Why PlayStation is Next Gen’s Big Loser
Now I know what you’re going to say. How? Are you crazy? Have you seen the games PlayStation announced? I’ll get to the how, I’m only a little crazy, and I agree the PS5 games line up is already a veritable who’s who of flagship PlayStation properties. Xbox Series X on the other hand has a few big names, but is heavily relying on third parties and unproven IPs to pull them through the launch window. Even so, Xbox is going to close the gap significantly.
Balanced Hardware
Taking a step back to look at the consoles themselves, there aren’t a lot of major differences we can point at yet. This is the first time in 3 console generations that the flagship consoles are launching with price parity, so there’s not a default cheaper option this time around. Xbox Series X has had hands on with their quick resume, but it seems like PlayStation 5 should have a similar feature based on patents and some evidence from the recent PS5 UI presentation. This feature really stems from the SSDs included in both next-gen consoles, so it’s not a big surprise.
If we want to look at the raw reported numbers, Xbox Series X’s GPU is capable of more Teraflops, but PS5 has faster storage speeds. Xbox Series X has slightly more available storage space by default, but you also need to buy proprietary external storage whereas PS5 lets you add in a wider selection of NVMe storage. So based on no first hand experience, there’s no real hardware advantage one way or the other, unless of course you’re averse to a black brick or a giant wifi router. Either way you go, this generation’s flagship consoles are going to look awkward in your living room, though I’m personally looking forward to getting my Portal turret modded PS5.
The PlayStation Presumption
So, hardware is a wash, but PlayStation still has the games, right? Yes! PlayStation has great exclusives. The question is what will that do for them? The highest attach rate, the percent of game copies sold per console sold, for a PS4 exclusive is ~14% with Uncharted 4: A Thief’s End, which is definitely good. Xbox has been notably weaker in that department during the last generation with Halo 5 as their biggest exclusive with an attach rate of ~10%, but they’ve been working to remedy that through studio acquisitions. They’ve acquired or opened 9 new studios in the past 3 years alone. PlayStation has only acquired a single studio in Insomniac, with which they already had a long-standing exclusive relationship. Going into a new generation, Xbox and PlayStation should be looking for growth opportunities. And that’s where PlayStation is missing the mark.
PlayStation is big, 113 million PS4s sold big. That lands the console comfortably at the number 2 spot on the best-selling home consoles list just below it’s own grandfather (mother?), the PS2. So what does it take to convert those PS4 owners to the PS5? A $500 console + $70 for each new game. That’s a big investment and even at that point, a lot of the new games are going to run on the PS4 just fine, so why upgrade?
One way Sony is trying to attract players to their new platform is with the PS Plus Collection. With this collection, they offer a selection of 18 PS4 games with your PS Plus subscription. That’s really good if you don’t already have a PS4 or the games in the collection. That said, the collection is made up of the best-selling games from the PS4 (notably excluding Spider-Man), so it’s likely that the owners of the previously mentioned 113 million PS4s that are interested in those games have already played them. So again, not a very attractive reason to upgrade.
The Xbox Advantage
But what about Xbox? They have a similar launch situation, where a lot of titles will exist on both platforms. But then we look at Game Pass. The big benefit of going with Microsoft’s option is a HUGE catalog of games included with Game Pass. More than 20x the size of the PS Plus collection, and with a significantly smaller install base (15 million subscribers), Xbox has much more room to grow the player base and it’s far more likely new Xbox owners will have plenty to play with a Game Pass subscription. Xbox has even committed to new exclusive releases being included in that subscription compared to the full price $70 purchase PlayStation is asking of players. Game Pass really is the best value in gaming.
Back in 2015 when it became apparent the Xbox One made some big launch mistakes (lookin’ at you Kinect), it was announced Microsoft would no longer report console sales. Instead, they turned their measurement of success towards the total number of active Xbox Live users, going after a model closer to Netflix than the standard game and console sales strategy. As of last reported numbers and estimated Xbox One’s in the wild, Game Pass sees an attach rate of ~30%, more than double any PS4 exclusive title’s attach rate.
It’ll be interesting to see how Xbox Game Studios manages its new portfolio of games developed by their newly acquired studios. There’s speculation that rather than using them as exclusive content to bring players to their platform, they may publish some titles on PS5 and Nintendo Switch. The theory being that the income from the extra sales would offset the lost Xbox platform users. Phil Spencer has recently stated the Zenimax acquisition “was not done to take games away from another player base like that.” The recent moves by Xbox have generally been very consumer friendly and it’s a good strategy to bring in or convert players.
Now let’s talk about why Microsoft is playing a winning hand this round. xCloud, their game-streaming service, takes the barrier to entry from $500 to a $15 subscription. At launch, there will be over 100 Game Pass titles available for streaming to your phone or tablet, no console needed. Not to mention Game Pass offering 100+ titles on PC included in the subscription as well. And this is where we see Microsoft’s big strategy. They aren’t focused on fighting a losing battle head-to-head on console sales and title-by-title exclusive face-offs. Microsoft wants users in their ecosystem, hard stop.
Growth > Volume
So looking at the potential for growth, the Xbox platform has all the advantages. They’re pulling in users to Game Pass on their console of course, but also on PC, Phone, and Tablet, significantly widening their target market. Even the refrigerator and smart watch gamers out there (all 5 of them) are being served by xCloud! That’s not to say PlayStation isn’t going to do well, but Sony is sticking to the status quo that got them the advantage on the PS4. Some people might think the different strategies means Microsoft and Sony aren’t really competing in the same arena this generation, but despite different approaches, they’re still fighting for gamers’ most valuable asset, their attention.
Xbox is going after larger potential growth opportunities while PlayStation doesn’t want to change up what’s been working for them. And that is why Xbox is going to see significantly higher growth in the long term. To be fair, it will take Xbox growing its user base by ~200% to make up the last generation differential, but relatively speaking they’re well-poised to make that up and then some. I’m excited to see how this generation unravels, but Xbox is making the right moves. And as Gary Whitta says: “If you’re not making moves, you’re standing still.”
