Console War: Is It Over for Good?

The debate between PlayStation and Xbox has been a staple of the gaming community for decades. Whether you've participated in Reddit discussions, created TikTok videos, or engaged in passionate conversations with friends, you're likely familiar with this ongoing rivalry. While some gamers advocate for PC gaming or swear by Nintendo, much of the last two decades of video game history has been shaped by the competition between Sony and Microsoft. However, the landscape of the gaming industry has transformed significantly over the past year and the last two decades. With the rise of handheld gaming and the tech-savvy younger generations building their own gaming setups, the battlefield has evolved dramatically. So, has a clear winner emerged from this so-called 'console war'? The answer might surprise you.

The video game industry has skyrocketed to become a financial powerhouse in recent years. In 2019, it generated $285 billion worldwide, which soared to $475 billion by last year. This figure surpassed the combined revenue of the global movie and music industries in 2023, which totaled $308 billion and $28.6 billion respectively. The industry shows no signs of slowing down, with projections estimating nearly $700 billion by 2029. It's a far cry from its humble beginnings with Pong.

Given this growth, it's no wonder that Hollywood actors like Mads Mikkelsen, Keanu Reeves, Jon Bernthal, and Willem Dafoe have been drawn to the gaming scene in the past five years. Their involvement signifies a monumental shift in how video games are perceived. Even giants like Disney are making significant strides into gaming, with a $1.5 billion investment in Epic Games during Bob Iger's second term to establish a gaming presence. However, not all boats are rising with this tide, particularly the U.S.S. Microsoft, which seems to be struggling.

The Xbox Series X and S were designed to be a significant upgrade from the Xbox One, yet they have struggled to capture the market's attention. The Xbox One currently outsells the Series X/S by nearly double. Mat Piscatella from analytics firm Circana has indicated that the current console generation may have reached its sales peak, a concerning sign for Xbox. Moreover, 2024 sales data from Statista shows that the Xbox Series X/S sold fewer than 2.5 million units throughout the year, while the PlayStation 5 achieved the same sales figure in just the first quarter of 2024. There are also rumors that Xbox may be closing its department responsible for physical game distribution, which aligns with reports suggesting a potential withdrawal from the EMEA region. If Xbox was indeed fighting a 'console war', these signs indicate it's time to retreat.

However, Xbox isn't just retreating—it has already surrendered. During the lengthy Activision-Blizzard acquisition process, Microsoft admitted in its findings of fact that it never believed it had a chance to win the console war. Faced with the underperformance of its latest console and candid remarks about its failure, Microsoft is shifting away from the console business.

Xbox Game Pass has become a central focus for the company. Leaked documents revealed the hefty sums Xbox is willing to pay to include AAA titles like Grand Theft Auto 5 ($12-15 million per month) and Star Wars Jedi: Survivor ($300 million) on its subscription service. This move underscores Microsoft's shift towards cloud gaming. The 'This Is An Xbox' campaign further emphasizes this change, redefining Xbox not just as a console, but as an accessible service with complementary hardware.

This redefinition suggests that Xbox hardware might extend beyond traditional consoles. Rumors of an Xbox handheld have circulated for over a year, supported by leaked documents hinting at a next-gen 'hybrid cloud gaming platform'. Microsoft's strategy shift is evident, from plans to launch a mobile game store to compete with Apple and Google, to Xbox chief Phil Spencer's acknowledgment that mobile gaming's dominance is guiding the company's future. The new strategy is clear: Xbox wants to be the gaming brand you can enjoy anytime, anywhere.

Why is Microsoft making this pivot? Despite the traditional dominance of console gaming, the numbers tell a different story. In 2024, of the estimated 3.3 billion gamers worldwide, over 1.93 billion play on mobile devices. Mobile gaming has evolved beyond casual audiences to become the dominant force in the video game market, especially among Gen Z and Gen Alpha. The total market value for the video game industry 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. Consoles, on the other hand, contributed $50.3 billion, or 27%, a 4% drop since 2023. It's no surprise Microsoft wants to transform your phone into an Xbox.

This shift isn't new. By 2013, the Asian mobile gaming market was already far ahead of the West, with South Korea and China leading by 759% and 280% respectively. Contrary to popular belief, the highest-grossing game of 2013 wasn't GTA 5, but Puzzle & Dragon and Candy Crush Saga, which earned $1.5 billion and $1.4 billion respectively. Looking at the 2010s, five of the top-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.

Mobile gaming's dominance extends across all generations, particularly resonating with Gen Z and Gen Alpha. Meanwhile, PC gaming has also seen significant growth, with 59 million new players annually since 2014, reaching 1.86 billion in 2024. The surge in 2020, with an additional 200 million players due to the COVID-19 pandemic, further boosted PC gaming. However, despite technological advancements and the rise in PC gaming, the market share in 2024 stands at $41.5 billion, with the gap between console and PC gaming increasing to $9 billion from $2.3 billion in 2016. This suggests a decline in PC gaming's market position, which is not promising for Xbox, which has heavily invested in Windows PCs.

On the other side of the 'console war', PlayStation is thriving. Sony's latest quarterly earnings report shows 65 million PS5 units sold, far outpacing the combined 29.7 million sales of the Xbox Series X/S. For every Xbox Series X/S sold, five PS5s find a home. Sony's Game and Network Services also experienced a 12.3% profit increase, driven by strong sales of first-party titles like Astro Bot, which sold 1.5 million copies in less than two months, and Ghost of Tsushima Director’s Cut, which surpassed 13 million lifetime sales. The future looks bright for the PS5, with projections estimating 106.9 million units sold by 2029. In contrast, Microsoft's leaked documents project around 56-59 million units for the Xbox Series X/S by 2027. To regain its competitive edge, Microsoft would need to close the 5:1 gap with PlayStation, significantly boost sales, and enhance the profitability of its exclusives—challenges that current projections suggest are unlikely to be met. With Phil Spencer's openness to bringing Xbox titles to PlayStation and Switch, it seems PlayStation has already secured its position as the King of Console.

However, the PS5's success is not without its challenges. Despite being in the second half of its lifecycle, 50% of PlayStation users still play on PS4s. This is largely due to the limited number of true PS5-exclusive games; of the top 20 best-selling games in the U.S. in 2024, only Marvel’s Spider-Man 2 at #19 is a genuine PS5 exclusive. Helldivers 2, ranking at #3, was also available on PC at launch. Excluding PS4 remasters, there are roughly only 15 genuine PS5-exclusive titles, which may not justify the console's $500 price tag for many. The $700 PS5 Pro's lukewarm reception further underscores this, with tech journalists suggesting the upgrade came too early, especially with its campaign featuring slightly upscaled older remasters. IGN's reader poll confirmed the sentiment: the PS5 Pro doesn't offer enough value for the price. The PS5 isn't a must-buy yet, but that could change with the anticipated release of Grand Theft Auto 6 later this year, which could showcase the console's true potential.

So, is the console war over? From Microsoft's perspective, it never believed it had a chance to win. For Sony, the PS5 is a success but hasn't yet proven to be a significant leap forward. The real winners seem to be those who opted out of the console war altogether. With mobile gaming companies like Tencent rumored to be acquiring Ubisoft and having already purchased Sumo Group in 2021, the focus on mobile gaming is set to intensify. Take-Two Interactive reports that 10% of the world's population plays its subsidiary Zynga's games monthly, highlighting how mobile gaming is funding major titles like Grand Theft Auto 6. The future of gaming will be less about hardware power and more about the expansion of cloud gaming server farms. The console war may be over, but the mobile gaming war—and the numerous smaller conflicts it spawns—is just beginning.