The videogame business – a key category for the licensing business as both an entertainment medium that spawns licensing programs, as well as a platform for sales of licensed games — is about to undergo its most unique platform shift this week as Sony and Microsoft launch new consoles to the global marketplace.

No lag time
Normally, videogame sales lag in the months before a platform shift, as gamers postpone their purchases to wait for next generation hardware and games designed to take advantage of the technology advances. But this year, says NPD Group’s Mat Piscatella, sales of hardware, software and accessories in the U.S. could reach a record $50 billion – fueled only partly by $13.4 billion spent as the new hardware comes to market during the November/December holiday period.

Sales spiked in the first part of the year as homebound gamers going through COVID-based lockdowns and travel restrictions play the games as a remote communal experience.  “The pandemic is expected to transform the U.S. holiday shopping season,” said Jason Benowitz, a senior portfolio manager at Roosevelt Investment Group. “Playing from home has become a way for some to safely socialize.”

Backward compatibility
Also, gamers haven’t been reluctant to invest in software, since all the new machines are backward compatible – games designed for legacy consoles can be played on the new ones. In some cases, consumers will be able to download upgrade “patches” to enhance play of their existing games on next-gen machines.

“We wanted to make sure people felt that they would be comfortable buying the Gen 4 [console] version and that they would be able to upgrade without any problems,” said Electronic Arts CEO Blake Jorgensen. “It’s all about the consumer experience, it’s about making sure you’re staying connected to your social network that plays the same game that you’re playing. We didn’t want anyone to fall out of the key component of what is so important in our games, which is the ability to play with your friends.”

So the typical pre-next-gen slump was avoided.

Unit sales of Sony PlayStation 5 and a lower cost version without a disc drive (launching this week in North America, Japan, Korea and Sea/Pac, and next week in the rest of the world) and Microsoft’s Series X and S (launching this week globally) are forecast to reach five million and 3.9 million units globally, respectively, through March, says research firm Ampere. By the end of 2021, it predicts, 13.5 million next gen Xbox consoles, and 17.9 million Playstation5 consoles, will be in the hands of consumers around the world.

They’re expected to be in short supply well into 2021 – Sony’s PS5 sold out pre-orders earlier this fall – and will only be sold online at the start to avoid having people crowd stores. Walmart stands to sell $1.1 billion of the new consoles through January, according to Wedbush Securities. Walmart and GameStop each have a 30% share of the U.S. console market, followed by Target and Best Buy at 15% apiece, Wedbush said.

The hardware sales accompanied by a few launch titles – several of them revamped versions of current games designed to take advantage of the consoles’ faster speeds and feeds as well as 4K Ultra HD resolution. Activision Blizzard Entertainment will release “Call of Duty: Black Ops Cold War” on Friday (Nov. 13) in versions compatible with new and older consoles. Take-Two Interactive will launch a Kobe Bryant-inspired “Mamba Forever” edition of its NBA2K 21 game priced at $100 and a standard, next-generation edition.

As always, both the Sony and Microsoft platforms will have exclusives only available for their own hardware. Sony is introducing an internally developed “Marvel’s Spider-Man: Mile Morales Ultimate Launch Edition”, while the new Xbox systems will have “The Medium” in January, and the latest in the Halo series later in 2021.