David Darling, Codemasters' co-founder and Kwalee CEO, has pointed towards the relationship between console platform holders and retailers, saying that a reliance on traditional retail partnerships will lead to console extinction in the face of far more flexible business structures from Apple and Google that actually serve consumer needs.
"If the next generation consoles have media drives like DVD to keep distributors and retailers happy so they can sell physical product this will make the machines uncompetitive," Darling said in a Kwalee blog post. "They will not be able to compete on price. The retailers will say to Sony and Microsoft 'you can’t sell game X at retail for $60 and then sell it in your App Store for $2.' However, console-makers will need to sell games for $2 or else they will not be competitive with Apple. Nintendo 3DS and Sony Vita are not currently competitive with iPhone and Android game prices.
"Digital downloads give publishers instant access to a worldwide marketplace, while cutting out the expensive chain of production and distribution required by boxed games. Developers can learn how to better look after their customers and provide exactly the experience they want. Players can play more games for free and pay just for the content that they want."
Darling highlighted creativity and profitability as two key differences between flexible and inflexible pricing models - pointing out that Epic recently announced Infinity Blade made them far more money than Gears, and noting SEGA had closed console studios to turn more towards digital distribution on downloadable platforms.
"The May 2012 figures given out by NPD (for the US) and Chart-track (for the UK) show an industry which is falling off a cliff," he went on. "In May 2012 UK sales were down 38% year-on-year and US sales down 28%. This, despite the fact that we had Diablo 3, Max Payne 3 and Ghost Recon: Future Soldier all released in that month.
"The old fashioned, dinosaur consoles are massively expensive to develop games for, it is like making a small movie. The size of this risk means that publishers concentrate on sequels and “me-too” clones of successful games, thus stifling innovation. To become an Apple publisher costs just $99 and the apps do not cost much to develop."
Darling prophesies that unless Microsoft and Sony drastically alter their approach to distribution and pricing with their next consoles, the war of the living room will be won by neither of them.
"Sony and Microsoft cannot let the retailers dictate game prices going forwards if they want to break free from the current over-priced model, their next consoles, PlayStation 4 and Xbox 720 need to be digital only, or they will fail. Once Apple add an App Store to Apple TV they could take over the living room games industry like they have taken over the handheld games industry with the iPhone and its flexible pricing and lack of distribution costs."