former Sega of America president Peter Moore and former PS Shawn just said this, from interview by kotaku:
Gaming hardware has never been a moneymaker for companies that make it, says former Sega of America president and former Microsoft gaming corporate VP Peter Moore. It’s a means to an end, a way to get as many people as possible into a content spending ecosystem for as long as possible. Each new generation, console manufacturers go through excruciating discussions in which they estimate what the maximum amount people might pay for consoles is, how many games they might buy, what revenue they might make on DLC and microtransactions, how much advertising will cost, and how much the console itself will cost to make. All those numbers smashed together, plus a lot more, result in the final price of a console.
The trouble is, that last bit, the amount a console will cost to make, is skyrocketing thanks to the AI boom. AI companies are ordering out more chips than the games industry could ever hope to ask for, sucking up all the inventory for years out, and sending the people in the backrooms making these console pricing discussions into a spiral. “Chips are now priceless,” Moore says. “These are gems.”
“[Everyone] should be afraid of the thousand-dollar console,” Layden said. “That’s a whole lot of money. And particularly when a new console launches, you’re not going to have a lot of games for it. You can have anywhere from maybe six to 12 that’ll be out there in that launch window. And if you put a four-digit price tag on the hardware against that, I think you really slow the adoption curve tremendously.”
Layden believes the change needs to come at the software level. We chatted about the history of PlayStation hardware, and its innovations and price increases over the years. For a long time, Layden says, there was a somewhat mythical $399 price point for hardware. “You can’t sell a game machine unless it’s $399,” he said, remembering the mess Sony ended up dealing with when it announced a $600 PS3. The $399 console worked for a long time because it was affordable enough for buyers, and the improvements between console generations were significant enough to justify the cost.
But even as consoles get more expensive, the leap from generation to generation is getting smaller and smaller. “I mean really, how much more ray tracing can you put in there?” he said. “And will my eyes actually see 120 frames per second?”
So if a hypothetical (and it is hypothetical, Layden hasn’t been at Sony since 2019) PS6 is going to be largely indistinguishable from a PS5, then what’s left to sell buyers on a wildly expensive new box? For him, it’s got to be software. And the current direction of game design isn’t cutting it.
“I think we’re already kind of limiting our reach just because of the games we’re building now. I mean, variety and range seem to be narrowing. Most games are falling into a standard set of buckets. It’s a zombie apocalypse game, or it’s a space marine game, or it’s guys with really long swords and not much armor and dragons.
“But there are a lot of people in the world who really don’t care about Grand Theft Auto. We talk about how big we are, $220 billion, $250 billion industry, but our social impact is the reverse. Everybody has a favorite song. That’s probably the least revenue-generating entertainment category, music, compared to gaming and film and television. But yet it has the widest impact. And so gaming, it’s huge on the revenue side of things, but it’s a very select group that are doing it. We’re getting more money from the same people all the time and not necessarily bringing in new people into the experience. And if these people who aren’t in the gaming experience have already said ‘we don’t care about Call of Duty, we don’t care about Grand Theft Auto, we don’t care about Gran Turismo,’ doing more of those same games is obviously not going to appeal to those people either.”
Some of the issue, he thinks, actually comes from difficulties with that old chestnut, discoverability. Walking into a brick-and-mortar store and having an employee recommend a game to you is becoming an increasingly rare experience and is about to become even more rare as physical discs phase out. He also recalls the popular DVD player addition to the PS2, which made that console appealing or justifiable to buyers who might not have gone for it otherwise.
But Layden is adamant that the main issue at hand here is creativity. “If we just close ranks, we just make the same kind of shooters we’ve always been making and appeal to that base user for what they want, yeah, we’ll be all right, but we won’t get any bigger. We won’t bring any more people into the tent. And that’s probably bad.
“…We need to bring out more games for more people, which means actually you have to have more people making games and in different places and different experiences. I want to find out what games from Uruguay look like and what kind of game designers we have in Bulgaria.”
Moore came at the innovation idea from a slightly different angle. He thinks the necessary change lies in business models rather than in software development. One possible path to that is bundling in services to tie users to a specific ecosystem, like what Sega tried to do in the late ‘90s by offering $200 rebates on a Dreamcast with a two-year SegaNet contract.
It didn’t work then for a lot of different reasons, but he thinks improved technology would help similar models work now.
“We learned how gamers are very savvy at working the system and disappearing on us once they got their Dreamcast…It’s like printer ink, right? HP and these guys, Epson, you know, they’ll sell you a $199 printer and then you’re spending $70 every time you need ink. And that’s where the money is. And so this classic, they call it razors and blades model, applies here and may apply to consoles if the threshold of paying is such that people go, ‘I just can’t afford it anymore.’”
“We did this 26 years ago at Sega…and we figured out how you can justify putting a console in somebody’s home in those days. Theoretically, it was very much that we’re going to block the other guy. We’ve got you and we’ve got you for a number of years. And you’re going to buy a lot of games as a result. It didn’t work out. But I think that’s probably what the hardware manufacturers are noodling right now is, the cost of making this stuff is now getting ridiculous. We can’t compete. We can’t even get supply for what we need because the chip manufacturers are fueling artificial intelligence demand. And they’re looking at [consumers] and probably say, ‘We can’t make enough profit on you.’”
“Every generation, the last two or three generations, we’ve all said, ‘Is this the last console generation? Do we need a dedicated piece of hardware between us, the television and our controller?’ And the answer so far has always been, yes, we do. But I’ve always said since I got in the industry in my Sega days, eventually you’ll just have a chip in the TV that will allow you to Netflix-style look at all the games that are available right now and how many people are playing and you’ll jump in. And do you need something between that experience on your screen and your controller? The lag and latency will be close to zero. And so off you go.”
“I think this is a real test for the validity of a video game console,” Moore said. “Either technology will solve the problem or the gamer will solve the problem by saying, ‘I can’t afford 800 bucks for a console. I will play on my PC. Maybe figure out ways of streaming the game to my 4K TV. If I don’t like to use a keyboard and a mouse, then I can get a controller that will work and off I go.’ And the PC becomes your console. I think that is the challenge. Gamers will always find ways to play games.”
Gaming hardware has never been a moneymaker for companies that make it, says former Sega of America president and former Microsoft gaming corporate VP Peter Moore. It’s a means to an end, a way to get as many people as possible into a content spending ecosystem for as long as possible. Each new generation, console manufacturers go through excruciating discussions in which they estimate what the maximum amount people might pay for consoles is, how many games they might buy, what revenue they might make on DLC and microtransactions, how much advertising will cost, and how much the console itself will cost to make. All those numbers smashed together, plus a lot more, result in the final price of a console.
The trouble is, that last bit, the amount a console will cost to make, is skyrocketing thanks to the AI boom. AI companies are ordering out more chips than the games industry could ever hope to ask for, sucking up all the inventory for years out, and sending the people in the backrooms making these console pricing discussions into a spiral. “Chips are now priceless,” Moore says. “These are gems.”
“[Everyone] should be afraid of the thousand-dollar console,” Layden said. “That’s a whole lot of money. And particularly when a new console launches, you’re not going to have a lot of games for it. You can have anywhere from maybe six to 12 that’ll be out there in that launch window. And if you put a four-digit price tag on the hardware against that, I think you really slow the adoption curve tremendously.”
Layden believes the change needs to come at the software level. We chatted about the history of PlayStation hardware, and its innovations and price increases over the years. For a long time, Layden says, there was a somewhat mythical $399 price point for hardware. “You can’t sell a game machine unless it’s $399,” he said, remembering the mess Sony ended up dealing with when it announced a $600 PS3. The $399 console worked for a long time because it was affordable enough for buyers, and the improvements between console generations were significant enough to justify the cost.
But even as consoles get more expensive, the leap from generation to generation is getting smaller and smaller. “I mean really, how much more ray tracing can you put in there?” he said. “And will my eyes actually see 120 frames per second?”
So if a hypothetical (and it is hypothetical, Layden hasn’t been at Sony since 2019) PS6 is going to be largely indistinguishable from a PS5, then what’s left to sell buyers on a wildly expensive new box? For him, it’s got to be software. And the current direction of game design isn’t cutting it.
“I think we’re already kind of limiting our reach just because of the games we’re building now. I mean, variety and range seem to be narrowing. Most games are falling into a standard set of buckets. It’s a zombie apocalypse game, or it’s a space marine game, or it’s guys with really long swords and not much armor and dragons.
“But there are a lot of people in the world who really don’t care about Grand Theft Auto. We talk about how big we are, $220 billion, $250 billion industry, but our social impact is the reverse. Everybody has a favorite song. That’s probably the least revenue-generating entertainment category, music, compared to gaming and film and television. But yet it has the widest impact. And so gaming, it’s huge on the revenue side of things, but it’s a very select group that are doing it. We’re getting more money from the same people all the time and not necessarily bringing in new people into the experience. And if these people who aren’t in the gaming experience have already said ‘we don’t care about Call of Duty, we don’t care about Grand Theft Auto, we don’t care about Gran Turismo,’ doing more of those same games is obviously not going to appeal to those people either.”
Some of the issue, he thinks, actually comes from difficulties with that old chestnut, discoverability. Walking into a brick-and-mortar store and having an employee recommend a game to you is becoming an increasingly rare experience and is about to become even more rare as physical discs phase out. He also recalls the popular DVD player addition to the PS2, which made that console appealing or justifiable to buyers who might not have gone for it otherwise.
But Layden is adamant that the main issue at hand here is creativity. “If we just close ranks, we just make the same kind of shooters we’ve always been making and appeal to that base user for what they want, yeah, we’ll be all right, but we won’t get any bigger. We won’t bring any more people into the tent. And that’s probably bad.
“…We need to bring out more games for more people, which means actually you have to have more people making games and in different places and different experiences. I want to find out what games from Uruguay look like and what kind of game designers we have in Bulgaria.”
Moore came at the innovation idea from a slightly different angle. He thinks the necessary change lies in business models rather than in software development. One possible path to that is bundling in services to tie users to a specific ecosystem, like what Sega tried to do in the late ‘90s by offering $200 rebates on a Dreamcast with a two-year SegaNet contract.
It didn’t work then for a lot of different reasons, but he thinks improved technology would help similar models work now.
“We learned how gamers are very savvy at working the system and disappearing on us once they got their Dreamcast…It’s like printer ink, right? HP and these guys, Epson, you know, they’ll sell you a $199 printer and then you’re spending $70 every time you need ink. And that’s where the money is. And so this classic, they call it razors and blades model, applies here and may apply to consoles if the threshold of paying is such that people go, ‘I just can’t afford it anymore.’”
“We did this 26 years ago at Sega…and we figured out how you can justify putting a console in somebody’s home in those days. Theoretically, it was very much that we’re going to block the other guy. We’ve got you and we’ve got you for a number of years. And you’re going to buy a lot of games as a result. It didn’t work out. But I think that’s probably what the hardware manufacturers are noodling right now is, the cost of making this stuff is now getting ridiculous. We can’t compete. We can’t even get supply for what we need because the chip manufacturers are fueling artificial intelligence demand. And they’re looking at [consumers] and probably say, ‘We can’t make enough profit on you.’”
“Every generation, the last two or three generations, we’ve all said, ‘Is this the last console generation? Do we need a dedicated piece of hardware between us, the television and our controller?’ And the answer so far has always been, yes, we do. But I’ve always said since I got in the industry in my Sega days, eventually you’ll just have a chip in the TV that will allow you to Netflix-style look at all the games that are available right now and how many people are playing and you’ll jump in. And do you need something between that experience on your screen and your controller? The lag and latency will be close to zero. And so off you go.”
“I think this is a real test for the validity of a video game console,” Moore said. “Either technology will solve the problem or the gamer will solve the problem by saying, ‘I can’t afford 800 bucks for a console. I will play on my PC. Maybe figure out ways of streaming the game to my 4K TV. If I don’t like to use a keyboard and a mouse, then I can get a controller that will work and off I go.’ And the PC becomes your console. I think that is the challenge. Gamers will always find ways to play games.”
