DFC: Greater Market Segmentation Expected in Next Gen

DFC Intelligence's latest research indicates that the market can and will likely support more platforms than ever in the next generation. While this may be beneficial to the console makers, publishers could have a difficult time adapting to this diversification. Ultimately, DFC believes that the industry will eventually change from a "packaged goods" industry to a more service-oriented one.

Market research firm DFC Intelligence released a report today indicating that game publishers might be in store for greater market segmentation in the coming console generation, instead of the consolidation of development operations most had hoped to achieve. For those publishers able to adapt quickly during transitional periods, DFC also anticipates rapid growth for new business models, as the industry begins to transition away from the traditional "packaged goods" model to a more service-oriented approach, as a result of the growing importance of online titles.

Platform Segmentation

"Now, more then ever, there is reason, for many hardcore gamers (an increasingly significant market) to own more then one console system. Given everything we've seen it only reinforces our notion that the world of semi-to-fully viable game platforms is doing nothing but increasing. The biggest players have no choice but to orientate to a world where they publish a portion of their brands on as many as 10 platforms and many on at least three to five distinct platforms some of which can share significant code-base and others that can't," the report states.

The news isn't all doom and gloom, however. Gaming has grown to such a scale that the industry can support such diversification without there necessarily being a significant number of losers. It's very possible, perhaps even likely, that all three hardware manufacturers can succeed, thanks to their different approaches—in the case of Nintendo, very different. It's clear that Microsoft's competitive advantage with the Xbox 360 is the system's online integration, while Nintendo is once again blazing their own path with unique input. Sony, meanwhile, seems intent on using pure graphical muscle and brand recognition as their trump card.

While this is great news for the "big three" hardware manufacturers, it could spell trouble for publishers and developers.

"One thing that is clear, the hardware manufacturers have thought a lot about the future of gaming and are building their systems accordingly. The main concern is that the traditional game publishers simply aren't prepared for these changes. Publishers will need to navigate what will likely be geographic, demographic, and now increasingly radically different styles of game play/gamers. It is an understatement to say that segmentation is not something that the game industry is especially adept at, especially given the method by which it builds, markets, and distributes its wares," DFC explains.

Nintendo's Gambit

Although Microsoft and Sony certainly aren't taking a "me too" approach to their next-gen consoles, there is no denying that Nintendo is the company blazing the most radically different trail. But what effect will this differentiation have on third parties?

"The key issue is simple: will it be easy for publishers to adapt multi-platform titles to the controller or will users be forced to buy more conventional controllers alongside the platform?" DFC asks.

If publishers are able (and willing) to put significant development dollars into adapting their franchises for use with Nintendo's proprietary control scheme, then Nintendo will have a much easier time selling the controller to the public. On the other hand, if most multiplatform releases only see a Revolution port with traditional controls, then Nintendo loses the biggest competitive advantage they had over MS' and Sony's powerful systems.

That being said, the unique control scheme could aid Nintendo in attracting new types of gamers. "Where the exclusivity of the controller could make a big difference is if the styles of games and game play that Nintendo offers is able to bring to it an exclusive cadre of gamers and families of gamers that want a machine for all ages. This is clearly also the intended goal behind the Revolution's planned service for digital distribution of classic Nintendo games," says DFC.

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