New gaming PCs, next-gen Xbox and PlayStation 4 all doomed?

Rahul Sood - onetime CPC columnist, founder of VoodooPC and now big cheese at HP - has been busy recently, presiding over lots of positive coverage of his most recent project, HP’s small-and-sleek gaming PC, the Firebird, while also finding time to write a series of lengthy and doom-laden blog posts. Well, their titles were doom-laden, at any rate: both the gaming PC and games consoles as we know them, are doomed. Both posts are confidently argued, and the reasoning behind both is similar: for Rahul, it’s a question of costs vs benefits. On the gaming PC side of things, the number of people willing to pay thousands and thousands of dollars/pounds for ludicrously powerful gaming machines is getting ever smaller, tempted into causing their own extinction by ever more expensive, power-hungry multi-GPU systems. On the console side of things, Rahul reasons, it’s not the customer but the companies - well, Microsoft and Sony - that can’t afford to create any more machines along the lines of the Xbox 360 and the PS3. Their business model is to sell the console itself at a loss, and make a profit on the add-ons, games and licensing agreements.

I certainly think he’s right about the PS3; all the sales data points to it being convincingly outsold by the 360 (with the pair of them being crushed by the Wii). Yet despite bleak numbers, Sony can’t afford to cut the price, because even at $400/£299, Sony still doesn’t make money on each unit sold. The high price then contributes to the slow sales, and the slow sales mean that the PS3 platform isn’t generating enough revenue to subsidise a price cut, or to fund a next-gen console. Microsoft’s position doesn’t look quite as bleak - the cheapest Xbox 360 can be had for £130, and sales are brisk - but then it did have to write off over $1 billion thanks to the high failure rate of the hardware. Last time round, with the Xbox competing agains the PS2, it was in Microsoft’s advantage to aggressively launch its ‘next-gen’ Xbox 360; now it has the advantage, it isn’t going to want to invest in new hardware. For Sony, life is trickier - moving to the next generation will be expensive, but then its current position is expensive, too.

So what about Rahul’s critique of the gaming PC? He’s of course right that it’s very tough at the moment for very high-end PC manufacturers, some of whom, notably Vadim, have gone out of business recently. That said, high-end PC manufacturers have always found it tough if they focus solely on top-of-the-range kit, because:

A) There’s obviously a limited number of people with large amounts of cash to spend on a computer.
B) Those that know enough about top-of-the-range kit to know why it’s good are also likely to have the knowledge to build their own PCs.

This doesn’t mean there’s zero market for the kind of beautiful PCs Vadim and VoodooPC used to make, but the two factors above certainly do reduce the number of people willing to pay for those kind of machines. The current economic climate is of course increasing the number of people falling into category (A) is only making life harder for the boutique companies, but I think Rahul’s broader critique that it’s game over for big, powerful PCs is coloured by his experience at HP. A small group of gamers and performance enthusiasts are always going to want big, powerful PCs - and a smaller group of these will be willing to buy these pre-built. Whether you can build a business solely devoted to this latter group is the key question. If you’re coming at it from the perspective of HP, the answer is probably “no”, but for a smaller company, the answer may be different. And even if the companies don’t exist to serve the niche, people will always build their own.