(Bloomberg) -- The human eye can’t really tell the difference between 4K and 8K resolution.
Video game console manufacturers, who have built their businesses selling increasingly powerful machines every few years, are grappling with a future where performance improvements are becoming less dramatic.
Sony Group Corp. launched its PlayStation 5 Pro console in mid-November. The $700 upgraded version of Sony’s 2020 gaming machine uses AI to improve games’ frame rate while maintaining exceptional image quality — at least for 82 games that have been enhanced to take advantage of the new specs. That means gamers can see the realistic glint of their metal sword and experience smooth, sword-swinging battle action.
But despite all the fancy tech and a $200 price increase over the previous version, reviews so far haven’t suggested it’s a must-have machine.
“It’s an improvement, but there’s nothing that makes it a complete generation above what the Series X offered,” Daniel Ahmad, director of research and insights at Niko Partners, said. “It’s a lot more difficult to distinguish the jump between each generation.”
The number of households with a gaming console hasn’t really budged in more than a decade. Many gamers are replacing older machines more slowly, finding the one they already have is good enough. While Sony tries to convince consumers their newest versions will be even more powerful — faster, crisper, more mind-blowing — that may not be enough to spur purchases if users can’t see the difference with their own eyes.
Ahmad forecasts PS5 Pro sales will be 10% of total PS5 sales by the end of the console’s life cycle. That’s lower than for the PS4 and PS4 Pro, which accounted for 15% of total sales.
“The reason for that is the price point,” he said, noting that Sony also offers a cheaper digital version of the PS5. “That may be more attractive and is getting the greatest share of sales compared to prior years.”
Microsoft’ Corp.’s Xbox Series X was the most powerful console of all time when it was released in 2020. Priced at $500, it’s 8K compatible and offers up to 120 frames-per-second to capture fast action. But even four years ago, consumers questioned whether they could meaningfully distinguish between the 60 frames-per-second on older models and 120 on the new.
Still, each new model seems to set the bar ever higher. Capabilities like ray-tracing, which is better at rendering light refracting off environments, are becoming standard on all consoles. And there are areas where hardware advances can offer consumers visible benefits, such as animation and 3D modeling to make realistic representation of characters and worlds. Further advances will require more advanced chips.
Meanwhile, unlike with previous generations, the cost of parts isn’t declining as the consoles age, keeping the companies from turning a profit on the hardware alone. As a result, neither Sony nor Microsoft have slashed prices on their now four-year-old consoles.
Nintendo Co., the other major provider, stepped out of the race to continuously beef up console horsepower long ago, after it found little success with GameCube in 2001. Since then, executives have openly criticized the path that Sony and Microsoft are following, saying using cutting-edge technology for household products without a careful cost-benefit analysis isn’t justified. The Nintendo Switch, which wasn’t the most powerful machine when it launched in 2017, still became one of the industry’s biggest hits.
Kyoto, Japan-based Nintendo is likely to stick to its vision with its next-generation console, due out next year, Ko Shiota, the company’s executive in charge of hardware development told investors this month.
“Bigger budgets do not necessarily equate to better ideas,” he said, “so we hope to continue to focus on a process where teams of hardware and software developers share ideas to create interesting things.”
Microsoft is shifting its sights beyond performance to ubiquity. Phil Spencer, Microsoft’s chief executive officer of gaming, acknowledged in a recent interview that, “We’re not going to grow the market with $1,000 consoles.” The new “This is an Xbox” Holiday campaign advertises how gamers don’t need a $500 Xbox to play; they can use the Xbox app on smart TVs, smartphones, hand held devices and laptops. Its cloud gaming technology can stream the games onto devices consumers already own.
Last week, Xbox announced that users who subscribe to its $20-a-month Xbox Game Pass Ultimate tier can stream 50 games to those devices as part of their plan.
“If you’re going to grow the market, you’re going to have to think about more flexible business models, content that’s more approachable, more accessible to more people and more devices where the games are available,” Spencer said.
At Sony, whose PlayStation remains the most powerful console, executives would seem to agree. CEO Kenichiro Yoshida recently suggested that the measure of success isn’t a number of units sold, but how many hours gamers spend playing games.
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