Is the Console War Finally Over?

The age-old debate between PlayStation and Xbox has been a staple of the video game community for years. Whether you've argued about it on Reddit, TikTok, or with friends, it's a discussion that captures the passion of gamers everywhere. While some swear by the superiority of PC gaming or the charm of Nintendo, the last two decades have largely been shaped by the rivalry between Sony and Microsoft. However, the landscape of gaming has shifted dramatically, especially in the last year. With the rise of handheld gaming and younger generations building their own gaming setups, the traditional console war might be a thing of the past. So, has a clear winner emerged? The answer might surprise you.

The video game industry has transformed into a financial powerhouse, with global revenue reaching $285 billion in 2019 and soaring to $475 billion in 2023. This figure surpasses the combined earnings of the global movie and music industries, which totaled $308 billion and $28.6 billion respectively in 2023. The industry's growth shows no signs of slowing down, with projections estimating nearly $700 billion by 2029. From its humble beginnings with games like Pong, the video game market has come a long way.

The lucrative future of gaming has not gone unnoticed by Hollywood, with actors like Mads Mikkelsen, Keanu Reeves, Jon Bernthal, and Willem Dafoe lending their talents to video games in recent years. This trend underscores a significant shift in how video games are perceived. Even giants like Disney are making substantial investments, such as the $1.5 billion put into Epic Games during Bob Iger's second term, signaling their commitment to the gaming space. However, not all companies are riding this wave of success equally.

The Xbox Series X and S were designed to be a significant upgrade over the Xbox One, yet they have struggled to capture the market's enthusiasm. The Xbox One continues to outsell the Series X/S by nearly double. Mat Piscatella from Circana suggests that the current console generation has already passed its peak selling period, a concerning sign for Xbox. In 2024, Xbox Series X/S sold less than 2.5 million units throughout the year, while the PlayStation 5 sold the same amount in just the first quarter. Rumors of Xbox closing its physical game distribution department and possibly exiting the console market in the EMEA region further indicate a strategic retreat.

Microsoft has openly acknowledged that Xbox never really had a chance in the console war. With the Xbox Series X/S struggling to match the sales of its predecessor and Microsoft's focus shifting, the company is moving away from traditional console manufacturing. Xbox Game Pass has become a central focus, with Microsoft willing to pay hefty sums to include AAA titles like Grand Theft Auto 5 and Star Wars Jedi: Survivor in its subscription service. The 'This Is An Xbox' campaign reflects Microsoft's aim to redefine Xbox as an accessible service rather than just a console.

Microsoft's new direction includes exploring a potential Xbox handheld, hinted at by leaked documents from the Activision-Blizzard acquisition. The company is also venturing into mobile gaming, with plans for a mobile game store to rival Apple and Google. Xbox chief Phil Spencer has acknowledged the dominance of mobile gaming, which is steering the company's future strategy. The goal is clear: Xbox wants to be the brand you can play anytime, anywhere.

The shift towards mobile gaming is undeniable. In 2024, out of an estimated 3.3 billion gamers worldwide, over 1.93 billion play on mobile devices. This trend spans across all generations, with mobile gaming dominating the market, especially among Gen Z and Gen Alpha. The total market value for video games in 2024 was $184.3 billion, with mobile games accounting for $92.5 billion of that figure, a 2.8% increase from the previous year. Console gaming, on the other hand, stands at $50.3 billion, down 4% from 2023. It's no wonder Microsoft is focusing on turning your phone into an Xbox.

This trend isn't new. By 2013, mobile gaming in Asia was already significantly larger than in the West, with South Korea and China leading the charge. Mobile games like Puzzle & Dragon and Candy Crush Saga outperformed even the likes of GTA 5 in revenue that year. Looking at the 2010s as a whole, mobile titles like Crossfire, Monster Strike, Honor of Kings, Puzzle & Dragon, and Clash of Clans were among the highest-grossing games, yet they often go unnoticed compared to their console counterparts.

PC gaming has also seen a shift, with a year-on-year increase of 59 million new players since 2014, reaching 1.86 billion in 2024. The COVID-19 pandemic in 2020 added 200 million more players, driven by the rise of streaming. However, despite advancements in hardware and increased technological literacy among younger generations, the PC gaming market's global share in 2024 is $41.5 billion. The gap between console and PC gaming has grown from $2.3 billion in 2016 to $9 billion in 2024, indicating a decline in PC gaming's market position.

Meanwhile, Sony's PlayStation 5 is performing well, with 65 million units sold to date, significantly outpacing the Xbox Series X/S's 29.7 million. Sony's Game and Network Services saw a 12.3% profit increase, driven by strong first-party sales like Astro Bot and Ghost of Tsushima Director’s Cut. Projections suggest Sony will sell 106.9 million PS5s by 2029, while Microsoft expects to sell between 56-59 million Xbox Series X/S units by 2027. To compete, Microsoft would need to close the 5:1 sales gap with PlayStation, increase yearly sales, and enhance the profitability of its exclusives, none of which seem likely based on current projections.

However, the PS5's success comes with caveats. Half of all PlayStation users are still playing on PS4s, despite the PS5 being in the latter half of its lifecycle. Only one of the top 20 best-selling games in the U.S. in 2024, Marvel’s Spider-Man 2, is a true PS5 exclusive. Excluding remasters, there are only about 15 genuine PS5-exclusive games. This scarcity makes it challenging to justify the console's $500 price tag, and the $700 PS5 Pro received a lukewarm reception due to its early release and reliance on upscaled remasters.

The release of Grand Theft Auto 6 later this year could change this narrative, potentially showcasing the PS5's true potential and driving sales. However, the current state of play suggests that the console war may not be the defining battle of the gaming industry's future.

The real victor in this evolving landscape appears to be mobile gaming. With companies like Tencent rumored to be acquiring Ubisoft and already having purchased Sumo Group, mobile gaming is becoming crucial for the industry's sustainability. Take-Two Interactive reports that 10% of the world's population plays its subsidiary Zynga's games monthly, illustrating the broad reach and financial impact of mobile gaming. The future of gaming will likely be defined by cloud gaming and the expansion of server farms rather than console hardware. The console war may be over, but the mobile gaming war is just beginning.