Data & Dimensions | Ep. 16 (Video) - The Future of Gaming is Higher Prices and Fewer Discs

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Neil:

The last game, and I think this underlines the point. The final game that I bought physically for PC was the Mass Effect Trilogy, and the interesting thing about that is that it came with a download code for Origin, which was EA, Electronic Arts' digital storefront at the time. So I've never put these discs into a computer. The last physical game I bought for the computer came with a digital code, and I used that. And I think that kind of signals where the PC was a decade ago, and also where we are now for consoles, and kind of where we've been for a long time.

 

Neil:

Welcome to Data and Dimensions, a podcast at the intersection of entertainment industry and interactivity. I'm Neil Barbour, an analyst with S&P Global Market Intelligence Kagan, and with me today is my colleague and fellow gamer Eiman Hussain. Eiman, thanks for coming on the show. 

 

Eiman:

Thank you so much, Neil. It's a pleasure to be here.

 

Neil: 

Great. So we have our game console forecast out in the wild now, and in broad strokes, the story we're telling is that shipments contract sharply in the near term. New consoles hit the market in 2028 or 2029. The RAM crisis abates somewhat, and the market slowly starts to recover as we move into the next decade. However, we're sort of signaling that it will struggle to return to the historic peaks it saw over the past decade or two,

 

Eiman:

I have gone through your console forecast, and it's amazing work, by the way.

 

Neil:

Thanks!

 

Eiman:

Now I see that the biggest driver in your forecast is growing costs around owning gaming hardware. As of August 1, PlayStation 5 with a disc drive will retail for $650 US dollars, and Xbox Series X would go for $800 US dollars. Now, these are huge price increases for aging hardware, and previously we have always seen consoles decrease in price 6 years into the cycle. This time we're seeing an opposite trend. So my question is, what's really happening here?

 

Neil:

Yeah, I think the big thing is that there, you know, there simply aren't enough memory modules to go around right now. You know, the AI buildout is monopolizing production of RAM and storage, and the component prices are going through the roof. The console vendors are already selling these devices often at low or no margin, so they don't have a lot of room to absorb those costs themselves, so they're passing them on to the consumer. The big thing that makes the console model so attractive to consumers is that it doesn't have a lot of upfront costs. And I don't mean to say that consoles are only affordable when compared to similarly spec'd PCs, or only affordable when compared to inflation or some other metric in the market like that. I mean to say that consoles are affordable in that weird psychological way where people say, "What is a fair price to pay to have cartoons on my TV that I control?”

 

You know, it's the very definition of disposable income expenses, and you know that price point can grow over time, but it can't really spike. So 20 years ago, that magic number was something like $150 or $200, and then the PS2 era came around, and they kind of snuck it up to $300, and they really only got away with it at that time because the console was also a DVD player, and those were hard to come by in that era.

 

So then the HD era came along, they sort of half stepped it up to $350, and there were options to go up to $400 if you were to buy like a hard drive with the Xbox 360 at the same time as you bought the console, and then you know through the generations you can see different vendors getting punished if they move too fast. The PS3 is the classic example. Xbox One a little less so, but still in this wheelhouse where you know they tried to go to market at $500, and they didn't really find any momentum until they priced down closer to the competition.

 

Over the past generation, you can see Microsoft and Sony making efforts to have consoles at around $400, $300-350, something like that. Even if the baseline kind of did move up to $500 with the recent consoles, but now that's gone. And suddenly people are being asked to pay, like you said, like $600, $700, $800. I think the PS Pro is $900. It's kind of an edge case, but still in the conversation here. These consoles are five years old, and that's simply just not something consumers are used to. And everything in the market is telling us that these prices are only getting a bit worse as we go down the line. I think that's untenable, and I think sales are going to suffer, and they probably only recover once the supply demand component thing equalizes. 

 

Eiman:

Let's talk about Microsoft's impact on the console forecast you’ve published. It seems like we're getting a lot of mixed messages from them a couple of years back. They realigned the business around Game Pass subscription service and called it the ‘Netflix of games’, and they went on a shopping spree to build up a content library for that service. And we saw a lot of consumers opt for Xbox Game Pass because of their library, and even I subscribed  to Xbox Game Pass. 

 

Neil:

Yeah, me too. 

 

Eiman:

Undoubtedly, it was pretty good, but this whole idea didn't really come through in a big way. Now they're trying to unwind some of their business decisions, pulling Call of Duty out of Game Pass, walking back on some of their multi-platform strategy, and recently there's been a lot of layoffs in the process. What’s your read on the state of Xbox right now?

 

Neil:

Yeah, you really summarized where they are in the market in this moment. So, but our big concern when putting the forecast together was what does the next Xbox look like, and we have to think about all the things that are happening right now and all the signaling we're getting. There have been signals from Microsoft that the next Xbox would be much closer in form and function to a PC than a traditional console, and that was tracking with their general drift away from exclusive games over the past few years. Well, now they're saying exclusives are important again, and then there's going to be a bunch of them going forward. There's, I think, Gears of War E-Day coming out this fall. That'll be an exclusive. Clockwork something…help me out here?

 

Eiman:

I think it was Clockwork Revolution. 

 

Neil:

Yeah, something along those lines. That'll be out as exclusive this year, and they're saying there'll be more down the line. You know, this shift doesn't really negate the idea that the next Xbox will be a PC, but maybe it's a cultural shift that you can try to draw conclusions off, right? But in reality, we really, we really don't know. We suspect that if they were to try to release a very open PC platform designed to run the Xbox desktop app right out of the box, you know, and that's a storefront they have on PC that has a lot of the Xbox games running on PC, the Xbox catalog, so to speak. Then that kind of hardware would also theoretically be capable of running Steam or Epic, you know, the other PC storefronts, and those stores, they don't drive revenue for Microsoft. So in that scenario, the hardware would probably end up costing a lot more since they aren't guaranteed to drive as much software margin for Microsoft. Because the idea of selling consoles is that you sell the console at low or no margin, and then make money from the software. But if you're selling a console that is splitting game sales with Valve or with Epic, that model doesn't make as much sense. So if they move forward with that framework, we suspect they sell a lot fewer boxes because the price is so much higher and the message is a little muddled, and it's just not a mass market device in the same way that a traditional console would be, you know, and that's even assuming we can still count whatever Xbox PC comes out, as a traditional console, which maybe we can't, particularly under our current definitions. And then there's another possibility that they try to go head to head with Sony again with just a traditional console, We've kind of already seen how that works out over the past two generations, basically a story of diminishing returns. So either way, we just think Microsoft sells fewer consoles over the next decade than they did in the previous one. You know, I'm kind of thinking. You know, you said you're on Game Pass. I don't know if you have an Xbox, but like, you know, what are you looking forward to from the next Xbox? If you had to, you know, bring out your crystal ball, or just make a wish list. 

 

Eiman:

I used to have an Xbox, and as soon as Game Pass became a lot more expensive, I was one of those people who discontinued my subscription. But I do agree that that is true. We talk about a new Xbox, which I think they're calling it Project Helix on the market right now as a code name. Thing is, I've always loved Xbox exclusive franchises like Halo and Gears of War, and in the foreseeable future, I'd like to see them expand those series with new gameplay mechanics. I also think Xbox has enough studios and capital to experiment with new IPs. I don't know if you remember the ‘Quick Resume’ feature on Xbox Series X, being able to seamlessly switch between games and pick up right where you left off

 

Neil:

Incredible engineering.

 

Eiman:

It was. It was a huge time saver for me. You know, instead of booting up games from scratch. Another thing I've always loved about Xbox is the Xbox Controller Elite 2. In fact, I have one right here. This is the Xbox Controller Elite 2.

 

Neil:

Ha, that's great.

 

Eiman:

It feels more ergonomic than the PlayStation 5 controller. 

 

Neil:

Oh right. 

 

Eiman:

The haptics in the Xbox controller haven't really evolved since the Xbox One generation. I'd love to see Xbox take inspiration from PlayStation's DualSense haptics and bring that level of immersion into their controllers. 

 

Neil:

Yeah, the force feedback. Really cool part of PlayStation. 

 

Eiman:

Exactly, and it's also a really neat gameplay feature as well, once they include that within the game design. I know you're a fan of Xbox IPs too. I'm curious to know what you would like to see in the new Xbox?

 

Neil:

Sure, I did bring my physical game collection, which we'll dive into a little bit later. But I wanted to say. I brought the original Gears of War, the collector's edition, close to day one, opening weekend. So definitely a big Xbox guy going down the line. But yeah, I mean I would say I don't have a big wish list, and I think you know the broader market of what they can offer consumers has sort of leveled off in the past generation. You know, it's kind of memetic to say that PS5 games don't look that much better than PS4 games. You know, maybe the resolution comes up, maybe the frame rate gets improved, loading times go down. But generally speaking, if you were to put two of those games side by side, you don't notice much of a difference. I think that's changing as we get further down the line. I think the games coming out this year and next, you're going to see pretty significant graphical improvements on. They finally got their hands around the hardware. A lot of these games are no longer cross generation, so they no longer owe the tech debt to the previous generation. When I think about the next Xbox, I am honestly just thinking about how can they get the price back down to a price that I like, you know, and that's like $400, $500 or $600. I don't think we're going to see $400 or $500 again. Our forecast said something like $600 to $800, and I think that's in the function step, with like we said, the 360 was $300, the PS4 was $400, the PS5 is $500, and so I think it's they'll take the opportunity to go up to $600, considering that they're probably going to need something like, you know, 32 gigabytes of shared RAM or you know this much RAM tied to the CPU and this much on the VRAM, and so those costs are going to go up whether RAM stabilizes or not. So, I hope they can deliver a device that can reliably push resolution of 4K at 60 Frames per Second and do it at a cost that most people can afford, is kind of my wish list for the expense.

 

Eiman:

I really hope they come up with new franchises, new games, because I think with this generation we've had a situation where we have the new generation consoles, but we don't have enough games, and I hope they really work on that. 

 

Neil:

Yeah, look, I mean, something about making Gears of War exclusive again is cool and is exciting and it's great that they have the confidence behind that franchise, but we have seen multiple exclusive Gears of Wars and Halo. There was an exclusive Halo to this generation, and it didn't really move the needle. It's a good game, but they probably do need some fresh blood in the pipeline to sort of really capture gamers' imagination. 

 

Eiman:

Absolutely, I completely agree. Now, let's talk about PlayStation. Recently, Sony announced they would discontinue support for physical discs after 2028, and the vast majority of their video game sales are now digital. And the PlayStation Store is really the center of the PlayStation ecosystem. Now, once this change happens, this will allow PlayStation to optimize its revenue share from digital sales on its platform. Because I think consoles are currently following suit of PC. I mean, when was the last time you bought a PC gaming disc? Are you still buying physical discs? I know that you've got the ones on your table from a long time ago, but are you still buying physical discs? 

 

Neil:

Yeah, I brought some exhibits to acquit myself here, but yeah, you know when this announcement first came out, I tweeted a chart that I have, you know, I look at every quarter that Sony publishes, which is the split between physical and digital games, and this is not even including the add-in content. When you buy V bucks or when you buy just you know energy or other coins to power in-game purchases. As far as I understand it, I've talked with their IR people for a while, so I feel like I have a pretty good handle on this number. When you're just talking about full games, the split between digital and physical is something like 90% - 80% depending on the quarter. So, in a lot of ways, you know, the consumer has already spoken on this matter, and so I published that chart, and there was a little pushback. I don't have a huge presence on  X, but there were a few people coming in my mentions that were sort of saying you're not really thinking of this persona or this kind of person who would rather buy a physical game than a digital one. You're leaving a certain part out of the market and there was a sense -- I didn't get as much of this but I saw other analysts get this -- that we're sort of shilling for the company, big digital or what have you.

And so, I just wanted to say that you know I have long collected physical games. I have a big stack here, and even on PC. Yeah, this is the original S.T.A.L.K.E.R. series, Shadow of Chernobyl on physical. A console guy too, here's Zelda: Skyward Sword for the big Nintendo Wii one. Metal Gear Solid 4 for PlayStation 3. I even have a newer Deus Ex. 

 

Eiman:

Deus Ex was really good. Yeah, that was a good game. 

 

Neil:

Great game! Here's BioShock Infinite with the alternate cover. I turned it inside out, never went back. But to your specific question, the last gam,and I think this underlines the point. The final game that I bought physically for PC was the Mass Effect Trilogy, and the interesting thing about that is that it came with a download code for Origin, which was their digital storefront, it was an Electronic Arts' digital storefront at the time, so I've never put these discs into a computer. The last physical game I bought for a computer came with a digital code, and I used that. And I think that kind of signals where PC was a decade ago, and also where we are now for consoles, and kind of where we've been for a long time. So I don't know. What about you? Are you still buying physical games? 

 

Eiman:

I would confess that even though I do have a collection of physical games, but I stopped purchasing discs after COVID-19. I buy my games digitally now, and I either wait for the game to be on my PlayStation Plus subscription, or I wait for the game to go on sale. Unless it's a game that I've been really looking forward to play. Also, the last game I bought digitally was James Bond 007 First Light. Have you played that one? 

 

Neil:

I have not. I want to double click on this thing you just brought up though about COVID-19 really shifting consumer purchasing habits. You saw that from groceries to increased Amazon usage and it happened across the board. So obviously, yeah, I mean that was a big catalyst, and I think Sony's definitely looking at that to really accelerating the change in consumer behavior. I have not played 007. I dearly want to play 007. Please tell me about 007. 

 

Eiman:

I played it a few weeks ago, and my experience was really good. I won't give away any spoilers though. 

 

Neil:

Oh, good.

 

Eiman:

While I was playing it, I realized that it was a really creative idea for players to explore the origin story of James Bond. I think the developer knew that a vast majority of the target audience would be completely new to the James Bond franchise, so they decided to go with the first time a young James Bond is recruited into MI6. You genuinely do feel they've quite accurately captured the sophisticated Bond, spy, espionage experience, and visually the game was pretty good. I think they've made a huge leap in terms of graphic fidelity and the number of NPC density they can have in an environment, but in terms of gameplay, I believe they kept it really safe, and they took gameplay mechanics from other games like Uncharted and Assassin's Creed, even previous titles like Hitman. I think the developer of Hitman is…

 

Neil:

IO Interactive.

 

Eiman:

IO Interactive, so it's the same developer. So they didn't really change the Hitman formula. So in terms of gameplay, I didn't feel like I played something entirely new, but you know, in terms of graphics, they made a huge leap, and I really love the textures, the hair textures, and the physics in the game. 

 

Neil:

Yeah, IO Interactive seems like such a great fit for that property because they've done Hitman and they've done shooters and they sort of meld them together, big action sequences. So, super interested. Just to double click on the digital physical thing, I think the big thing to keep in mind here is that you know as we sort of said people don't really buy physical games anymore. I mean there are certainly releases that play well in the physical market and specific consumer personas that prefer physical games, but again, if you look at the numbers, it's just not, it's just not there.

 

So it's caused a lot of stir on social media, but I don't think it's going to impact sales in a meaningful way. And yet, this was a very bad PR move for Sony, at least in that week.

 

Eiman:

It was all over the news. 

 

Neil:

Yeah, it dominated the news cycle, and even when I think Microsoft layoffs happened a few days later, people still just wanted to talk about the discs, which is fair enough. That probably feels like an impact a little closer to home than just a few developers hitting the exits. I don't mean to minimize that situation. There were a lot of layoffs. But so, the hardcore hobbyists are really not happy here. They feel they're losing some sense of ownership and that the right to play the game could be revoked in 10 years.

 

Certain cases like that have emerged in the past. You know, I wouldn't say it's the chance if it's zero, you know, I think some of those concerns are overblown. Some people want to be able to play the game if their internet goes down. I don't know if there are ways you can mitigate that. Probably, we'll see. And again, some of those concerns I think are coming kind of out of fantasy land, but some have some real weight to them. 

 

I would say Sony is kind of flexing here. They can claim with some authority that they have won the console war and they get to make this call. They probably feel like they are in a position that they can yield this influence or wield this influence. You know they're saying we're done with discs. We're done with the costs associated with discs. It's going to be fine if you want to play these games, this is how we're doing it. Now, I want to flag something in our console forecast. Even though PlayStation 6 is in a good position to take market share from Xbox, we're not really anticipating that they will absorb every user defecting from Xbox. We think some of those users migrate to other platforms, you know, PC or cloud or mobile. 

 

Last episode we did with AMD and the work that they're doing to really push mobile graphics processing power forward through neural processing and other techniques like that. Some of that is that we just expect you know, PS6 will be like $600 or more, and that sort of scrambles the economics and pushes people to different platforms, right? But moves like this don't help. Sony has a habit of being kind of rigid when they think they're in the driver's seat. I'm thinking of the really high price point for the PS3 back in the day.

 

That can turn away some people who might otherwise make the leap. I'm not saying this is as big as pricing the PS3 is as big of forced error as that, but it might have the feel of it to some people, so it's something to keep in mind. 

 

Eiman:

I think that's a really valid point. And speaking of your console forecast, one of the potential growth vectors in your forecast is Grand Theft Auto VI, GTA VI by Rockstar Games. As we speak, GTA VI is available for pre-order at $80 for the Standard Edition and $100 for the Ultimate Edition, which includes extra in-game features. Now, consumers should also take note that Take-Two (TTWO) will not be publishing a disc version of this game, probably not in the foreseeable future.

 

If you buy the physical game, you get a code in a box. Two questions emerge here. Number one, the price tag is up from the standard $70 the industry moved to a couple of years ago. Do you think this is the cue other developers have been waiting for to raise the price of other games to $80, or is this simply the ‘Rockstar tax’, and obviously the ‘Rockstar Tax’ is because GTAV has been so, so successful, which leads me to my next question: Will consumers be okay with not getting discs anymore? 

 

Neil:

Good questions. Yeah, I mean, Grand Theft Auto, really big deal. We've been talking about it for years, particularly pertaining to this console forecast. You know, when we thought it was coming off last year and they moved the date. We actually recast our forecast to align with that new reality on the ground. I feel like so many sequels have come into the channel for this generation's hardware and kind of been a little disappointing, or a little ‘meh’, or maybe haven't even shown up at all. It's not that this console generation has been a failure in terms of sales. It's slightly behind the previous one, but you can point to macroeconomic headwinds. You know, the pandemic didn't help with supply issues. Then there was inflation. Then there were tariffs, and then now there's this RAM thing. So considering all the headwinds there have been, the consoles are still in a pretty good place.

 

But again, you know, this game will sell consoles, and we've tried to factor that in here. But again, the problem is that since consoles are so expensive, and this game is more expensive, they're going to turn some of that demand away simply because of sticker shock. Maybe they find a way to get some Black Friday promotions to retail or what have you, and maybe they don't, and they just push through and hope for the best. You know, Grand Theft Auto V had such a long tail of sales; they don't have to make all their money right up front here.

 

To your question, I don't think…

 

Eiman:

I think GTA V is still making a lot of money. 

 

Neil:

Exactly 

 

Eiman:

Because of Shark cards and a very robust online ecosystem. 

 

Neil:

Yeah, Grand Theft Auto Online, they have a long tail to build into here. I don't think the rest of the market immediately moves up to $80. I think probably some of the tippy top AAA games. I'm kind of thinking of Call of Duty here. I'm kind of thinking of Madden and EA FC, I think they migrate to that price point over time, particularly if they see that this one worked. But again, maybe this is like you said, this is the tax for a game that took a long time to make, and then there's generational demand for.

 

On the point about the discs, I would circle back to what we said earlier, and I just don't think most consumers are super tied to the idea of a disc. This is a little different because they're buying a box, and you kind of expect a disc to come in the box. You know, I know Nintendo's done some different things around game key cards and stuff like that, but just open the box and get a code. Particularly when they're being asked to pay more than they would for other games. You know, the thing about the discourse around discs is that you know you'll be able to play the game with the local hardware and the local media, right? And that just kind of isn't the case anymore, anyway. For a vast majority of software, when you put the disc in, it installs to the local storage, and then it downloads a huge patch. So the game isn't really on the disc anyway, and then probably has to authenticate. If you want to play multiplayer, you have to get online anyway.

 

I think most consumers either know that or at least suspect the disc is more of a key than it is the actual game anymore. I think there'll be some confusion, but I don't think it'll be. 

 

Eiman:

Yes, that's a great point. So let's talk about the Nintendo Switch 2. They're also moving to a higher price point, and they won't be getting GTA 6 since the game would be too demanding for the Switch 2's graphics chip. What do you think is really going on with Nintendo Switch 2, and how do you see Nintendo positioning itself in the market?

 

Neil:

Yeah, I would say up top. I wouldn't say Grand Theft Auto VI will never come to the Switch 2. I think there's probably stuff they could do. I mean, what they're targeting right now, yeah, obviously they would have to really pare it down. I wouldn't say that's beyond the possibility. There are paths to making something like that work. If there's a will, there's a way. But yeah, you know, the Switch 2 had this enormous success out of the gate. Part of that was that they had a lot of supply upfront, which they typically don't at launch. Part of that was there was a ton of people who wanted the big Switch that would run their old games. You know, the Switch 1 had an enormous install base, and had a great library. They wanted those games again at a higher frame rate and better resolution, and they launched with Mario Kart World, which is a great game, and Mario Kart is a franchise that people really love. And they followed up with Donkey Kong Bonanza, which I don't think is quite as beloved, but was still a pretty good game and it is selling fairly well. The problem is that we suspect a lot of the demand that would have emerged in year two and three was pushed into the launch window, and now the hardware is getting more expensive, and that's going to eat into demand as well. But what's really troubling us in the forecast, you know, the pricing thing is actually probably number one. But what's also really troubling us in the forecast is there's not a clear software tentpole for people to get in the door. You know, I believe there's a mainline Pokemon in late 2027. That'll move some numbers for sure. But before that, it's unclear what the plan is. I think the Ocarina of Time, the Zelda Ocarina of Time remake, comes this year. At least that's kind of what they're teasing. Maybe it comes Q1 next year or something like that. 

 

Eiman:

Now, since we've covered Nintendo, PlayStation, and Xbox, there will be a fresh entry into the console market. Recently, there was news that Valve is also launching their new console called the Steam Machine, with a price point of $1000 U.S. dollars. I am tying this back to your point about the current DRAM prices, because I'm a bit confused about the decision to release such an expensive console in the middle of RAM shortages. How does the Steam Machine fit into your console forecast that you've published?

 

Neil:

Yeah, good question. You know, we've historically avoided putting this kind of open PC hardware into our console forecast. You know, that calculus is getting a little more complicated, and we'll probably continue to do so as the next Xbox is maybe a PC or something. But for now, we're not counting the Steam machine in, or the Steam Deck, or similar devices that ostensibly are games-focused PCs or handheld PCs. They're not in the forecast right now.

 

But I definitely want to talk about what the Steam Machine means for the console gaming market in general. You know, in gaming in general, you know, it's first this device does not have a great shot at finding a mass market, as I think you're sort of hinting at. You know, and the big reason is that it's way too expensive. It's $1,000. That's kind of a non-starter for most consumers, you know, for any gaming device, you know, you could say. Oh, I'm buying a laptop at $1,000, and it has all this productivity aligned with it. Like maybe this does that; it's Linux based. Its power envelope sort of sits somewhere between the Switch 2 and the PS5. I should say it's focused on delivering 1080p resolution at 60 frames. It can do 1440. It can do 4k. But, you know, your mileage is really going to vary there, particularly as you step up into 3D games in the last two, three years and two, three years going forward. So you're not even really getting a lot of bang for your buck there. I think if you want to be charitable, you can say, "Well, it unlocks a huge library of games”, and we have the numbers to back that up. You know, the sheer count on Steam is way higher than what you're going to get on PlayStation and Xbox. Everybody knows that.

 

But then a lot of the games that are exclusive to Steam are also games you could also just run on your laptop that you might already have. I don't want to paint with too broad of a brush here but you know if it's a it's a big standout 3D game usually those make their way to Xbox and PlayStation anyway and then you have to consider some of the biggest games simply don't work on the Steam Machine right now and I've made a little list here so Call of Duty, Fortnite, Roblox. League of Legends, Valorant, Apex Legends, Destiny 2, EA Sports FC, Madden, Battlefield 6, Rainbow Six Siege. Siege, PUBG. All these games have kernel-level anti-cheat that won't run on Linux, so they won't run on a Steam Machine. So you get a deep library, but the omissions are pretty significant. Frankly, it's a very niche device even before you get to the price point. But the price point is the big one, and so it speaks to you know building hardware in this moment. I'm sure they wanted to come to market much closer to $600 or $700. You know there are rumors around that they were going to maybe go for $500. You know, subsidize it a little bit hoping that it brings more people into the Steam ecosystem. That's almost out of the question now, and because hardware is such a tertiary concern for Valve, they really don't have a lot of incentive to stick with this. Maybe they try again in a couple years, maybe not. Some people have pulled that $1,000 price point out to the PS6 and the next Xbox. You know, Sony and Nintendo, you know, and to a lesser extent Microsoft right now have more pull with component suppliers. They can say, you know, we're going to buy this many units, so can you give us a break on the price? But as we've seen, that only goes so far. If they were to release consoles right now, the price would probably be in this same league, maybe a little better. I mean, you maybe look at the PS Pro and say and make rationalizations there. I think if Sony's only option were to release that $900 PS6, I think they would decline to do so. So I think they're going to wait until they can pull one out for $600 or $700, and that window really only starts to open up at 2028 and could potentially be much later, depending on what the component shortages look like at that time. But Eiman, I know you're a big PC guy. Does the Steam Machine entice you?

 

Eiman:

I mean, I do have a gaming PC at the moment, so a $1,000 Steam machine doesn't attract me as much. I'd rather upgrade my current gaming PC with a 4090 or 4080 whatever is available in that price point. What I think about this Steam Machine is that a new entry in the console market, new competition is good for business. So I believe if we have more competition to Sony, Xbox, and Nintendo in this space, probably the prices would go down. I'm a little optimistic they would go down, but one can only hope. 

Neil:

Yeah, not in this environment, but maybe over the long term.

 

Eiman:

In the long term, yeah. Especially with AI and everything in the market right now. It's great that you brought up the PS5 Pro. My last question to you is that we're seeing many consumers are not buying PS5 Pro consoles, and it's primarily because they don't own a 4K TV with a really high refresh rate, and I know since you also cover 4K TVs and smart TV shipment forecasts as well within your purview, and we all know that the next generation of consoles will demand 4K TVs in higher refresh rates to enjoy their video games. Do you think there is any correlation between console forecasts and the shipment of 4K TVs in the future? 

 

Neil:

Yeah, we don't weigh it too heavily into the opportunity. We kind of say if you're a TV household, then you are a potential buyer. It's not like if you have an older HDTV, we take you out of the stack, or that we wait for 4K TVs any higher, there could be some reason to do so, but we haven't been doing that. I haven't looked at those 4K penetration numbers around different markets. I know that they're pretty solid in the U.S. and Western Europe, and they're getting higher all the time. If you go to the store in those sort of prime media markets to buy a new TV, you're more than often coming home with a 4K TV, whether you know it or not, because that's kind of all they have on the shelves. So, I think the thing that's holding the PS5 Pro back right now is that it's like $900, and again, I think that's just a lot of money to spend. Now, I've talked to people at Sony, and they're saying that the share of PS5 units going out the door are increasingly PS5 Pro, and maybe that's because people are looking forward to playing GTA 5 on the best hardware they can get. You know, maybe GTA 5 runs at a solid 4K 30fps with a PS5 Pro or something like that. I don't think we have any specific numbers around that, but that's kind of the general messaging that they have out right now. If you get the PS5 Pro, you're going to get the best experience for the best game that ever existed, and maybe that's worth $900 to you. But for most people, $500-$600 is good enough. They can play it at you know 30 frames of checkerboarding or what have you in the performance movement or something like that. So I will say, yeah, I think that's a good point. As the PS6 comes online and we look at the long tail of its penetration opportunity, that you'll have to say at that point how deeply penetrated our 4K TVs across these other markets. You know, you go down to Japan, South Korea tend to be pretty good console markets, less so South Korea. Get into South America, how well have 4K TVs penetrated there. Because I think what you're saying is exactly right. A lot of the benefits that you're going to get out of the PS6 are going to be based around higher resolution. You know, there'll be some ray tracing involved. Those sort of bells and whistles will be there too that you could conceivably see on a 1080p display, but 4K is going to be very important going down the line.

 

Eiman:

You know what I find funny in all of this? I don’t know if you remember the first PS5 box that first shipped.

 

Neil:

Ha.

 

Eiman:

It had 8K on top of that box. 

 

Neil:

I have that, yeah. 

 

Eiman:

I don’t think we have seen 8K TVs see the light of day as of 2026. 

 

Neil:

Yeah, I don't even know. I mean, if you were to find an 8K YouTube video and play it on your PlayStation browser or something like that, would that display at 8K? I assume it would. 

 

Eiman:

I don't think YouTube still has the 8K on..

 

Neil:

Okay so there you go. That solves that. 

 

Eiman:

It’s capped at 4K. 

 

Neil:

Let's say hypothetically there were some videos there or maybe you plugged in some of your own 8K media on a USB stick or something could you explain that I mean there's they're saying that the the visualization pipeline is capable of displaying 8K. Not necessarily that the GPU is capable of pushing a bunch of polygons at 8K. That's kind of how they got away with saying that in the first place, and why sometimes they still say stuff like that. And I think even the Steam machine says something like this. If you look at the description on Steam or on Valve, it will say something like this is a 4K device, and and what they mean is that the display pipeline is technically capable of outputting 4K, and if you play older games, maybe you get some 4K, but it's not really targeting new games in 4K. So there's confusion around that, but yeah, absolutely. There was a sense that we were going to move to 8K more quickly than we did, and it didn't really happen. It turns out other parts of the TV stack were more important: the streaming OS, you know, the input interface, maybe where the speakers are, how thin the bezel is, how good is the HDR technology. Those turned out to be a little more important this time around. So yeah, I definitely I'm not thinking about the PS6 in terms of moving to 8K just yet, primarily because they haven't really solved for 4K yet in in the current generation.

 

Eiman:

Especially for guys like me because I tend to keep multiple consoles at a time. When I go into a shop, the first thing that I ask is how many HDMI 2.1 slots the TV has because that's one of the things I incorporate in my purchase decision. Neil, it was a pleasure. Thank you so much, this was really insightful and all that we've discussed today I'm really looking forward to the rest of 2026.

 

Neil:

Absolutely. Thanks, Eiman, for coming on the show. This is Data & Dimensions, and we'll see you next week.