The Great Entertainment Fragmentation

Yeah, I remember unboxing my N64. Mario 64 was the time of my ten-year-old life. I had managed to talk my parents into purchasing the console at launch in late September 1996, and it felt like a Christmas. All things considered, it was probably a decent investment on their part. The launch price was $199 (about $300 adjusted for select inflation); but considering the other forms of entertainment in my youth, it must have looked like a steal.

MSRPs of Top-Grossing Toys in 1996
In unadjusted USD, excluding video games

  • Tickle-Me Elmo (Tyco Toys) == $27.99
  • Buzz Lightyear Action Figure (Disney) == $29.99
  • Shark's Crystal Castle Set, 253pcs (Lego) == $49.99
  • Lazer Challenge Duel Set (Toymax) == $39.99
  • Star Trek Barbie (Mattel) == $75.00
  • Radar the Two-Way Tutor (Fisher Price) == $59.99
  • Goosebumps Fright Writer Pen (Tiger) == $24.99
  • Capsela 3000 Voice Command (Capsela) == $54.99
  • Marvel Super Heroes Collector Pack (Hasbro) == $39.99

The N64's value was shown by its staying power. It outlived all of the best toys, without incredibly high cost of ownership, and when allowance ran dry, circling back to play Mario a second or third time was still enjoyable. A lot of people owned that console, too. It was a very accessible consumer electronic.

And that reality has been sharply altered in the last two decades, uniquely, by a transformation in customer base. The broadband Internet era has catalyzed a more expansive world of digital entertainment consumption, one that has carried the production of video games out of a market predominantly targeted at children, and into a landscape where most development investment builds games for young adult men.

The Console Crisis

A new generation of video game consoles launched late last year, from Microsoft and Sony, and the relatively poor sales figures are beginning to incite industry-wide panic. TechCrunch is calling this the console crisis, and that's substantiated by the comparative sales data:

==2006 Sales== | ==2013 Sales==
Wii: 436,000 > PS4: 271,000
360: 294,000 > XB1: 141,000
PS3: 244,000 > 3DS: ~97,000
PS2: 299,000 > PS3: ~53,500
NDS: 239,000 > WiiU: ~49,000
PSP: 211,000 > 360: ~48,500
GBA: 179,000 > Vita: ~17,000

Add the January 2014 figures up and the tally is closer to 700,000. So that’s 2 million vs. ~700K — a very big market contraction, even if some of those sales figures are underestimates.

The Wii U has certainly flopped — but, taken as a whole, the console market is generally not shipping the numbers it once was. The Xbox One’s sales look especially bad compared to the previous gen Xbox 360. But even the PS2 was selling more units than the PS4 at the equivalent point in its sales cycle… Whatever the exact truth of the new generation of consoles sales — and it is still certainly early days for the PS4 and Xbone — it looks pretty clear that the console market overall has a big problem: aka the C-word, market contraction.

Writers across the Internet have some interesting theories about this, and the majority opinion goes something like this: video games have become increasingly expensive to develop, leading to more risk for each title, downward pressures from mobile and free games are picking off market segments that would otherwise be buying titles, and many of the smartphones being used have hardware that's been improved several times over in the course of a console cycle. Unrelated industries are driving mobile device advances, but the effect on consumers is dizzying. Of course console evolution looks sluggish. The best-selling mobile phone of 2006 was the Motorola RAZR, and we were still five years out from the iPhone 4S, the oldest model Apple still has in production.

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But none of these explanations are complete. The phones are far from perfect substitutes. There are still a lot of people who want to make really elaborate videogames. Though games are not immune from its effects, piracy has been less of a problem on the set-top boxes. These theories have merits, but they miss the larger story of fragmentation in digital media and entertainment electronics that has formed over the past decade.

In only ten years, we have borne witness to a tremendous proliferation of competitive product alternatives. Yes, that includes mobile apps, but also the golden age of television, social media, streaming services, and the bits of blogspam and Buzzfeed that coat the outer walls of a room filled with personality quizzes. The only universal force across the Great Entertainment Fragmentation is price, and the cost per hour of entertainment has never been lower. It has to be. A wider collection of platforms is competing for smaller fractions of stagnating middle and working class wages.

Purchasing a new game for these systems will still run you $60, and while the cost has remained stagnant for almost two decades, it simply doesn’t reflect the entertainment-to-cost ratio that alternative mediums are exploiting. Think about it: an Internet connection, Netflix, and Spotify will run about $65 a month, which means the entire Web, thousands of hours of television, and millions of music tracks all at your disposal for the price of a single video game.

It is this price disparity that is driving down sales across the entire video game industry. Game developers will argue that the price is necessary because of the cost of development, which is merely an admission that the economics no longer work. There are simply too many alternatives, too many ways to get lost in writing and television, too many entertainment options that costs a fraction of the latest and greatest games being published.

New consoles and games haven't corrected for this new reality. They're simply overpriced. And that may not be something that manufacturers or developers can afford to remedy. Other technologies and concepts have been able to become more dense. You can get Netflix, Spotify, and an Internet connection for the price of some console titles, and by then, it's the N64 versus the action figures in reverse. There's an obvious imbalance of opportunity, a clear gap in potential utility. They can blame Flappy and Farmville, but Sony, Nintendo, Microsoft, and the gaming studios did this to themselves.

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Nick DeBoer is a digital archivist and the writer of Metric Hour. You can find him on Twitter at @NickDeBoer.