The age-old debate between PlayStation and Xbox has been a staple of the video game world for decades. Whether you've engaged in heated discussions with friends, started a Reddit thread, or created a TikTok video on the topic, you're likely familiar with this ongoing rivalry. While some gamers swear by PC gaming or worship at the altar of Nintendo, the last two decades of video game history have largely been shaped by the competition between Sony and Microsoft. But has the so-called 'console war' truly reached its conclusion? The video game industry has undergone significant transformations in recent years, with gamers' habits, preferences, and options expanding rapidly, thanks in part to the rise of handheld gaming and the tech-savvy younger generations. The battlefield has evolved dramatically from its tribal origins, but has a clear winner emerged? The answer might surprise you.
The video game industry has become a financial powerhouse in recent years. In 2019, it generated $285 billion in revenue worldwide, which soared to $475 billion by last year. This figure surpassed the combined earnings of the global movie and music industries in 2023, which totaled $308 billion and $28.6 billion, respectively. The industry's growth shows no signs of slowing down, with projections estimating nearly $700 billion by 2029. This meteoric rise from the humble beginnings of Pong is nothing short of remarkable.
Given this lucrative landscape, it's no wonder that Hollywood actors like Mads Mikkelsen, Keanu Reeves, Jon Bernthal, and Willem Dafoe have been drawn to video games in recent years. Their participation underscores the shifting perception of video games as a mainstream entertainment medium. Even giants like Disney are making significant moves into gaming, with a $1.5 billion investment in Epic Games during Bob Iger's second term, aiming to establish a strong gaming presence. However, not all boats are rising with the tide, particularly for Microsoft's Xbox division.
The Xbox Series X and S were designed to be a significant upgrade over the Xbox One, but their innovations have yet to capture the market's enthusiasm. The Xbox One currently outsells the Series X/S by nearly double. According to Mat Piscatella from Circana, this console generation may have already peaked in sales, which is a concerning sign for Xbox. The 2024 sales figures from Statista further highlight the issue, with the Xbox Series X/S selling less than 2.5 million units throughout the year, while the PlayStation 5 sold the same number in just the first quarter. Rumors of Xbox potentially closing its physical game distribution department and pulling out of the EMEA region only add to the sense of retreat.
Microsoft has essentially conceded the console war. During the Activision-Blizzard acquisition process, Microsoft admitted that it never believed it had a real chance in the console market. With the Xbox Series X/S struggling to match the sales of its predecessor and Microsoft openly acknowledging its challenges, the company is shifting its focus away from traditional console manufacturing.
Xbox Game Pass has become a central focus for Microsoft, with leaked documents revealing the high costs associated with adding AAA titles like Grand Theft Auto 5 and Star Wars Jedi: Survivor to the subscription service. This shift underscores Microsoft's commitment to cloud gaming. The 'This Is An Xbox' campaign further emphasizes this pivot, positioning Xbox as an accessible service rather than just a piece of hardware.
Rumors of an Xbox handheld device have been circulating, supported by leaked documents hinting at a next-gen 'hybrid cloud gaming platform.' Microsoft's strategic shift is evident in its plans to launch a mobile game store to compete with Apple and Google, and Xbox chief Phil Spencer's acknowledgment of mobile gaming's growing dominance. The new strategy is clear: Xbox aims to be a brand you can play anytime, anywhere.
Why is Microsoft pivoting? The video game console market is no longer the dominant force it once was. In 2024, out of an estimated 3.3 billion gamers worldwide, over 1.93 billion play on mobile devices. Mobile gaming has evolved beyond casual games like Candy Crush Saga and Clash of Clans, becoming the leading segment of the video game market across all generations, particularly among Gen Z and Gen Alpha. The total market valuation for the video game industry in 2024 was $184.3 billion, with mobile games accounting for half of that at $92.5 billion—a 2.8% increase from the previous year. Console gaming, on the other hand, represents just $50.3 billion, or 27%, and has seen a 4% decline since 2023. It's no surprise that Microsoft is keen to transform your phone into an Xbox.
This trend isn't new. By 2013, the Asian mobile gaming market was already outpacing the West, with South Korea and China leading by 759% and 280%, respectively. That year, Puzzle & Dragon and Candy Crush Saga outperformed GTA 5 in revenue. Looking at the 2010s as a whole, five of the highest-grossing games were mobile titles: Crossfire, Monster Strike, Honor of Kings, Puzzle & Dragon, and Clash of Clans. These games may not be the first to come to mind when reflecting on the decade, but their impact is undeniable.
Mobile gaming isn't the only platform drawing attention away from consoles. PC gaming has also seen significant growth, with an increase of 59 million new players each year since 2014, reaching 1.86 billion in 2024. The COVID-19 pandemic in 2020 added 200 million players, driven by the popularity of streaming. Gamers have become more tech-savvy, learning from online communities about building powerful PCs, the best GPUs, and overclocking. Despite this, the PC gaming market's global share in 2024 is $41.5 billion, and the gap between console and PC gaming has widened to $9 billion since 2016. This suggests that PC gaming, while growing, is not poised to overtake consoles in the near future, which is not good news for Xbox, given its strong presence on Windows PCs.
Turning to PlayStation, Sony is enjoying a strong position in the console war. The latest quarterly earnings report shows that 65 million PS5s have been sold, significantly outpacing the combined 29.7 million sales of the Xbox Series X/S. For every Xbox Series X/S sold, five PS5s are purchased. Sony's Game and Network Services saw a 12.3% profit increase, driven by strong first-party sales like Astro Bot, which sold 1.5 million copies in under two months, and Ghost of Tsushima Director’s Cut, which surpassed 13 million lifetime sales. Projections suggest that by 2029, Sony will have sold 106.9 million PS5s, while Microsoft expects to sell between 56-59 million Xbox Series X/S units by 2027. To regain competitive ground, Microsoft would need to close the 5:1 gap, significantly boost unit sales, and enhance the profitability of its exclusives. However, current projections do not support a favorable outcome for Xbox, especially with Phil Spencer's openness to bringing Xbox titles to PlayStation and Switch, potentially including the next Halo game.
However, the PS5's success is not without its challenges. Despite being in the second half of its life cycle, 50% of PlayStation users still play on PS4s. Of the top 20 best-selling games in the U.S. in 2024, only Marvel’s Spider-Man 2 at #19 is a true PS5 exclusive, while Helldivers 2 at #3 was also available on PC. Excluding remasters, there are only about 15 genuine PS5-exclusive games, which may not justify the console's $500 price tag for many consumers. The $700 PS5 Pro received a lukewarm reception, with tech journalists suggesting the upgrade came too early in the cycle, especially given the games showcased were slightly upscaled remasters. IGN's reader poll confirmed that the PS5 Pro offers little value for the price. However, the upcoming release of Grand Theft Auto 6 later this year could change this narrative, potentially showcasing the PS5's true capabilities.
So, is the console war over? For Microsoft, it seems there was never a belief in a chance to compete with Sony. For Sony, the PS5 has been successful but lacks the groundbreaking exclusives to justify a significant leap forward. The true winner of the console war appears to be those who opted out of the traditional console market altogether. With mobile gaming companies like Tencent rumored to be acquiring Ubisoft and having already purchased Sumo Group, the focus is shifting. Mobile gaming is becoming crucial for the sustainability and profitability of gaming companies, with Take-Two Interactive reporting that 10% of the world's population plays its subsidiary Zynga's games monthly. This means that casual mobile gamers are indirectly funding major titles like Grand Theft Auto 6. The next five years of video gaming will be less about hardware power and more about the expansion of cloud gaming services. The console war may be over, but the mobile gaming war—and the myriad smaller conflicts it spawns—has just begun.
