They're caught between ultra-cheap (but mostly crap) mobile offerings and slightly-cheaper, more technically impressive PC releases of the same games (with even a basic home PC now easily able to outperform the consoles and the level of tech-savvy required lower than ever)
The problem is that releasing new hardware isn't going to change anything. Sure, the first few months the consoles will have that edge over the PC in the price point, but as new CPUs and GPUs are released the point for a PC to be competitive in price quickly arrives. Look at the XBox One specs: 8 cores and 8GB of RAM with 500G of HDD. I can get an 8-core Bulldozer for a decent price. Finding 8GB of RAM is not all that uncommon with the average PC gamer. What's left is the resolution (4K) and 7.1 surround, which all in all is not that impressive since most people sit on 1080i TVs and 5.1 or better sound systems are a bit of a rarity for TVs (at least here, unless you're one of those home entertainment system guys/girls). The focus on the whole reveal seemed to be on the services: integrating it with cable, kinect and voice control, DVR features (to be discussed with the networks). All things considering that's a bit disappointing, because most people interested in such features have a DVR solution already, and the whole kinect/voice thing seems so pointless... Top it off with the heavy focus on DRM (required internet, the whole used games thing) and the console caters more to publishers than its owners. The same applies to what's know about the PS4: it has similar hardware to what's found on the market today in PC-land.
The mobile market does what Nintendo did with the Wii and the DS. Games don't need to have that much hardware available as long as they're well presented and have average to decent gameplay they'll sell. A lot of people are just interested in a quick casual diversion, and mobile taps that market pretty well, and it becomes more of a pricepoint issue where people decide on buying a game. Few people flinch at dumping $2.99 into some casual puzzle game. While the mobile gaming and the AAA title demographics overlap a little bit, I doubt that it will affect the bottom line much. Mass Effect and Angry Birds are two different beasts with two different types of consumers, and while some will play both, they serve a different "function". Angry Birds is what you play in 10 minutes of idle time (waiting for a appointment, sitting on the train, etc) while Mass Effect is something you play at home. Mobile is more likely to eat away at Nintendo with its relatively large casual games compared to MS and Sony.
A significant portion of the Japanese games industry has already given up (or is in the process of giving up) the ghost and pulling out of any meaningful participation in the international market, in favour of their more forgiving (and heavily kids-and-otaku-driven) domestic market.
When has that never been the case? The only exception to that rule are the fighting games and most of the Square Enix titles. For the most part Japanese publishers have always catered to Japan first, and the western market has for the most part been second. This is not exactly a new trend.
At the same time, development costs for games have risen and are rising still further. Early in this console cycle, the rule of thumb was that an "AAA" console game needed to sell 1 million copies to break even. That figure is closer to 3 million now.
That's kind of the problem with AAA titles, isn't it? If you want the damn thing to shine like nothing else available today you're throwing in a lot of skilled labor: programmers, artists, (voice) acting, and the list goes on and on... Yet over the years I've found AAA games to be providing less and less content or depth and more superficial shine, and to me this shows especially in RPGs because that is a genre where content really is king in my opinion. In MMOs the lack of content is made up for by delaying the player with grind and copy-paste quests ("Fetch me 300 moose heads" -> "Fetch me 300 deer heads") in order to buy the dev team time to create new content and keep the player paying for another month, but this pattern has been adopted in so many single player RPGs as side-quest filler content that I in general am very disappointed with the genre as of late. The thing is, I remember RPG games having interesting side-quests (with an actual plot), exploration that went beyond copy-paste dungeon #23, and I don't find that in todays RPGs, which probably has to do with the costs associated with the development and the heavy emphasis on impressing people with graphics and engine features.
Games are cheaper than they used to be - a lot cheaper. In the mid-1990s, a new PC game would be 45-50GBP, with console games being more expensive still in some cases.
That's strange, I remember picking up games in the early to mid 90s for as little as 2.5 euro (converted from my own currency). I think the most I ever paid for a game at the time was 12 euro. Inflation has been pretty bad, so I'm sure that with enough math and argumentation you can make it look like today that would 30 euro, but today AAA titles go for 50 to 60 euro, not including the day 1 DLC or some sort of pass, not to mention subscription fees in the case of most MMOs. I have more disposable income these days than I used to have as a kid, and I find the current pricepoint for new games to be at a point where I hesitate and wait for a bargain, whereas when I was younger it was less of an issue despite having less disposable income and more interests to spend that income on. Then again, this is my own experience, and I guess it depends on country to country, and from person to person, and in no doubt nostalgia-goggles play a big part in my opinions.
However, at some point in the last 5 years, that growth in the gaming demographic slowed dramatically.
I think there are many reasons for this, and not just the exhaustion of the 1st world market:
- Some people grow up and have less time for games, instead there's work, family, other hobbies, ... That doesn't mean they stop gaming, just that their time allotted to games is smaller. So they'll buy one game over the same period of time instead of 3. You don't have an ever fast-growing audience, rather it stagnates and depending on how kids spend their disposable income can even shrink.
- Some people (like me) don't feel like paying 60 euro for a game with 12 hours of gameplay at most, when I can pay 15 euro for an indie game which offers more gametime. Doesn't mean I'm not interested in that game, but I'll just wait until it's cheaper in a bargain. The title has to be really really good to warrant my 60 euro. For me games are often an impulse purchase ("I'm bored... Oh hey, [Game X] is only Y euro" -> click click -> bought & installing"). At 60 euro that impulse is gone. A game which is 60 euro, for it to be a day 1 buy it's usually something I've been looking forward to for years, and I still tend to wait for the first decent reviews on metacritic.
- Which brings me to the next point: metacritic, user submitted reviews, youtube and word of mouth. If you're going to release a bad game, your target audience is far more likely to find it out. There's so many places for people to get information from that nobody bothers with the major review sites like IGN etc anymore, because they'll hardly ever give a honest review anyway. Youtube will have tons of gameplay videos, often from "Let's Play" type of videos, metacritic has a user review system where people submit their own experiences, and internet fora the specialize on gaming are VERY honest about games. It's much harder to sell a terrible game compared to that past.
Stuff like online passes, day-one DLC and used-game controls aren't being implemented so that executives can have a bigger pile of gold to roll around on top of; they're fairly desperate survival strategies.
Which has a very adversive effect on people like me by the way, especially day 1 DLC and season passes. I know, nobody is forcing me to pay for these, but it feels like content is being left out on purpose at times, especially when there's an NPC in the game telling me to buy the DLC on the day of release to do quest X, or something like that. Not only that, but the whole price-point difference between "regular version", "deluxe version" and "super-dooper deluxe version" is sure to make me wait until the GOTY edition or whatever name pasted on top of it comes out with all of that included at half the price of the regular version. Mind you, it's not the fact that DLC exists that bothers me, but it's the non-cosmetic day 1 DLC, and intentionally leaving out content. If the deluxe version includes a soundtrack, a making of movie, or some sort of PDF file containing bullshit on how great the dev team is, I don't really mind, since I'm not interested in anything beyond the game.
What your argument basically boils down to is that games are too expensive to make and that consumers aren't willing to pay 70 euro (or arbitrarily higher number) on release date. The argument that it's not about maximizing profits doesn't fly with me since a lot of game companies are doing well enough to make a tidy profit in general. I won't deny the huge cost of making games, but in the end you need to do the math as a business before you start. If your costs are too high compared to your expected sales it should be an indicator that you need to scale down the costs required for making the game itself.
Instead of a sensible approach many large game companies seem to prefer the route where they start with a well-thought out concept, then crack the whip to the dev team, release a half finished game preferably with some of the content put in day 1 DLC. Instead of developing a proper expansion for a reasonable price, the aim seems to be to nickle and dime people to death with tiny updates which barely add any content. "Oh boy, a new area with 2 hours of gameplay and a fetch-sidequest." Big whoop.
Go to an average gaming forum, ignore the rabid fanboys and the obvious flamebait and hate and you'll discover that a lot of people feel that the current gaming industry, while releasing quite a few good games, is getting a terrible reputation for many of the tactics they're using to maximize revenue. The words "rushed", "buggy" and "short" come too mind all too often.