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Microsoft, Sony Should Follow Nintendo with Xbox 720, PS4

With the Wii dominating console sales and the PS3 and Xbox 360 battling for second, it’s not surprising to see developers and hardware experts looking toward the next generation of home consoles. Never content with the here and now, the game industry is always asking “what’s next?” and evaluating the lessons of the current generation. Previous hardware evolutions saw consoles get bigger, more expensive and more technically advanced. Nintendo took a different model with the Wii, as of July, it finds itself in the top spot. The result? As experts look for “what’s next?” they should really be looking at “what’s here” — because the next generation of consoles will either be more delayed than expected or show virtually no innovation.

The Wii hardware is a sales success story, and it’s tapped into a “casual gaming” market that’s now experimenting with home consoles. Although the hardware itself has not advanced since the GameCube, its motion-sensitive user interface has, offering something fresh and new that justifies the “downgraded” graphics compared to the PS3 and Xbox 360. However, while the PS3 and Xbox 360 lag behind in sales, their software attach rates are higher, meaning “hardcore” gamers buy more games than their “casual” Wii-owning counterparts.

It’s tempting to make the argument that one financial model is more successful than the other, but more important is what these models indicate for the future. If stockholders and accountants are to be followed — and make no mistake, they are — the next generation of consoles will not move forward on either model, nor will it show much hardware advancement. Instead, the “PS4” and “Xbox 720” will combine the two models, blurring the lines between systems and putting an increased onus on exclusive content.

To Boldly Go…Nowhere

Gameplay versus graphics is a classic argument among gamers. “Which one matters most?” If the Wii has shown anything, it’s that gameplay innovation matters to new gamers, but graphics and multimedia matter to current ones. Presumably, that battle will continue for years until the next generation of consoles comes out. Sony has long since claimed the PS3 will have a 10-year lifecycle, while Microsoft has remained relatively mum on its plans for the Xbox 360. But where can game development realistically go in four to seven years’ time? Honestly, not far.

The PS3 and Xbox 360 are delivering graphics and audio never before seen from a home console, and there are many years left to eek out even more. But how much more A/V improvement do gamers really need? Would the ever-elusive Pixar-quality graphics really matter, let alone be feasible in light of the development budgets needed to achieve them? Likewise, Sony has grand plans for Home, and Microsoft is continually bringing gamers together and delivering digital content through the Xbox Live Marketplace, with future innovations easily delivered digitally via system updates. Frankly, there’s not much more these companies can do to meaningfully “beef up” their next systems.

Likewise, the Wii has shown that mainstream consumers are searching for an interactive experience more than an eye-pleasing one, and it would take full-body Wiimotes to extend that interactivity. WiiMotion Plus is an incremental improvement, not a revolutionary one, and until Virtual Reality becomes living-room reality, these peripheral-like improvements are really all we can expect. Where things can improve is in the software.

History Says: R+D = $$$

Nintendo is pulling in money hand over fist as the Wii enjoys the best-selling year of any console. Meanwhile, it’s estimated that Microsoft has lost $6 billion on the Xbox systems, and Sony is out $3 billion with the PS3. Why? Because Nintendo invested not in the hardware between generations, but the user input. The Wii is basically a glorified GameCube, and Nintendo has said as much. By the time the GameCube ceased production, Nintendo was reportedly making $50 per console sale. Why break that model? What the company did instead was create the motion-sensing Wii Remote, a technology that Nintendo had actually toyed with for decades. Microsoft and Sony, on the other hand, invested heavily in new hardware, from graphics to processors to Blu-ray (in Sony’s case), which required significant sums of money. Presuming Microsoft and Sony break even at the end of this console generation, how willing do you think the companies — and their investors — will be to turn around and start losing money again?

Not very.

Instead, what could very well happen is both companies borrowing a page from Nintendo in the next generation. The PS3 is a beast of a machine, the closest thing to “future proof” that gamers have seen in years. The Xbox 360 is no slouch either, though its biggest selling point is Microsoft’s Xbox Live service — which isn’t hardware-dependent, by the way. There’s truly no need, let alone any financial incentive, to re-invent the wheel a third (our fourth) time with new hardware. Microsoft and Sony could very well tweak their current configurations to accommodate new user-input options — a DualShock 4 or the oft-rumored Xbox 360 motion controller, if you will — and have their “next-gen” hardware complete.

This model would take from Nintendo’s playbook in more ways than one. The user-input change is the most obvious, but more important is the significant reduction in research and development, as well as the sudden attainability of those systems to mainstream consumers. This opening wouldn’t just be through the Wii-like interactive experience, however; it would be through the reduced R&D costs. With the PS4 and Xbox 720 less expensive to produce, Sony and Microsoft could reduce the retail cost of their consoles, thus putting them more on par with the Wii. True, the Wii at that point will also be less expensive, but the casual gamers drawn into the console world by the Wii today will be craving something new — the types of advanced graphics and games that “hardcore” gamers today enjoy.

Can’t We All Just Get Along?

Overnight, these “new” consoles from Sony and Microsoft would become the all-in-one systems both companies have sought for years. The user input would be present for casual and younger gamers, while the graphics and audio capabilities would be there for those interested in more-advanced technology. The irony, of course, is that Sony and Microsoft would realize their dreams by, well, not doing much of anything.

Rather than ask “what’s next?” the game industry needs ask “what’s working now?” The graphics and audio technology are already incredible — when was the last time you heard someone bemoan the graphics in Metal Gear Solid 4 or the audio in Call of Duty 4? — and until the “uncanny valley” can be crossed in no uncertain terms, improvements to those A/V aspects will be minimal at best. Likewise, Nintendo has found great financial success by focusing on control options rather than hardware innovation, but its casual-gaming audience has lagged behind in software sales. Combining the models — low R&D, high-quality games and improved input — provides a win-win for the entire industry, from developer to manufacturer to consumer. Developers will hit the ground running in the next generation, as they already know the hardware. Manufacturers will turn profits much more quickly due to decreased R&D costs. And consumers will have a console that’s not only less expensive, but delivers a great experience for hardcore and casual gamers alike.

Nintendo, Microsoft and Sony are trying to achieve this in the current hardware generation, but none of them has taken all the steps necessary to do so. If this console generation will be known for one thing, it won’t be BioShock or the Wii Remote or Xbox Live. It will be known as the generation when the console manufacturers finally learned how to combine production models and deliver true value to investors, developers and gamers alike.

— Jonas Allen

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