Have consoles peaked this generation?

The console business as we know it has peaked this generation and will, from this point on, decline.

That was the eye-opening declaration made by video game research outfit DFC Intelligence this week. "We feel overall [the dedicated consoles business] has peaked with the current console systems," wrote DFC president David Cole, summarising a new 165-page report on the games business. (To read the entire work means ordering a package of DFC reports - the cost of which starts at $3495.)

A DFC news story written to announce the report - "Online Sales Expected to Pass Retail Software Sales in 2013" - didn't share research statistics or detailed forecasts.

But David Cole did offer that, "Systems like the Xbox 360 and PlayStation 3 are having their best sales ever five or six years into their lifecycle.

"Unfortunately," he added, "this means Microsoft and Sony are in no hurry to launch new systems that would generate substantial consumer excitement and spending.

"The console business is firmly established and suffers mainly from the reluctance of hardware manufacturers to commit to expensive new products."

DFC reckons this, coupled with a "more diversified and global" games industry - where the "greatest growth" is in PC and mobile (smart phones, tablets) - is what will result in the dedicated console business decline.

That's what DFC thinks. What do other future-gazing analysts think?

"To say that our cycle has 'peaked' is a very broad and macro-level view," EEDAR analyst Jesse Divnich warned Eurogamer.

"Of course this generation has peaked, but there still remains multiple areas of growth, despite a potentially declining market in traditional physical sales."

"For publishers and developers, it is important to recognise that despite a total market decline, there always remain opportunities to release quality content and generate substantial profits."

Jesse Divnich, EEDAR analyst

"Categories such as dance, shooters and action continue to show positive growth, and will likely continue well into 2012. For publishers and developers, it is important to recognise that despite a total market decline, there always remain opportunities to release quality content and generate substantial profits. Even if traditional physical console sales decline from $60 billion to $40 billion, that still leaves $40 billion on the table and nearly $5 billion in profits."

For "opportunities to release quality content", see Activision's DreamWorks Super Star Kartz.

"Additionally," added Jesse Divnich, "our industry is facing a major and upcoming transition with the rise of social and digital games. You can certainly expect the consoles of the future will expand upon these business models to publishers and developers."

Wedbush Morgan analyst Michael Pachter had plenty to offer.

"Beginning when I wrote my 2004 industry report entitled The Great Console Cycle Myth," he began, "I've consistently said that the current generation will be the last true console cycle.

"I wrote 200 pages then - updated in 2005, 2006, 2007 and 2009 - talking about how technology had advanced to the point where it might not make sense to put out another generation of consoles.

"I'd say that the analogy is to beef, where all of us can discern the difference between Chateaubriand and Filet Mignon, but it isn't sufficiently better to justify twice the price for most people."

Michael Pachter, Wedbush Morgan analyst, on next-gen consoles

"Of course, I didn't see tablets or smart phones changing the landscape back in 2004, and clearly didn't imagine the possibility or the potential of Facebook games, but suffice to say that on the console side, technology is not so advanced as to warrant another generation.

"We may be able to see games that run faster than 60 frames-per-second and at fidelity higher than 1080p, but we can't really justify a several hundred dollar console purchase and games that may cost $100 million to make just because Sony or Microsoft decides we need to play games at 240 frames-per-second in 1620p (or whatever is the next step up).

"The experience may be better," Pachter remarked, "but not sufficiently better to have mass appeal at those prices.

"I'd say that the analogy is to beef," he went on, full flow now, "where all of us can discern the difference between Chateaubriand and Filet Mignon, but it isn't sufficiently better to justify twice the price for most people.

"The ultra-wealthy will embrace new technology, but since the price to make the consoles faster and the games more robust will be high, the cost of the consoles and games will likely be priced beyond the mass market's ability to justify, and the next generation will therefore be less successful."

Screen Digest analyst Piers Harding-Rolls nodded his assent.

"I do not expect the next generation of home consoles to be as widely adopted, primarily because of the incoming competitive challenge from alternative non-specialist devices - tablets, connected TVs and advanced set top boxes - that will increasingly serve games content."

Piers Harding-Rolls, Screen Digest analyst

"IHS Screen Digest believes that total packaged games sales, a majority of which are console games, peaked in 2008," he informed us. "The next generation of consoles will continue their shift towards digital games business models, and other types of entertainment media, in addition to packaged games.

"As such, the console business is an increasingly complex proposition, making comparisons less legitimate from generation to generation. In pure device sales volume terms, I do not expect the next generation of home consoles to be as widely adopted, primarily because of the incoming competitive challenge from alternative non-specialist devices - tablets, connected TVs and advanced set top boxes - that will increasingly serve games content.

"But console revenues from digital and non-games media opportunities are likely to be higher next generation even across a smaller installed base of users."

Nintendo's Wii U will be the first next-generation console if, that is, the industry carries on banding machines together using that term. DFC Intelligence forecasts "strong sales" for Wii U, and has even written a forecast for the unknown home consoles from Microsoft and Sony. This wasn't elaborated upon.

Whether Microsoft and Sony will radically alter their console outlook from one complete overhaul of hardware every (now) 10 years, with iterative updates in between, remains to be seen. Rumour has it that Microsoft will share its next-generation vision at E3 2012 next summer.