Next-gen gaming kicks off at E3 2013

By Philip Morton

A lot has happened in the seven years since the Xbox 360 heralded a new generation of videogame consoles. The iPhone, iPad, Android, App Store, Twitter, Netflix and Amazon cloud services have all changed the tech landscape in the meantime.

Will the newly announced PlayStation 4 and Xbox One flourish in this new environment or will they be irrelevant by the time they are due to be replaced? This year’s E3 trade show in Los Angeles gave us a few insights about the direction of the industry.

Opening salvoes: Microsoft flounder and Sony capitalise

Sony had a distinct advantage coming into E3. When they announced the PS4 in February, they revealed few details, not even showing what the console would look like. Microsoft unveiled the Xbox One three weeks before the show, but created a large amount of negative sentiment amongst the gaming community due to seemingly draconian DRM policies.

At its press conference first thing on Monday, Microsoft did nothing to address these concerns, instead focusing on the system’s game lineup. They then dropped a bomb towards the end of the presentation: the console would retail for $499/£429. After moving quickly on to another game reveal, they simply ended the briefing with no conclusion or round-up. They had failed to articulate any clear reason to buy the Xbox One.

This gave Sony an opportunity to push home their lead in the PR battle and they took full advantage. After an hour and a half, Sony showed a slide stating that the PS4 will support used games. It was the biggest cheer heard at an E3 press conference in years, with Sony’s Jack Tretton struggling to hold back laughter. The next slides were the same, going point-by-point through their used-games and DRM policy, Tretton pausing for cheers after each one. The final blow came with the announcement of the price – $399/£329 – significantly below the Xbox One.

The games: edging cautiously towards the next generation

Of course the games each system will have will be one of the main factors in anyone’s purchase decision, and here the results were inconclusive. While Microsoft had more exclusive titles and arguably the better ones, many such as Dead Rising 3 featured little innovation.

This caution was evident throughout the show, with many publishers sticking to conservative game designs and iterating existing series. The most innovative big-budget titles were showcased by Ubisoft, with Watch Dogs and The Division the most impressive games of the show.

Independently produced games (like many of those on the App Store) were also a hot topic at E3, with Microsoft and Sony’s policies starkly different. While the former has done little to support these developers, the latter is actively courting them. The consequence of this will only materialise in the long-term, but that’s a topic for another, upcoming blog post.

The battle for the living room: using gamers as a Trojan horse

Both consoles will be competing for people’s time, for jobs-to-be-done that centre around entertainment. With powerful hardware and high price points, both Sony and Microsoft are approaching the problem by treating gamers like a Trojan horse. If gamers buy their consoles and put them in their living rooms, then perhaps other people in those households will start using them, making them a one-stop shop for entertainment. Multiple users will magnify the reach of each console, creating huge value even if they sell the same number of devices as the current generation (both 77 million units).

But whether you should communicate this to the market is another matter. The answer: you probably shouldn’t.

Microsoft has been marketing the Xbox One as an “all-in-one entertainment system”, emphasising TV, movies and Skype calls. This seems logical, since over 50% of Xbox 360 usage is not gaming-related, but this confuses those who use consoles and those that buy them. Gamers, the primary decision makers for console purchases, do not care about the other things you can do with a console; they care about the games.

This partly explains Sony’s marketing strategy, which has focused almost entirely on gaming. With a console that is less expensive, less restrictive and just as powerful as Microsoft’s, they hold a significant advantage going into the Christmas launch window.

The threat on the horizon: a black box from Cupertino

The fight is not over though, as console cycles are years long and the sternest challenges are yet to come.

The biggest threat to the industry lies in plain sight: the Apple TV. Even as a self-described ‘hobby’ product with few features beyond streaming iTunes and Netflix content, Apple has sold 13 million units. But when they inevitably open the system up to third-party developers and broaden its input methods, it could be as thriving a games development platform as the iPhone and iPad. That should worry console manufacturers.

While the hardware for a sub-$100 device could not play a title like Watch Dogs, it will be good enough for the kind of games that people already ‘hire’ for their entertainment jobs-to-be-done on mobile devices. It will also improve quickly with annual, rather than multi-year updates.

A recipe for success: the user experience

If the PlayStation 4 and Xbox One are to succeed in the next seven years, they must do three things:

  1. Appeal to gamers, to rapidly expand their user base
  2. Be the best place for entertainment for the whole family
  3. Raise people’s expectations of the quality of gaming experiences

Or to put it another way, provide the best user experience for gamers and people who live with gamers, while ensuring that such an experience continues to be seen as valuable.

This will not be easy, but console manufacturers do not need to reinvent their businesses to stay relevant. Instead, they should build on what they have, focusing on the user experience to both grow their user base and defend against threats.

If they do not, consoles will become the new PCs, devoured by competitors (tablets) which offer a better user experience. Succeed, and they will conquer the living room as they have set out to.

Philip Morton

I help businesses create better products and services by putting customer insight at the heart of the design process. In the last six years, I've worked with the likes of Sony PlayStation, HSBC, Sega, Tesco and TSB. In that time, I've seen our research, design and strategy work improve both the experience for customers and commercial outcomes for clients.

View Philip's profile

What do you think?