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Gaming broadcast service Twitch might have found a home on consoles, but in the coming years, the company’s chief executive doesn’t believe those devices can maintain their current business model.
“The problem is, the seven-year upgrade lifecycle doesn’t work in the face of the two-year upgrade cycles for every other hardware platform,” Twitch chief Emmett Shear told the Guardian in an interview published Monday. “It’s so intrinsically built into how consoles get manufactured and made and the full business model, that I’d be surprised to see another generation.”
Shear’s comments run contrary to how the industry has been operating for decades. Consoles, like the Xbox One or PlayStation 4, come out every five to seven years, offering updated graphics and a budding game library. Initially, hardware makers lose money on the consoles to acquire a sizable user base, but as times goes on and component costs fall, the companies are able to turn a profit on each sale. By then, however, it’s typically time to start developing another console and the cycle starts anew.
The way console gaming works has long been criticized by PC gamers who have computers with components they can update whenever they like to accommodate the latest and greatest titles. Consoles, however, are closed systems that cannot be upgraded so easily.
Toward the beginning of a console’s lifecycle, its components are nearly on-par with some of the latest components available in a solid PC gaming computer. As time goes on, however, and component makers bring new higher-end components, consoles remain relatively static, limiting the graphical quality of games. On the PC side, owners can simply swap out components and play a game that might look better on a computer running a higher-end graphical processing unit (GPU) or requires more RAM.
Although console makers have acknowledged the shortcoming, they are also running a for-profit business. And companies like Microsoft and Sony, which are in a constant price battle, need to generate a profit on their hardware at some point. Leaving a console as-is for several years changes the cost curve and allows them to actually post a profit on hardware sales later in a console’s lifecycle. In early years, most vendors post a sizable loss on each unit sold, so they can build a user base and acquire more revenue through video games licensing.
Shear, however, argues that the model must change. He says that in the future, game companies will need to offer set-top boxes that are upgraded every couple of years with better components. Shear told the Guardian that such an upgrade cycle would make consoles more competitive in what is increasingly becoming a crowded space.
His comments are well-founded. There was a time years ago when the average gamer would have a DVD player, a game console or two, and a cable box connected to a television. Now, with products like Amazon’s Fire TV, Roku, and others, they can have games, apps, streaming television and more, all in one box. They can connect a computer to their television and play games, surf the Web, and even watch TV with a built-in tuner or streaming service.
The competition, in other words, is becoming extremely strong and the idea of having an extra console sitting in the entertainment center for years could be a thing of the past, Shear argues.
Nintendo might agree. The company revealed last week that not only is it getting into mobile gaming, but it’s also planning to announce a new game platform next year it’s currently calling “NX.” There’s no word yet on whether NX is a portable device or a console, but given the struggles the company’s Wii U console is having, it could very well be the latter.
Regardless of what happens, Shear just needs gamers to keep gaming. His service, which allows users to livestream their game content and chat with each other in real-time, has over 100 million users. The company was recently acquired by Amazon for $970 million, but is operating independently. Twitch works on all platforms, including consoles. In fact, Shear said that consoles like the Xbox One and PlayStation 4 “drive a ton of broadcasting” for the service.
None of the major console makers — Nintendo, Microsoft, or Sony — immediately responded to CNET’s request for comment.
