7 Console Gaming Predictions For 2011

In 2011, radiation from 3D TVs will cause gamers to emit a green glow.

The console gaming market is now the "traditional" game market, composed  of software sold in retail stores. Of course, publishers are exploring other business models and types of games, investing in social games, mobile games, freemium games and more. The console gaming market is the bulk of game sales; if you just look at software, it was $10.6 billion in the US this last year (if you add in hardware sales, including accessories, the total is north of $21 billion).

The last couple of years have not been kind to the traditional segment of the business, though. Sales grew an amazing 28% in 2007 to hit a total of $18.85 billion overall ($9.5 billion in software), but the worldwide economic problems of 2008 were bound to have an effect. Game sales in 2008 were up 19% to over $21 billion (up more than 26% in software to over $11 billion), though signs of the slowdown were already showing up in holiday sales. Then 2009  showed up and hit hard with an 8% decline in overall sales to $19.66 billion (software slid to $10.5 billion).

While the year-end figures aren't tallied yet, 2010 looks like a decline again despite a record November that wasn't enough to rescue the year. Total sales will probably end up a few percent below last year (it was down 8% until November, which was enough to make it only 5% lower than last year). What's on tap for 2011?

• Software sales continue to erode. The overall picture doesn't look great for $60 software titles. While some releases will do well, overall I think the sales decline will continue as gamers move to lower-cost alternatives. And more lower-cost alternatives will continue to appear, and they'll be better.
• Console sales stay steady due to price cuts. Much as they will resist it, price cuts will happen by the holidays for all the consoles, though they may be minor. Or they may be hidden by increasing the value of the bundle you get (an extra controller, more software, etc.) Growth in smartphones, tablets, social games, and F2P (free-to-play) will tend to keep people from console purchases unless the price gets more attractive.
• Big hits are rare, and will get rarer. The high sales points get even higher for titles like Black Ops, but fewer titles will achieve orbital status. The publishers with the megahits may do well, but the ones without will be gasping for oxygen. It's going to be a cruel market.
• XBLA and PSN continue to grow sales. Meanwhile, though, those sneaky little download games will continue to gain despite the barriers placed in their way. (I mean, Microsoft Points instead of dollars? Really? Or how about that interface, and all of the non-existent tools for finding the types of games you're interested in...) Heck, even WiiWare will do better, despite Nintendo's almost criminal neglect. It turns out that customers are interested in lower-price titles they can have via download without a trip to a retail store. Who would have thought that?
• Nintendo finally reduces Wii to $149, then to $99 by Christmas. This one is actually more wishful thinking than a prediction. Yes, it would certainly be sensible for Nintendo to do this, but since they've been studiously avoiding sensible moves lately who can say what they will actually do.
• A successor to the Wii is finally announced, but it won't appear until 2012. Although Nintendo may not actually announce this, and information will just leak out, to avoid ruining already devastated Wii sales. By the time it actually appears the market may be so different that no one will care, unless Nintendo embraces the market changes.
• The 3DS and PSP2 appear to good initial sales that quickly decline to disappointing levels. Partly because the price points will be so high initially. Once the fanboys have gotten their units, less fanatical customers will look at the prices and think about buying a smartphone instead. Many will. Developers in particular will be annoyed, because developing for these new handhelds will be significantly more expensive than the old handhelds, yet software sales will be worse. This will lead to a quick fall-off of third-party support.

Overall, I expect the console business for 2011 to be up somewhat, mostly due to Kinect. Move, and price cuts. The software part of the business (at least the traditional retail boxed part) will be flat. Significant growth will continue to be in other areas like mobile, social, DLC and F2P.