysis, the PS3 will
remain a significant force in the marketplace for some time, owing to Sony’s long-term
planning and significant investment in the system. Although Nintendo’s plans for Wii
hardware are unclear, successful sales, particularly during the 2007 and 2008 holiday
seasons, suggest that a premature abandonment of the platform is unlikely. The Xbox
360, on the other hand, was the first to launch, and the early-to-market success will
likely spur them to be the first to launch an eighth generation console. However, any
predictions of a cl
								
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