Why the gradual death of the console exclusive makes business sense
And why Lego Horizon Adventures is coming to Switch.
Back in 2021, GamesIndustry.biz spoke to former PlayStation CEO Jim Ryan about his hopes for the future of the company. And he gave the following answer:
"I would like to see a world where the games we make at PlayStation can be enjoyed by many tens of millions of people. Perhaps hundreds of millions. Right now success with the current console model, a really great PlayStation hit... you're talking 10 or 20 million people being able to play that game.
"We're talking about games stacking up against music, we're talking about games stacking up against movies. Music and movies, they can be enjoyed by almost limitless audiences. And I think some of the art our studios are making is some of the finest entertainment that has been made anywhere in the world. And to kind-of gate the audience for that at 20 or 30 million frustrates me. I would love to see a world where hundreds of millions of people can enjoy those games."
There is a problem with this vision, which Ryan acknowledges when he mentions 'the current console model'. The audience for games consoles hasn't grown bigger in decades. For PlayStation in particular, it has never gone much beyond 150m. In a panel GI.biz held at IGN Live last week, former PlayStation Worldwide Studios president Shawn Layden said the games market is "still in the 250m overall install base of active consoles, and that's a challenge."
The console games market has done a good job of making more money, through things like digital distribution and subscription services. But by and large, the likes of Xbox, PlayStation and Nintendo have just been getting the same number of players to spend more.
PlayStation wants to make its games more popular. It wants to turn its franchises into real entertainment powerhouses. But more than that, it needs to do it. Its games are often at the cutting edge of what's possible, and that takes time and costs money. Development costs have (in some cases) tripled over the past five years. And if Sony wants to keep its games at the high end, they need to make them more successful.
I'm picking on PlayStation because they've just announced that Lego Horizon Adventures is coming to Nintendo Switch. A PlayStation-owned IP launching on a rival console is unheard of. You'd have to turn back the clock to 1998 and Wipeout 64 to find another. But of course, this isn't purely a PlayStation thing. Almost every company in the games industry is trying to push its biggest franchises into new areas to try and find new fans, and I'm not just talking about games. We've seen AAA Assassin's Creed and Resident Evil games on iPhone, Mario on the big screen, Halo on the small screen, Sonic in Roblox, Final Fantasy coming to more consoles... they're all at it.
The situation feels more significant with platform holders because there's a contradiction at the heart of putting their franchises on different games platforms. Xbox, PlayStation and
Nintendo effectively have two parts to their business: platform and IP. The platform business is everything from hardware sales, accessory sales, subscriptions and store sales. These companies receive a large cut of the revenue (30 percent in most cases) for every third-party game sold on its platform, so the platform business is an extremely lucrative and important part of their income. There's a reason why Sony was mortified at the idea of Xbox owning Call of Duty, and it wasn't purely to do with the impact on its console sales. It made money from each game sold.
Meanwhile, the IP business is what we're talking about, which encompasses game sales, merchandise, expansions into TV and movies and so on. The easiest way to find new players for these games is to go and seek them out, and not expect them to come to you. In other words, if Microsoft thinks PC gamers might like a particular console franchise, it's better to launch on Steam than expect them to go buy an Xbox.
But for console makers, this is the key challenge. If they aggressively chase players on other platforms by releasing its games on them, it risks weakening its platform business.
Looking at the platform holders in turn, Xbox has perhaps the least to lose by going multiplatform considering the comparatively small size of its platform business. Its main focus has been expanding its franchises to PC and mobile. It's currently building a mobile games store, and has been launching all of its first-party titles on PC, on the day they come out on console, for the best part of a decade. It's also expanding its franchises via TV and film.
But considering PlayStation and Nintendo's install base, there's clearly a decent audience it can reach via those consoles, too. And the firm has been strategically releasing selected titles on PS5 and Switch.
Nintendo has shown no interest in putting its brands on its direct rivals. And it is in a slightly stronger position as its console platform has actually grown quite a bit from one generation to the next. Even so, it is aggressively pushing its brands outside of Switch, initially with smartphones, and now via movies and theme parks. Things like Super Mario Run and the Mario Bros Movie are its ways of finding new fans, and it's working. The mobile games have attracted hundreds of millions of players (although haven't been as lucrative as expected), while the Mario movie was one of the biggest animated films of all time, and its release even increased sales of Switch hardware.
Back to PlayStation, and the company has targeted PC as a place to release its games. It has even acquired a PC port specialist (Nixxes) to deliver its franchises on Steam. However, with a much larger audience of PlayStation owners, it has more to lose than Xbox, and so (outside of live service efforts like Helldivers 2) has primarily waited one to two years before porting a PlayStation game to PC. The hope is that not only will it reach more players this way, but this might create new fans of PlayStation's games, who would then purchase a PS5 console in future.
"We are finding new audiences [via PC] that are potentially going to be very interested in playing, for example, sequels on PlayStation platforms," said PlayStation Co-CEO Hermen Hulst in a business update last month.
Meanwhile, like Nintendo, the firm has been investing heavily in TV and movie expansion, including with last year's The Last of Us TV and Gran Turismo movie. It's also making early moves into creating mobile games too.
For a lot of companies, mobile is the biggest opportunity. We're seeing an increasing number of AAA games coming to the latest Apple phones, such as Assassin's Creed Mirage and the remake of Resident Evil 4. This platform may not seem like the ideal place to experience these games, but it's worth remembering the console business isn't really a global one. There are numerous major games markets, including China and India, where the console install base is very small, and most gaming - even amongst hardcore players - is being done on mobile devices. The challenge, as is often the case with mobile, is how this audience pays for their games. It's a free-to-play market, which doesn't typically sit well with premium AAA console games.
Releasing games on mobile and PC carries less risk for the console makers than putting their games on other consoles. And considering the relative small size of the console business, it is understandable for them to focus more on areas like smartphones. Nevertheless, depending on the game, there will be cases where releasing titles on rival platforms can make strategic sense.
"People aren't going to turn their back on PS5 because of a Lego re-telling of a 2017 game coming to another platform."
The news that Lego Horizon Adventures is coming to Switch may have been a surprise, but there's a lot of logic to it. Guerrilla has been proactive in trying to build the Horizon brand, with comics, toys, a board game and even an upcoming TV show. The Lego game is part of this strategy. It's a game that targets younger audiences compared with the main Horizon series, and if you're actively after younger players, what better platform than Switch, where Lego games typically sell extremely well?
Sony will have evaluated this move and deemed it largely additive. People aren't going to turn their back on PS5 because of a Lego re-telling of a 2017 game coming to another platform. The risk is low. Switch represents an untapped audience for Horizon who might, in turn, come the other way: 'Like the Lego Horizon game? Well, why not try one of the main games on PlayStation?'.
By contrast, an Xbox version of the game isn't as appealing. The Xbox audience is much smaller than the Nintendo one and not quite as family-oriented (there's also an abundance of Lego games available on Game Pass).
Xbox has been more open to releasing games on PlayStation and Nintendo, which makes sense considering the size of its console business versus the rest. But even it is being selective and strategic with the games it picks. Take Sea of Thieves and Grounded, which are live-service games that benefit greatly from more players. Or Hi-Fi Rush, which is a game that could potentially do well in Japan, so should really be released on platforms that Japanese gamers actually own. Or the Ori games, which are in a genre - Metroidvania - that is hugely popular on Nintendo.
In the future, we should expect to see more games crop up in surprising places. And there is likely to be some tension behind the scenes over what is right for each game. It's somewhat telling that PlayStation has named two CEOs this time around, one to lead the platform business and one in charge of the games. And there's a potential challenge in this relationship, because what's best for God of War or Uncharted may not always be what's best for PlayStation 5.
Consoles are not about to disappear, and neither are exclusives, not completely. But as games become increasingly mainstream, with an ever-rising number of multi-billion-dollar franchises, the need to make these properties as available as possible will only increase.
Christopher Dring runs GamesIndustry.biz, Eurogamer's sister publication all about the business of video games. To get the latest news and analysis on what's happening in the business of games, why not sign-up to the GamesIndustry.biz Daily?