Latest Battle in Games Consoles and the Acceleration of Cloud Gaming, Insights from Futuresource Consulting

The most topical theme within gaming is the launch of next generation consoles by Sony and Microsoft in Q4 2020.
Both vendors have seen significant demand for their hardware, selling out of available stock minutes after launch, highlighting consumer interest in gaming as an outlet during the COVID-19 pandemic.
There is a question arising as to whether this may be the last generation of console hardware, given the threat posed by cloud processing services emerging from the likes of Amazon and Google.

The most topical theme within gaming is the launch of next generation consoles by Sony and Microsoft in Q4 2020. Both vendors have seen significant, excess demand for their hardware, selling out of available stock just minutes after launch, highlighting the intensity of consumer interest in gaming as an outlet for both entertainment and socialisation during the COVID-19 pandemic.

There is a question mark arising as to whether this may be the last generation of console hardware, given the threat posed by cloud processing services emerging from the likes of Amazon and Google. Whilst this threat will prove substantial in the long term and competition amongst gaming platforms is expected to fragment the current status quo, it is expected that both the PS5 and the Xbox Series X will outperform their predecessors, with total sales of next generation consoles forecast to exceed 170 million units between 2020 and 2024.

The emergence of cloud processing services is also changing the ways in which gamers access content, removing the need for dedicated (and expensive) gaming hardware, enabling a much a larger segment of budget-constrained, would-be gamers to enjoy AAA (top tier) content via non-gaming devices such as standard PCs or even via smartphones.

Alongside this, certain services such as Amazon Luna and Xbox Game Pass are giving consumers access to the latest AAA games via monthly subscription, a business model which has been slow to gain traction within gaming relative to music and video entertainment, but one which promises to develop rapidly over the next five years.

The pandemic has also had a significant impact in the market for gaming accessories, with consumer uptake of gaming headsets in particular growing as a result of both increased usage for gaming, as well as satisfying excess demand for office headsets as consumers transitioned to virtual working environments. Gaming headset shipments are forecast to increase by 26% in 2020, amounting to over 38 million shipments, with gaming keyboards and mice also exhibiting growth of 17% and 20% year on year, respectively.

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