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Connected Homes August 2020 Viewpoints

Technology Analyst: David Strachan-Olson

PS5 and Xbox Series X

Why is this topic significant?

Microsoft and Sony are preparing to release their next-generation video-game consoles this fall. The consoles will offer not only improved graphical fidelity but also an increased focus on digital services.

Description

Sony and Microsoft will launch their next-generation video-game consoles during the last quarter of 2020. Sony's PlayStation 5 (PS5) is the successor to the PlayStation 4 and, likewise, Microsoft's Xbox Series X is the successor to the Xbox One. Both the PS5 and Xbox Series X will use eight-core AMD central processing units (CPUs) and custom graphics-processing units (GPUs) from AMD, with bases in AMD's newest architecture. Both Sony and Microsoft claim their next-generation consoles will support 8K video output and 4K video output at 120 Hertz, but industry analysts are skeptical about whether graphically demanding games will reach such resolutions and frame rates. Both companies also mention that the AMD GPUs will support ray-traced rendering for some effects. The PS5 and Xbox Series X will feature solid-state drives instead of the hard-disk drives in current consoles, which will decrease game load times. Sony is also publicizing a new 3D-audio system for the PS5 that will reportedly provide an immersive audio experience for gamers.

Sony will release two editions of the PS5 in 2020; both editions will have identical processing capabilities, but one will have a 4K Blu-ray drive and the other will be a digital-only edition with no optical disc drive. Microsoft has announced only one version of the Xbox Series X, but video-game journalists have reported that Microsoft will release a second, less-powerful Xbox Series console in 2020 targeting users who require only lower-resolution video outputs of 1080p (1,920 pixels by 1,080 pixels) and 1440p (2,560 pixels by 1,440 pixels).

Implications

The new hardware from Sony and Microsoft replaces not only the PS4 and Xbox One consoles available since 2013 but also the upgraded consoles (PS4 Pro and Xbox One X) that became available a few years ago. On paper, the PS5 and Xbox Series X appear to have similar performance specifications, so success of the consoles will likely come down to game exclusives, user preference, and buy-in to the ecosystems of previous console generations. The new consoles could also help encourage further adoption of 4K televisions and potentially 8K televisions in the future.

Impacts/Disruptions

Sony and Microsoft are releasing their new consoles at an inflection point for video games. Although gamers have had the option to download games from digital stores for many years, Sony and Microsoft are pushing players farther in this direction with this generation of consoles. The PS5 will launch with a digital-only version, and analysts speculate the less-powerful Xbox Series console will also lack a disc drive.

Without disc drives, Sony and Microsoft gain a firmer grip over modes of sales and distribution of video games for those consoles. Sony and Microsoft control the only game stores on their respective platforms and will no longer lose a portion of potential profits to retailers and the second-hand market. Additionally, digital-only consoles might help Sony and Microsoft with digital-service efforts for rentals, game-subscription services, and cloud-gaming services. Some analysts suspect that Sony and Microsoft will offer the digital-only versions of consoles for well below the price of a 4K Blu-ray disc drive because they can recoup revenue through digital services. The way customers pay for and play games could change significantly during this console generation, and both Sony and Microsoft are trying to hedge against disruption.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Medium to High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: Now to 5 Years

Opportunities in the following industry areas:

Video games, electronics manufacturing, smart TVs, digital marketplaces, digital services, low-latency networking, cloud infrastructure

Relevant to the following Explorer Technology Areas:

Big Picture: Video Games and the Connected Home

Why is this topic significant?

Video games represent a number of important opportunities in connected homes—including video games, software, hardware, digital marketplaces, and digital services.

Video games provide entertainment for children and adults alike and have grown to represent a significant market worth more than $140 billion in annual revenue, according to Newzoo. Opportunities related to video games include not only video games themselves but also hardware and digital services. For years, dedicated game consoles—such as Sony's PlayStation 4 and Nintendo's Switch—and gaming PC hardware represented the bulk of video-game hardware. But the modern capabilities of smartphones, tablets, and laptops have expanded access to video games, and now billions of people play video games through these devices.

Online services represent a vital aspect of modern video games. Many of the most popular games in the world—such as Fortnite, PlayerUnknown's Battlegrounds, and League of Legends—rely on network connectivity to enable players to play with and against each other online. These services handle matchmaking for tens of millions of players concurrently but support only a limited number of players within a single match. Network connectivity is also vital for the sale and distribution of games. Video-game consoles have exclusive stores run by the console's maker, whereas PC players have access to a number of digital storefronts. After purchasing a game, users can download and install the game through the store, but large download sizes and download bandwidth limits can slow this process. Modern video games are also changing constantly, with updates and patches to add new features, balance game play, and remove bugs. Digital stores also provide avenues for selling extra downloadable content and digital items for use in game. Some companies have introduced game-subscription services, wherein users gain access to a large library of games for a single monthly payment.

Connectivity is also important for digital services associated with video games. Voice chat is an important part of many multiplayer games, enabling teammates to coordinate their actions together. Many games and consoles have built-in voice-chat functionality, but PC and mobile players also use third-party services, such as Discord, for voice chat.

Capturing and streaming game-play footage in real time is a growing trend among video-game enthusiasts. Many gamers use Twitch (an online streaming platform dedicated to gaming) to watch popular streamers and their friends play video games live. Such use cases have led to hardware and software improvements for capturing and streaming live game play and also the growth of new platforms for streaming, social media, and advertising.

Cloud-gaming services offer an alternative way for users to play video games with high detail content by off-loading computation and graphics processing to the cloud. The user's device sends user input to the cloud, where processors in data centers render the game and stream a video to the user's device. Cloud-gaming services could in principle enable gamers to play the same high-detail, graphically demanding games they currently play on consoles on almost any device—including low-cost smartphones. The development of cloud-gaming services will likely have significant impacts on the gaming industry and has the potential to be disruptive for the relationships between game developers, publishers, console makers, and game marketplaces.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: Now to 15 Years

Opportunities in the following industry areas:

Video games, electronics manufacturing, personal computers, smart TVs, digital marketplaces, digital services, social platforms, low-latency networking, cloud infrastructure

Relevant to the following Explorer Technology Areas: