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IDC Predicts Microsoft Will Unbundle Kinect and Xbox One Next Year, Sony's PlayStation 4 Wins the Eighth Generation Game Console Race

A new packaged video game and entertainment console forecast from International Data Corporation (IDC) concludes that competitive pressures will lead Microsoft to unbundle the Kinect sensor from its Xbox One console in 2015, Nintendo's Wii U will receive the equivalent of a $50 price cut worldwide in late 2014 or early 2015, and Sony's PlayStation 4 (PS4) will emerge with the largest global installed base of any console by the end of 2016.

The forecast additionally expects that, together, eighth generation consoles – Xbox One, Wii U and PS4 – will generate about 10% less retail revenue from console hardware and disc-based games than did seventh generation consoles – Xbox 360, Wii and PlayStation 3 (PS3) – combined through their first six years on the market. Total eighth generation console hardware revenue is projected to be above the comparable seventh generation total at the end of this period as a result higher average selling prices (ASPs). Disc-based software revenue is expected to be far lower. The number of eighth generation game discs sold to retailers (sell-in) is, in fact, projected to be 45% below the seventh generation total through six years of availability.

If digital games and related online console revenue streams are included in the picture, however, the outlook for eighth generation consoles improves substantially. The inclusion of digital console game spending, subscription revenue and other content/service/app purchases billed through online eighth generation console stores pushes total revenue up to within a few percent of the seventh generation total through the first six years of availability. Rising digital revenue is forecast to nearly offset the fall in disc-based revenue.

"If Microsoft unbundles the Kinect sensor from the Xbox One console as we expect in 2015, this should lead to rough price parity with the PS4 and reset the sales dynamic at retail," explained Lewis Ward, Research Director, Gaming at IDC. "We project this change will lead to enough of a console sales bump that Xbox One will emerge with the largest installed base of any console in North America by the end of 2016. The PS4 should still lead globally, but the unbundling of Kinect and Xbox One should move the sales needle enough to give Xbox One the installed base edge in the United States and Canada before the end of 2016."

Other key findings from IDC's Worldwide Video Game and Entertainment Console Hardware and Packaged Software 2014-2018 Forecast include the following:

  • Microconsoles (digital-only devices such as Amazon Fire TV that support TV-based gaming) aren't considered in the forecast, but it appears that these devices will only erode demand for disc-playing consoles at the margins in the next few years.
  • China remains the biggest global wild card; despite the console ban repeal, early indicators suggests that eighth generation consoles will face large barriers to success in China.
  • Revenue is shifting towards developing economies despite limited Chinese demand; North American console gamers' share of all console hardware and disc-based spending, for example, is forecast to slip 5% from 2014 to 2018.

The new forecast, Worldwide Video Game and Entertainment Console Hardware and Packaged Software 2014-2018 Forecast (IDC Doc #248241), includes a breakout of console hardware and disc-based software sales to retailers (sell-in) for North America, Western Europe, Asia/Pacific and a combined rest of the world (ROW) region. Installed bases for the major console families are also forecast in the 73-page report, as is the number of unique console gamers and their average annual spending on console software.

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community to make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. In 2014, IDC celebrates its 50th anniversary of providing strategic insights to help clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com.

All product and company names may be trademarks or registered trademarks of their respective holders.

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