1. WHEN THE CONSOLES DIE, WHAT COMES NEXT?
BEN COUSINS
(ALL MARKET INFORMATION CORRECT ON 7TH MARCH 2012)

2. WHO IS THIS GUY ANYWAY?

3. WHO IS THIS GUY ANYWAY?

4. WHO IS THIS GUY ANYWAY?

5. WHO IS THIS GUY ANYWAY?

6. WHO IS THIS GUY ANYWAY?

7. WHO IS THIS GUY ANYWAY?

8. SOME DEFINITIONS

9. WHEN THE CONSOLES DIE, WHAT
COMES NEXT?

10. WHEN THE CONSOLES DIE, WHAT
COMES NEXT?
Die, for the purpose of this talk means
‘Significantly smaller market share with no sign of return’

11. WHEN THE CONSOLES DIE, WHAT
COMES NEXT?
Sales drop in absolute terms, often because customers move to a new solution for
their need

12. WHEN THE CONSOLES DIE, WHAT
COMES NEXT?
Sales drop in absolute terms, often because customers move to a new solution for
their need

13. WHEN THE CONSOLES DIE, WHAT
COMES NEXT?
Sales drop in absolute terms, often because customers move to a new solution for
their need

14. WHEN THE CONSOLES DIE, WHAT
COMES NEXT?
Market share drops in relative terms, often because a new product massively expands
the overall market

15. WHEN THE CONSOLES DIE, WHAT
COMES NEXT?
Die, for the purpose of this talk DOES NOT mean
‘The product is never used by anyone ever again’

16. WHEN THE CONSOLES DIE, WHAT
COMES NEXT?

17. WHEN THE CONSOLES DIE, WHAT
COMES NEXT?

18. WHEN THE CONSOLES DIE, WHAT
COMES NEXT?

19. THE WEDDING THEORY

20. THE WEDDING THEORY

21. THE STATE OF THE INDUSTRY
The Old World

22. THE OLD WORLD
NASDAQ +25.78%
EA -61.77%

23. THE OLD WORLD
NASDAQ +25.78%
ATVI -33.34%

24. THE OLD WORLD
NASDAQ +25.78%
MSFT +24.39%

25. THE OLD WORLD
‘Consumer Software, Services & Devices’,
‘Entertainment & Devices’ Division Profit/Loss
Lifetime results for this
division = $7.807B loss

26. THE OLD WORLD
NASDAQ +25.78%
SNE -46.42%

27. THE OLD WORLD
‘Games’, ‘Networked Products & Services’,
‘Consumer Products & Services’
Results for this division
since 2000 = ¥252.9B
loss (around $3.1B)

28. THE OLD WORLD
NASDAQ +25.78%
NTDOY -71.28%

29. THE OLD WORLD
US Annual sales (hardware and software) 1997-2011 (NPD, billions USD)

30. THE OLD WORLD
UK Annual sales (hardware and software, billions GBP)

31. THE OLD WORLD

32. THE OLD WORLD

33. THE OLD WORLD

34. THE OLD WORLD

35. THE OLD WORLD IS LARGE BUT
SHRINKING FAST
• In summary;
• Investors are not showing confidence in the future of large traditional publishers
• Sony, Microsoft showing losses for console divisions over the last 10 years
• Nintendo in ‘disarray’
• Retail sales dropping year on year since 2009
• Major European retailer Game in serious trouble
• Casual & kids games on console and handhelds hit by an unseen force

36. THE DEATH OF DEDICATED ELECTRONICS HARDWARE
Down 17% Down 42.5% Down 32.6%
Down 20.5% Down 20.8%

37. THE STATE OF THE INDUSTRY
The New World

38. THE NEW WORLD
Top 5 dedicated gaming companies by market cap, August 2008 (millions USD)
123 33 30 26 43

39. THE NEW WORLD
Top 5 dedicated gaming companies by market cap, March 2012 (millions USD)
123 33 5 8 18

40. THE NEW WORLD
Audience sizes for games
25 million
sales 500 million downloads

41. THE NEW WORLD ‘100’
20 19 Market caps of platform companies (billions USD)
267
495
198

42. THE NEW WORLD
Combined market caps of platform companies (billions USD)
793
306

43. THE NEW WORLD
Growth rates of platforms (assumes 70% of iOS are gamers, 50% of FB are gamers, excludes iPod touch sales)

44. THE NEW WORLD
The Japanese revolution

45. THE NEW WORLD IS GROWING VERY
FAST
• In summary;
• Now 3 out of 5 of the world’s largest gaming companies distribute digitally, are
freemium focussed
• The audience sizes for a hit game has increased 20x on new platforms like FB, iOS
and Android
• New Mobile/Social platforms are driven by huge companies
• In Japan freemium social mobile has already overtaken the traditional business

46. THE LAST BIG CHANGE
When The Arcades Died, What Came Next?

47. THE LAST BIG CHANGE
Per Capita Spending on Video Games in the United States by Revenue Model (2010
dollars) Copyright © 2012 SuperData Research
The 1980’s
Traditional Retail revenue hovers between 3% and 35% of
Arcade

48. THE LAST BIG CHANGE
Per Capita Spending on Video Games in the United States by Revenue Model (2010
dollars) Copyright © 2012 SuperData Research
The 1990’s
Traditional Retail revenue grows steadily
from 38% to 166% of Arcade

49. THE LAST BIG CHANGE
Per Capita Spending on Video Games in the United States by Revenue Model (2010
dollars) Copyright © 2012 SuperData Research
The 2000’s
Traditional Retail
revenue grows
sharply, ending up
17x the size of
(declining) Arcade

50. THE LAST BIG CHANGE
Per Capita Spending on Video Games in the United States by Revenue Model (2010
dollars) Copyright © 2012 SuperData Research
What happened
here?
The Tipping Point What killed the
arcade?

51. THE LAST BIG CHANGE
The 1980’s
•Arcades dominated
home experience
•Better graphics
•Bigger screens
•Better controllers

52. THE LAST BIG CHANGE
The 1980’s
•Arcades dominated
home experience
•Better graphics
•Bigger screens
•Better controllers

53. THE LAST BIG CHANGE
The 1980’s
•Arcades dominated
home experience
•Better graphics
•Bigger screens
•Better controllers

54. THE LAST BIG CHANGE
The 1990’s
• Arcades start much more powerful
than home consoles
• Mid 90’s consoles and PC start
competing with textured 3D arcade
games
• Sony’s entry into the business - a
company 3.7x bigger than Nintendo
• 1998 Dreamcast launched, same as
Naomi system board, less memory

55. THE LAST BIG CHANGE
The 1990’s
• Arcades start much more powerful
than home consoles
• Mid 90’s consoles and PC start
competing with textured 3D arcade
games
• Sony’s entry into the business - a
company 3.7x bigger than Nintendo
• 1998 Dreamcast launched, same as
Naomi system board, less memory

56. THE LAST BIG CHANGE
The 1990’s
• Arcades start much more powerful
than home consoles
• Mid 90’s consoles and PC start
competing with textured 3D arcade
games
• Sony’s entry into the business - a
company 3.7x bigger than Nintendo
• 1998 Dreamcast launched, same as
Naomi system board, less memory

57. THE LAST BIG CHANGE
The 2000’s
• Home consoles now in parity or
above arcades in power
• Arcade still have better
controllers, bigger screens
• Microsoft’s entry into the business
- a company 6x Sony, 12.7x
Nintendo
• Dead arcades - novelty
controllers/cabinets, 2D fighters

58. THE LAST BIG CHANGE
The 2000’s
• Home consoles now in parity or
above arcades in power
• Arcade still have better
controllers, bigger screens
• Microsoft’s entry into the business
- a company 6x Sony, 12.7x
Nintendo
• Dead arcades - novelty
controllers/cabinets, 2D fighters

59. THE LAST BIG CHANGE
The 2000’s
• Home consoles now in parity or
above arcades in power
• Arcade still have better
controllers, bigger screens
• Microsoft’s entry into the business
- a company 6x Sony, 12.7x
Nintendo
• Dead arcades - novelty
controllers/cabinets, 2D fighters

60. THE TIPPING POINT
• Two big things happened;
1.Bigger companies entered the games business
• More marketing clout, grow the overall business
2.Chips got cheap enough and lower power enough
• Creating an ‘arcade experience’ in the home, that pulled in the arcade gamers
• Home consoles had always been cheaper and more convenient, but these advantages now
really mattered
• Worth noting arcades still often had bigger screens & always better controllers

61. THE NEXT BIG CHANGE
?
When The Consoles Die, What Comes Next?

62. THE NEXT BIG CHANGE
When The Consoles Die, What Comes Next?

63. THE DEATH OF DEDICATED ELECTRONICS HARDWARE
Down 17% Down 42.5% Down 32.6%
Down 20.5% Down 20.8%

64. DISRUPTIVE TECHNOLOGY

65. • ’Sustaining Technologies’
dominate
• Disruptive tech enters the
market
• Incumbents don’t take it
seriously
• It rapidly increases in
performance
• Disruptive tech replaces
all usages

66. • ’Sustaining Technologies’
dominate
Large scale businesses
computing • Disruptive tech enters the
Scientific
market
computing
Personal • Incumbents don’t take it
Computer seriously
Small business
computing
• It rapidly increases in
performance
Hobby computing
• Disruptive tech replaces
all usages

67. • ’Sustaining Technologies’
dominate
AAA
Console Games • Disruptive tech enters the
market
Handheld Games
iOS/Android • Incumbents don’t take it
devices seriously
• It rapidly increases in
Kids Games performance
Casual Phone
Games • Disruptive tech replaces
all usages

68. We are here • ’Sustaining Technologies’
dominate
AAA
Console Games • Disruptive tech enters the
market
Handheld Games
iOS/Android • Incumbents don’t take it
devices seriously
• It rapidly increases in
Kids Games performance
Casual Phone
Games • Disruptive tech replaces
all usages

69. DISRUPTIVE TECH MOVES FASTER
My Little Tank (2005)

70. DISRUPTIVE TECH MOVES FASTER
Gran Turismo 4 (Polyphony Digital 2005) God of War (Sony Santa Monica 2005)

71. DISRUPTIVE TECH MOVES FASTER
Infinity Blade Dungeons (Epic 2012)

72. DISRUPTIVE TECH MOVES FASTER
Modern Warfare 3 (Activision 2011)

73. WHAT’S HAPPENING RIGHT NOW?
• Two big things are happening;
1.Bigger companies have entered the games business
• More marketing clout grows the overall business
2.Chips are getting cheap enough and lower power enough
• Creating a ‘console experience’ on the move, pulling in the console gamers
• Mobile games have always been cheaper and more convenient, but these advantages now
really matter
• Worth noting that consoles will still often had bigger screens & always better controllers

74. WHAT A STRANGE, MARGINALIZED
OPINION!

75. JOHN CARMACK
“platform wise, you could certainly
imagine a future where, instead of
having your console, you have
your mobile device”

76. PHIL HARRISON
“If they carry on unrestrained in their
growth, then there’s a pretty good
chance that Apple will be the
games industry”

77. MIKE CAPPS

78. HIDEO KOJIMA
“Gamers should be able to take the
experience with them in their
living rooms, on the go, when
they travel -- wherever they are
and whenever they want to play. It
should be the same software and the
same experience,”

79. GABE NEWELL
“I suspect Apple will launch a living
room product that redefines people's
expectations really strongly and the
notion of a separate console
platform will disappear”

80. KOTAKU
‘Tim Cook holds the future of
gaming in his hands.’

81. CONSOLES WONT DIE - CINEMA
WASN'T KILLED BY TV!

82. CONSOLES WONT DIE - CINEMA
WASN'T KILLED BY TV!
% of the US population who visited the cinema on a weekly basis (Michelle Pautz, Elon University, 2002)

83. CONSOLES WONT DIE - CINEMA
WASN'T KILLED BY TV!
Total UK cinema attendance (British Film Institute, Cinema Advertising Association & Rentrack EDI)

84. CONSOLES WONT DIE - CINEMA
WASN'T KILLED BY TV!
UK box office cinema revenue as a % of GDP (Bakker 2008 and ONS)

85. CINEMA WAS CRUSHED BY TV
• The ‘platform holder’ (cinema) didn’t do ok - thousands of cinemas closed down
• The ‘content people’ (movie studios/distributors) did ok
• Made movies available on the lower-res ‘free to watch’ TV and ‘for hire’ VHS
platforms
• Games content developers need to do the same - move content to new low-res
platforms - or we will suffer the same fate as the cinema

86. FOX THEATRE
SAN FRANCISCO

87. TWITTER: @BENJAMINCOUSINS