End of consoles: Cloud gaming is slowly making consoles obsolete

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  Quantumrun Foresight
• May 6, 2022

Insight summary

The gaming industry is undergoing a pivotal shift with cloud and mobile gaming taking the center stage, phasing out the dominance of traditional consoles and PC games. This transformation, accelerated by tech giants promoting inter-platform playability, is fostering a more inclusive gaming community by making games accessible across various devices. As the landscape evolves, it presents opportunities and challenges, including the need for regulatory frameworks to ensure fair competition and consumer protection, and the potential for educational institutions to leverage gaming technologies for interactive learning experiences.

End of consoles context

Consoles and PC games have long been the bread and butter of gaming industry revenue. But during the late 2010s, digital games rapidly began to outsell physical disks as cloud and mobile gaming became more widespread. Cloud gaming is now likely to represent the next great step for the gaming industry.

In 2013, consoles and PC games contributed USd $6.3 billion in revenue to the gaming industry, compared to just USd $4.7 billion for online games, according to consulting firm PwC. In 2016, the trend reversed, and spending on online games accounted for USD $6.8 billion compared with USd $5.7 billion for physical copies. PwC estimated that by the end of 2022, revenue for online and other digital forms of games ballooned to USD $11 billion, while physical gaming revenue shrank to USD $3.8 billion.

This trend signals the eventual end of consoles as a gaming platform, with consoles only capable of running games that meet specific requirements. More and more players are also beginning to prefer subscription-based platforms to stream hundreds of games instead of paying between USD $40 and $60 per download or hard disk game copy.

Disruptive impact

In 2021, Microsoft took significant strides in promoting inter-platform playability, allowing games to be played across a variety of devices including PCs, high-powered laptops, and even Android phones and tablets. This development means that individuals with older console systems can enjoy newer games without the immediate need to upgrade their hardware, fostering inclusivity among gamers of different economic backgrounds. Moreover, it opens up avenues for more people to delve into gaming, as it removes the barrier of high upfront costs for consoles, potentially nurturing a more diverse and expansive gaming community.

Companies in the gaming industry are navigating a transformative period, with a pressing need to adapt to the emerging cloud gaming trend that is projected to largely replace consoles by the 2030s. The hybrid solution offered by Amazon and Microsoft, which leverages the cloud to render high-resolution images on lower specification computers, is a testament to the industry's commitment to enhancing the gaming experience. However, they may need to address persistent issues such as connectivity lag that can impair the gaming experience. 

Governments, too, can play a role in this transformation, by fostering environments that support the growth of cloud gaming. This support includes encouraging the development of infrastructure that can handle the high data demands of cloud gaming, to prevent issues such as connectivity lag that has been a concern for avid gamers. Moreover, educational institutions might find value in incorporating elements of gaming into learning environments, given the inter-platform playability that allows for a more accessible entry into the gaming world. This trend could potentially facilitate collaborative learning experiences, where students engage in problem-solving and critical thinking through multi-player games that span across different platforms, fostering a dynamic and interactive learning environment.

Implications of the end of consoles

Wider implications of the gaming console era coming to an end may include:

• A surge in the popularity of mobile and cloud gaming, fueled by the increased adoption of 5G internet plans, leading to a more connected and expansive gaming community.
• The decline in traditional console sales, as they become a niche market for collectors and enthusiasts, leading to a shift in the economic dynamics of the gaming industry with a potential rise in the value of vintage consoles as collectibles.
• The development of new mobile interfaces, including VR goggles and AR glasses that can connect with 5G cloud gaming platforms, leading to a blurred line between what constitutes a gaming console.
• A shift in business models with companies focusing on creating diverse subscription packages for online and mobile gaming, leading to a more flexible and customer-centric approach to monetization.
• Governments potentially introducing policies to regulate the emerging technologies and platforms, ensuring fair competition and protecting consumer rights.
• The gaming industry leaning towards the creation of more cross-platform games, making gaming more accessible to a wider demographic.
• A potential increase in the production of gaming accessories such as haptic gloves and suits, leading to a new market segment that focuses on enhancing the physical experience of gaming through tactile feedback and immersive technologies.
• The rise in energy demands due to the growth of cloud gaming, leading to a greater strain on power grids.
• A potential shift in labor markets with a decrease in manufacturing jobs related to console production, leading to a need for workforce retraining and adaptation to new roles.

Questions to consider

• If you’re a gamer, do you prefer to stream games, download them, or purchase them on a disk?
• If console games no longer become available, what benefits of console gaming will you miss the most?