The smartphone killed off the camera, streaming services killed the video store and cloud gaming now threatens the existence of the video game console.
The ability to play games across multiple devices such as smartphones, tablets and tvs through a subscription model is catching the attention of tech groups. just this week, microsoft spent $7.5bn to buy creative content studio zenimax, while amazon announced the launch of streaming games service luna its answer to xbox game pass and google stadia.
Sony released its playstation 2 in 2000 and sold a record 155m consoles. the ps4, which it released in 2013, still managed to sell more than 110m units. the xboxone launched in the same year has sold around 50m units, according to mirabaud securities. however, these numbers are all dwarfed by smartphone sales. in the past three quarters alone, the three largest handset makers have sold more than 140m units each.
Converting some of that audience to gaming subscribers is what companies are prepared to pay huge sums for. the gaming industry, microsoft says, is moving from a device-centric era to a player-centric era powered by new technology.
But domination of the rapidly growing market is up for grabs. none of americas four biggest companies apple, microsoft, amazon and google would call gaming their primary business, yet all are involved and its one of the only areas where they compete directly.
Total gaming revenue, including consoles and mobile gaming, is expected to surpass $160bn this year, according to research group pelham smithers. thats eight times as much as global recorded music revenues and 1.5 times all film revenue including for cinemas, home watching, mobile and streaming.
Fifteen years ago, you had about 200m gamers in the world and today youve got about 2.7bn, said neil campling, tech analyst at mirabaud securities. it's become the biggest form of media.
Most of the 2.6bn gamers are unlikely to self-identify as such, as the vast majority are just killing time on smartphone games downloaded for free. however, these games still generate big enough business that apple, which does not even create games, is among the top gaming companies in the world by revenue.
Seventy-two per cent of their app store revenues are coming from gaming that tells you exactly where people are spending their time, mr campling said.
To understand the market, said sarah hindlian-bowler, head of software research at macquarie, online gaming venues need to be understood more like social media platforms. its where kids are communicating, where they socialise.
Mr campling estimates nearly one-third of all youtube content is gaming related, with more than 200m people watching gaming content on the platform each day. pewdiepie, a swedish gamer on youtube, has 106m subscribers three times that of justin bieber and his videos have received more than 26bn views.
For now, the console market is still the big driver of revenue per user. the console remains of central importance in driving service adoption including cloud gaming offers. consoles will remain relevant for the foreseeable future, but i predict that cloud services will start to disrupt hardware sales more progressively in the [next] five-to-ten years, said piers harding-rolls at ampere analysis.
Playstation chief executive jim ryan said the $300-$500 spent on a console pales in comparison to how much users spend over the lifespan of the device. on average it's well over $1,000 over the life of the [console] purchase, he said.
The upshot is that consoles are likely to become much less dominant this decade, giving way to battles to win subscribers for streaming services. the barriers to entry, meanwhile, could limit market access to all but the biggest operators behind global cloud infrastructure and mobile phone operating systems.
For the creative studios able to create hit games, the much bigger market means the rewards have never been greater. games like minecraft have shipped more than 200m copies, more than the biggest game of the 1990s, tetris, and five times that of pac-man in the 1980s.
The numbers being put up now are bigger than anything weve seen before both in value terms and copies, said pelham smithers, owner of pelham smithers associates. the video game market in the 1980s consisted of the us, japan, france and the uk, whereas it is now a global business with china as the biggest market.
Additional reporting by patrick mathurin and chris campbell