Console War: Is It Over?

The age-old debate between PlayStation and Xbox has been a cornerstone of video game culture for decades. Whether you've sparked discussions on Reddit, created content on TikTok, or engaged in passionate debates with friends, you've likely weighed in on this topic. While some gamers swear by the superiority of PC or the charm of Nintendo, the narrative of the past two decades has largely been shaped by the rivalry between Sony and Microsoft. But with the rapid evolution of the gaming industry, is the 'console war' still a relevant battle? The gaming landscape has transformed significantly, especially in the last year, driven by the rise of handheld gaming and the tech-savvy younger generations building their own gaming setups. The battlefield has changed beyond recognition, but has a clear victor emerged? The answer might surprise you.

The video game industry has skyrocketed to become a financial powerhouse in recent years. In 2019, it generated a global revenue of $285 billion, which surged to $475 billion by last year. This figure surpasses the combined earnings of the global movie and music industries in 2023, which totaled $308 billion and $28.6 billion respectively. The growth shows no signs of slowing down, with projections estimating nearly $700 billion by 2029. From its humble beginnings with Pong, the industry's trajectory is nothing short of remarkable.

Given this booming market, it's no wonder that Hollywood stars like Mads Mikkelsen, Keanu Reeves, Jon Bernthal, and Willem Dafoe have jumped into the gaming scene over the past five years. Their participation underscores a significant shift in how video games are perceived. Even giants like Disney are making strategic moves, investing $1.5 billion in Epic Games during Bob Iger's second term to solidify their gaming footprint. A rising tide should lift all boats, but it seems Microsoft's Xbox division is struggling to stay afloat.

The Xbox Series X and S were designed to be a significant leap forward from the Xbox One, yet they haven't captured the market as anticipated. The Xbox One outsells the Series X/S by nearly double. According to Mat Piscatella from Circana, the current console generation may have already peaked in sales, which is a concerning sign for Xbox. Sales data from 2024 reveals that the Xbox Series X/S sold less than 2.5 million units throughout the year, while the PlayStation 5 achieved the same sales figure in just the first quarter of 2024. Rumors also suggest Xbox might be phasing out its physical game distribution, and there's talk of potentially pulling out of the EMEA region. If Xbox was ever truly in a 'console war', these signs indicate a strategic retreat.

However, Xbox isn't just retreating; it has essentially surrendered. During the Activision-Blizzard acquisition, Microsoft admitted that it never believed it had a real chance in the console war. With the Xbox Series X/S struggling to match its predecessor's sales and Microsoft openly acknowledging its shortcomings, the company is shifting away from the traditional console market. Xbox Game Pass has become a focal point, with leaked documents showing hefty investments in bringing major titles like Grand Theft Auto 5 and Star Wars Jedi: Survivor to the service. Microsoft's recent 'This Is An Xbox' campaign reflects this shift, positioning Xbox not just as a console but as an accessible service complemented by hardware.

This redefinition suggests that Xbox hardware may not be limited to a box under your TV. Rumors of an Xbox handheld have been circulating, supported by leaked documents hinting at a 'hybrid cloud gaming platform'. Microsoft's pivot is evident in its plans for a mobile game store to rival Apple and Google, and Xbox chief Phil Spencer has acknowledged the dominance of mobile gaming in shaping the company's future strategy. The goal is clear: Xbox wants to be the gaming brand you can play anytime, anywhere.

Microsoft's pivot is driven by the undeniable rise of mobile gaming. In 2024, out of an estimated 3.3 billion gamers worldwide, over 1.93 billion play on mobile devices. This includes casual players and has become a dominant force across all demographics, particularly Gen Z and Gen Alpha. The total market value for video games in 2024 was $184.3 billion, with mobile games accounting for half of that at $92.5 billion—a 2.8% increase from the previous year. Console gaming, on the other hand, represents just $50.3 billion, down 4% from 2023. It's no surprise Microsoft is keen on transforming your phone into an Xbox.

This shift isn't new. By 2013, mobile gaming in Asia was already outpacing the West, with South Korea and China leading the charge. That year, mobile games like Puzzle & Dragon and Candy Crush Saga out-earned GTA 5 by $1.5 and $1.4 billion respectively. Looking at the 2010s, five of the highest-grossing games were mobile titles—Crossfire, Monster Strike, Honor of Kings, Puzzle & Dragon, and Clash of Clans. These games might not be the first to come to mind, but their impact is undeniable.

Beyond mobile, PC gaming has also seen a surge, growing from 1.31 billion players in 2014 to 1.86 billion in 2024, with a significant spike of 200 million in 2020 due to the COVID-19 pandemic. The rise in PC gaming is fueled by gamers' increasing tech-savviness, learning from online communities about building powerful PCs. However, despite this growth, the PC gaming market in 2024 stands at $41.5 billion, still behind consoles at $50.3 billion, and the gap has widened since 2016. This trend suggests that PC gaming, while growing, isn't poised to overtake consoles in the near future, which is a concern for Xbox, given its strong presence on Windows PCs.

On the other side of the 'console war', PlayStation is thriving. Sony reported sales of 65 million PS5 units, significantly outpacing the combined 29.7 million sales of the Xbox Series X/S. For every Xbox Series X/S sold, five PS5s are purchased. Sony's Game and Network Services saw a 12.3% profit increase, driven by strong sales of first-party titles like Astro Bot and Ghost of Tsushima Director's Cut. Analysts project that by 2029, Sony will sell 106.9 million PS5 units, while Microsoft anticipates selling around 56-59 million Xbox Series X/S units by 2027. To regain its competitive edge, Microsoft must close this gap, boost unit sales, and enhance the profitability of its exclusives. However, current projections don't favor Microsoft, and with Xbox titles potentially coming to PlayStation and Switch, PlayStation's dominance seems unchallenged.

However, the PS5's success has its caveats. Despite the new generation being in its second half, 50% of PlayStation users still play on PS4s. Of the top 20 best-selling games in the U.S. in 2024, only Marvel's Spider-Man 2 ranks as a true PS5 exclusive at #19, with Helldivers 2 at #3 also available on PC. Excluding PS4 remasters, there are only about 15 genuine PS5 exclusives, which might not justify the console's $500 price tag for many. The $700 PS5 Pro's lukewarm reception further suggests that the console isn't yet a must-buy. However, the upcoming release of Grand Theft Auto 6 could change this narrative, showcasing the PS5's true potential.

So, who won the console war? For Microsoft, it seems there was never a belief in victory. Sony's PS5 is successful but hasn't yet justified a significant leap forward. The true victor appears to be those who opted out of the traditional console war. As mobile gaming companies like Tencent continue to expand into the console space, the next five years will be defined less by hardware and more by cloud gaming capabilities. The console war might be over, but the mobile gaming war—and its related skirmishes—has just begun.