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TheStreet Open House

Who Will Win the Console Wars?

Stocks in this article: MSFTSNEFB

NEW YORK ( TheStreet) -- It could well be no one will win the console wars, a conclusion that should scare investors in both Sony (SNE) and Microsoft (MSFT).

My source on this is my college-age son John, a long-time gamer who has been regaling us at dinner for a year on the machinations of the gaming industry. He has graduated from pure gaming to watching others play games on "Let's Play" and reading the industry's blogs.

His take is that neither Sony nor Microsoft may succeed with hardcore gamers because their new consoles are trying to be "all-in-one" entertainment centers and because they require online access, along with online permissions, for gamers to access their own games.

Before putting out $300 for a new console, he says, gamers need a compelling reason to do so. The Sony PS4 and Microsoft XBOne both have more graphics capability, but neither is backward-compatible with previous boxes, there's no new compelling interface and they're both heavily focused on Digital Rights Management.

This means that players have to sign-in to an online screen in order to play games they thought they bought at a store. It's a trend that open-source legend Eric Raymond called "cloud cuckoo land" at his own blog when done in office products, and it's the same here.

There is an open-source gaming platform being built called Ouya that doesn't have all these "features" designed to turn consoles into something more like credit card-operated arcade games. But Ouya lacks software, interfaces or anything resembling measurable market reality. My son laughs each time he mentions it.


The arcade features are necessary because new games are just so expensive to produce. M2 Research told TechNewsDaily recently the 2010 cost of producing a quality video game was $28 million, with a "franchise" title like "Call of Duty" costing $50 million. It's only going up from here.

This means that a game that sells 3.5 million copies, like "Hitman" or "Tomb Raider," may not be meeting expectations. This is why their publisher, Yoichi Wada of Square Enix, resigned in March, citing financial losses. He detailed the firm's problems in a presentation posted on the company Web site.

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