Microsoft Is Preparing For A Future Where Consoles Are Less Important, According to Michael Pachter

I recently had the chance to sit down with Michael Pachter, the well known analyst with Wedbush Securities, who is known for his outspoken opinions. We managed to talk to him about a lot of things, but the one thing that I was most curious about was the future of Microsoft in the console business. With all the moves that Microsoft are making lately, including emphasizing Xbox Live membership over actual units sold, and putting all their games on Windows as well, and with them aiming for a universal gaming platform- are they basically just preparing to leave the console market? Are these the first indications that we are seeing towards that?

According to Pachter, no. Pachter said that Microsoft are actually preparing themselves for a future where consoles are not the only means of consuming gaming entertainment, a future where games can be played on a whole host of devices.

“I think you said it backwards- I don’t think that they are trying to get out, I think that it is inevitable that consoles will go away eventually,” Pachter said. “So I would say that it’s fair to presume that after this console cycle, each succeeding console cycle will be about half as big as before. And the reason for that is not fewer people playing games- the reason for that is more people playing games. But they’re going to be playing games on other devices.”

Pachter went on to point out that consoles as devices were made necessary by the fact that there was no device that could play games properly, on a big screen, at home. This led consoles to catch on- but with modern devices, such as smartphones, tablets, PCs, and media boxes like Apple TV and Roku, increasingly becoming capable of playing games with few to no restrictions, and also capable of casting their image to TVs, consoles are not as necessary now as they used to be before. While consoles will continue to survive, because some will always prefer them, he said that they won’t be the most important pillar in the gaming ecosystem- the ecosystem will basically become a market of hundreds of millions of connected capable devices, including consoles. In such a context, no publisher will want to restrict themselves to just one,or even all, consoles’ install base.

“EA sells something like 18 million units of FIFA a year to 150 million console households- but if there are 2.5 billion people on the planet with internet access, what do you think FIFA sales would be now? At least double. Same with Call of Duty, same with any game. So I think Microsoft’s Windows 10 integration is just and acknowledgement that thesis coming. And they would like to be the relevant platform, they would like games to be played on whatever CPU/GPU combination you choose, using Windows 10. So they stay relevant,” he concluded.

I do agree with Pachter here- the death of gaming consoles has been greatly exaggerated. They are not going anywhere at all. At the same time, their share of the overall market will continue to shrink, because that market will grow, and grow some more, as more and more devices enter the picture, capable of playing games. We are already seeing this happen right now, as PC and smartphone gaming, in particular, continues to grow at an astounding rate. This will only continue and even accelerate in the future, as even more devices enter the fray.