PlayStation 5 vs Xbox Next

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A Preview of the Next Console Generation

The signs and portents are showing that a new console generation is heading towards us, sometime in the next year or so. Interestingly, we can already describe the new consoles pretty well, given what’s been going on in the last console generation. The exact details will remain a mystery until launch, but knowing the general outline of the new consoles can help everyone make their plans for the next two years, whether that’s for game development, marketing, or just purchasing a console for personal use.

When will these consoles launch? Probably in time for the 2020 holidays, perhaps even earlier. Look for more hints over the next year, but we probably won't see a complete official announcement until just a few months before a new console ships.

First off, the most clear picture will be for Microsoft and Sony, so I’ll deal with those in this essay. Nintendo and others (Google, Apple, Amazon, and maybe others) will be considered separately.

Let’s start with the features that we can be nearly certain these new consoles from Sony and Microsoft will have, along with the justification for believing in these features. Then we’ll move onto more uncertain features that these consoles may or may not have.

The PlayStation 5 and Xbox Next will be X86-based.

Likely AMD will be supplying customized CPU/GPU combinations to both Sony and Microsoft, which will probably have some technical differences that may or may not make much of a difference to users (though marketers will no doubt play them up). There’s no more custom CPUs for consoles, as game developers are much happier with the ease of supporting PC, PlayStation, and Xbox with essentially the same code base. Developing AAA games is difficult and expensive enough these days without adding in the need to work on a unique CPU. Sony and Microsoft have also saved money by not having to develop a completely new CPU and all the software tools that would go with it. These days, AMD and Nvidia have been pushing the state of the art for GPUs far beyond what Sony or Microsoft could afford to do – so they will stick with what worked for them on the current generation of consoles.

The PS5 and Xbox Next will be 100% backward compatible with their predecessors.

Given that the new consoles will use the same X86 CPU as the current generation, this one’s a no-brainer. Besides, this is of great value to current players – your software library will work just fine on new consoles, and possibly even better. This is important for game publishers, as they will be able to keep selling existing games even after new consoles arrive. Of course, there may be updates for older games to make them look even better on new hardware – an opportunity for game publishers to re-ignite interest in older titles and perhaps make some more money from them.

The PS5 and Xbox Next will be capable of 4K HDR display with 60 frames per second – or better.

The primary selling point of these new consoles will be to fully support the growing market of 4K HDR televisions, showing off the added resolution that people have available. Yes, the Xbox One X can sort of hit this mark, but not consistently. More horsepower is really necessary to take full advantage of what 4K HDR screens have to offer. Of course, it may not be all that much of a difference to the casual observer – but this capability will be heavily touted as an important reason to buy a new console. This is part of why the new console generation may not be a big sales winner, after the initial surge of early adopters – you really aren’t going to see much of a difference over what your old consoles could do.

The PS5 and Xbox Next may have more than one model apiece, with different price points, but regardless the most expensive model will not exceed $599 at retail.

Here we get into the realm of less certainty. Exactly how Sony and Microsoft deal with their current consoles when new ones come out, and whether they introduce more than one new model, is not clear. It’s likely that both companies would want to have hardware at both a lower and a higher price point, the way they do now – but they may see advantages in having three or even more different price points covered. Say, $199, $299, and $399. Maybe they’ll have cost-reduced versions of old consoles, or consoles with more limited storage capacity. This will be interesting to watch.

Game-streaming (inbound and outbound) will be an important part of both the PS5 and the Xbox Next, possibly with specific hardware features designed for that.

Having players stream their games to the world is going to be a more important part of consoles. Being able to take advantage of a streaming-game service, where you don’t even have to download a game, is also part of what console makers (and major game makers!) are dreaming of. The phrase “Netflix for games” makes them visualize large piles of recurring revenue. Now, there are plenty of technical hurdles to overcome, and reasons to be skeptical that game-streaming will finally become a major profit center (since it never has before). But game companies will keep trying, so expect to hear more about that.

What will be more powerful, PlayStation 5 or Xbox Next?

This is anyone’s guess. Really, both Sony and Microsoft can build hardware to any power level – the question is what profit margins will the company allow? Or will either company be willing to entertain a loss on the console hardware in order to gain market share? Either company could decide to sell $600 worth of game hardware for $499. That’s easier for Microsoft than it would be for Sony, since Microsoft has well over $100 billion of cash on hand, and Sony’s still trying to recover from its lean times of a few years ago. Who really, really wants to have the most consoles out there? It’s anyone’s guess. So it’s hard to say which hardware will really be more powerful – it’s not an engineering question, it’s a financial and business decision, in the end. The engineers will design to what the suits at the top decide.

Final Thoughts On Next-Gen Console Wars

Both Sony and Microsoft have done well with current console generation, though Sony clearly came out on top. Both companies will likely do well with new hardware, though it’s not at all clear that new consoles will sell anywhere near as well as the current generation has. Will Nintendo take away the best-seller crown? Or will Google or Apple manage to create something that actually competes?

Microsoft’s Bid for World Domination of Games

Microsoft is getting ready to expand Xbox Live, its gaming network/community, from Xboxes and Windows PCs to include Android, iOS, and Nintendo Switch. This will grow the potential market/community for Xbox live to over 2 billion devices. Notably, this includes pretty much every major gaming platform – except MacOS (the number of MacOS game players is minuscule) and (of course) Sony PlayStation and their network.

It’s a smart move. Once upon a time, the walled gardens of Xbox and PlayStation were enormous compared to any other game audience. Now, single games like Fortnite or League of Legends dwarf the size of those console audiences. Hardware generally is powerful enough to play most games pretty well, perhaps with some graphics compromises that really don’t matter to the majority of players. (Fortnite is doing extremely well on mobile, for instance, despite the differences in controllers and graphics with consoles or PCs.) The gameplaying audience is mostly not concerned with being fans of a particular hardware, as they often were in days gone by – now they want to play a game wherever they are, with whatever hardware is handy.

Microsoft is smart to recognize that, and to attempt to get out in front and be the gamer’s network across all platforms. It’s a smart competitive move, particularly because Microsoft’s rivals aren’t going to go there – can you see Nintendo doing something like that? Or Sony? Sony seems too satisfied with its market leadership, resisting all efforts to open up (Fortnite pried them open a crack, after weeks of fan pressure).

Microsoft wants to gain market leadership, or at least recurring subscription revenue and extensive virtual goods sales. Particularly as the next generation of consoles looms on the horizon. Though once again, it’s unclear whether there may be future console generations beyond this. The biggest games are growing well beyond the platforms they began on. As billions of people now have access to a gameplaying device, the biggest money lies in finding the best games to reach the widest number of people – and the best business models to monetize those people.

Microsoft sees connecting those game players together as a great way to make money by marketing games, virtual goods, and services to the widest possible audience. If they can get the details right, this looks like they are correct. Grand concepts are one thing, and implementation is another. I look forward to seeing how well Microsoft does at implementing this vision.

What is Bungie's Destiny?

Now that Activision Blizzard and Bungie have parted ways, Bungie took all the rights (and responsibilities) to Destiny. Is that a good thing or a bad thing, for Destiny fans, for Activision Blizzard, for Bungie? There have been numerous opinion pieces on the subject lately, but I think many of them are missing the mark.

Let's start with what we do know from the outside. Activision Blizzard and Bungie had a $500 million contract spanning ten years for Destiny, which initially called for regular releases every couple of years supported by healthy infusions of downloadable content (DLC) that would keep the revenue flowing in-between major releases. Well, it didn't quite work out that way. The initial release sold $325 million worth in its first five days, but then things slowed down. Destiny 2 ended up at about half that level for its initial release. For whatever reason (and fans had many gripes about the game), the game never really caught fire.

Who's to blame for Destiny's below-expectations performance? Some point to game design decisions, which should be squarely in Bungie's lap; others note strong pressure from Activision Blizzard to get new material out there and to generate more revenue, which may have led to decisions about conent that had less-than-optimal results. It's impossible to know for sure where the truth lies, particularly from the outside.

Regardless, we do know that Destiny did not perform at the level that Activision Blizzard desired. One clear inference we can make from the early end to the Destiny publishing agreement is that ultimately Activision Blizzard did not feel that Destiny's prospects were strong enough to warrant fighting over the franchise. So now it's Bungie's property, for better or for worse.

Now, keeping Destiny at its current level is not inexpensive -- and either adding more content, or creating a new game (Destiny 3?) is not going to be cheap. There's a big marketing challenge, too, in convincing people who already made up their minds about Destiny to give the game another try. Putting the Destiny ship into a new, more profitable trajectory is going to be neither easy nor inexpensive. The process will take time, too.

Succeeding in revitalizing Destiny will require a clear-eyed evaluation of what the game's problems have been, and smart decisions about how to fix them. It may be that the game's audience has reached a plateau, given the widespread competition, and changes that could be made with reasonable time and expense might not generate enough additional revenue to make them profitable. It's possible that Bungie might conclude that beyond a certain maintenance level, Destiny is not worth a major upgrade project.

Conversely, Bungie may analyze the situation and determine that some game design changes along with a steady flow of new content and good marketing may put Destiny firmly in the black. I don't know which case is true (though the decision is rarely so clear-cut). I wish Bungie well in making that decision. Whatever Bungie decides, the next decision will be what to tell the Destiny fan base -- and when.

Whatever changes Bungie makes (or doesn't make), you can be sure there will be a number of people who don't like those changes. The company needs to manage expectations and keep the fan base as happy as possible, either for new Destiny content or for a new Bungie franchise.

Meanwhile, Activision Blizzard now has to figure out how to replace the revenue hole Destiny's departure leaves. Spin up a new franchise? That takes a lot of time and money with no guarantee of success. Acquire a profitable game company? Possible, but expensive -- and that can take a long time to negotiate, and maybe even longer to show a profit.

I wish Bungie all the best in their quest. There's a tremendous amount of work that's been put into Destiny, and I hope that they can find a way to continue that world for many years to come.

Unity Makes Improbable's SpatialOS Impossible

The news came seemingly out of nowhere: Improbable, the well-funded UK startup producing the SpatialOS system for running massively multiplayer online games across multiple servers, announced that game development engine company Unity yanked their license to run Unity-based games. An unknown number of developers have been busy creating games for SpatialOS, and it's not clear how many of them were using Unity. What an unpleasant surprise to wake up to!

The news wasn't over for the day, though. At first, Improbable was pleading on their blog to get the whole issue squared away with Unity; apparently the two had been in negotiations over the issue for some time. Unity wasn't having any of it, though, issuing a statement that the whole thing shouldn't have been a surprise to Improbable -- Unity said they told them in person over a year ago that SpatialOS was in violation of Unity's terms of service, and notified them in writing six months ago, and has been negotiating over the issue for months.

That raises the question of why Improbable hadn't mentioned the issue to developers -- well, you can understand why (they wouldn't want to scare people off), but given the outcome some warning would have been nice, don't you think? At least Unity clarified later in the day that SpatialOS projects that were live and in production would still be supported.

Now at the end of the day comes news that Epic Games has stepped in to help Improbable create a $25 million fund to help developers "move to more open engines." Gee, I wonder what engine they could be referring to? This offer is... Unreal, so to speak.

I know there's more to the story that what we've been reading here -- I suspect there's money at the root of it, and Unity wanted some part of Improbable's revenue stream in some way. I hope all parties can resolve this issue without leaving developers feeling whipsawed. Imagine having to try and rework your late-in-development game to an entire new engine... a nightmare scenario.

I think Improbable has a bright future ahead, as there are many interesting game designs I can think of that would benefit from a fast, cloud-based OS like this one that can enable some things we haven't seen before in games. Let's hope they can find a way to play nicely with Unity as well as Unreal.

Activision Blizzard Shakes Up Management

Management has been changing over the last few months at Activision Blizzard. Netflix poached Activision Blizzard's CFO, and then Blizzard's CFO announced she was leaving to become CFO at Square. This follows after longtime Blizzard president Mike Morhaime stepped down last year, as did Activision Blizzard president Eric Hirshberg. Now Activision Blizzard announced that Call of Duty Exec Rob Kostich is the new President for Activision Blizzard; Humam Sakhnini was named president of King Digital; and Dennis Durkin will continue as Activision Blizzard CFO as well as heading up emerging businesses.

Why all the changes? Well, some are no doubt due to a desire to try something different (or just to retire), but one can't help but connect all this management movement with the fact that the stock has dropped 30% in recent months, and that the Q3 results showed a drop of 12% in overall sales. Some of the marquee titles like Destiny and Overwatch seem stagnant. Call of Duty still hasn't regained the sales it reached several years ago, though it's still selling tremendously well.

Perhaps some of this is due to Fortnite taking some of the oxygen away. The market for hardcore players is only so big, after all, and it's hard to expand your audience when you're already one of the market leaders. Investors are wondering where the growth will come from in the future. Esports? Perhaps, though it's not clear exactly how that segment will evolve over time. Mobile? Activision Blizzard's King is doing quite well with Candy Crush, but it seems to have trouble coming up with a new hit of that size.

Of course, Activision Blizzard is not alone in its doldrums. Electronic Arts is facing similar questions about where future growth is coming from. Market leadership makes it difficult to rack up strong growth numbers year after year. Just ask Apple.

What should these giants do? Perhaps look at some acquisitions; picking up a company with proven properties in key market segments should be good for growth, if you can make the right picks. (King Digital has certainly performed well for Activision Blizzard.) Mining the back catalog to bring back the hits of the past could be lucrative as well, if you carry it off properly. (Command & Conquer? Tony Hawk?) Both of these companies have many great hits in their past, some of which might be dusted off and brought back to great acclaim.

It will be interesting to see what happens over the course of 2019.

Update: The first big news has already dropped, as Bungie splits away from Activision Blizzard to put Destiny completely under Bungie's control. The game hasn't been performing as well as Activision Blizzard had hoped, clearly, and Bungie will see if they can do better. However, Activision Blizzard is now down two key franchises (Destiny and Skylanders) which had been major contributors to revenue in the past few years. What will replace them? It's not clear what, and certainly creating a franchise that can perform on the scale Activision Blizzard would like (hundreds of millions in revenue per year; ideally a billion or more) is an expensive, time-consuming gamble. Unless you buy one that's already doing well... I expect this will put even more pressure on Activision Blizzard to find something like that.

What this also says, pretty clearly, is that Activision Blizzard has lost faith in the ability of Destiny to grow to the size they need. The game could still be a good performer for Bungie, which doesn't necessarily need such huge numbers. Still, I wouldn't be too surprised to see Destiny go free-to-play at some point in an attempt to grow the user base significantly. That's easy to say, but remarkably difficult to pull off -- you need to have a game design that works well with monetization and can retain customers for the long haul, and it's not clear Destiny has that.

Buckle up, this may be a bumpy ride.