This article was originally published on July 24, 2026 - read the full issue

By James Batchelor

The future of the console has never seemed so uncertain. From Xbox's aggressive downsizing to Sony abandoning physical discs, combined with escalating component costs and the inevitable impact on prices at retail, it's increasingly hard to predict how the next generation of living-room game boxes might perform. 

Multiple analysts tell Knowledge the sector is in "an existential crisis," with Aliena Analytics head of market analysis Rhys Elliott clarifying that this is "an economic and margin crisis rather than an audience one." 

"The historic console playbook of manufacturing a bespoke box, subsidising it heavily at launch, and making the margins back on software royalties is structurally broken and simply not possible under the current component crisis," he says. "And that shows no signs of slowing down, thanks to the fickle, misguided, greed-driven gen-AI bubble."

Biggest threats 

Kantan Games CEO Dr Serkan Toto declares the rising component costs are "one of the biggest threats for growth in the space," adding: "In my view, the traditionally lower price point for consoles has always been their raison d'être for many people. Remove that, and you have a problem getting into the mainstream." 

The reaction to Valve's $1,000 Steam Machine was a sign of things to come. Elliott observes that if the next generation of PlayStation and Xbox hardware arrives as digital-only boxes with a four-figure price point, "mass-market growth is effectively dead on arrival."  

"When a console costs that much, casual consumers simply opt out, choosing to spend their time and money on the hardware they already own, or migrating over to mobile and PC," he adds. 

Ampere Analysis head of games research Piers Harding-Rolls notes that even the rumoured introduction of 'buy now, pay later' options won't offset the impact of high prices. 

"It will mean reduced scale of sales over a console's lifetime, and gamers playing older consoles for longer," he says. "This reduction in scale will have a knock-on impact on games publishers and they will be looking for more opportunities to monetise to overcome these smaller userbases." 

Toto agrees the mainstream appeal of consoles is in danger, as rising prices and the disappearance of physical media will mean "a significant part of the audience will get further priced out."

The size of the console audience is a major concern here. Aldora CEO and SuperJoost Playlist author Joost van Dreunen reports that the addressable audience for dedicated consoles has remained the same for at least a decade, with annual revenue fluctuating around the $40 billion mark during that period. Meanwhile, spending on PC has grown and mobile spending has tripled. 

"Dedicated gaming hardware increasingly caters to diehard players," van Dreunen continues. "That audience has become a clear minority in the overall games industry… but a minority is not the same as small or casual." 

He likens players who buy dedicated consoles to sports fans who buy season tickets, adding that the current economic climate is "pushing [platform holders] to evolve faster." The answer, he suggests, is "not cheaper components or a snazzier title selection but an evolution of what console gaming can be" – namely, the premium gaming experience.  

"Consoles should stop trying to be everything to everyone," van Dreunen says. "The idea of console gaming as the primary entry point for mainstream audiences has always been a beautiful dream, but it has clearly been eclipsed by mobile and, to a degree, PC. Mobile now accounts for roughly 55 per cent to 60 per cent of all revenue – roughly three times the console share."

Rocks, hard places 

Elliott observes that platform holders are "trapped trying to serve two conflicting masters." On the one hand, they vie to maintain their identity as premium hardware providers (but are unable to subsidise that hardware due to high component costs). On the other, they need to fund blockbuster exclusives to sell those boxes, but development costs have become so unsustainably expensive they can't afford to lock those games to a single platform. 

"The spreadsheet always wins in the end," Elliott adds. "This is why Xbox is shifting its centre of gravity toward PC and mobile, and why first-party exclusivity is being quietly dismantled on a 'case-by-case' basis – walking away from huge external playerbases makes no economic sense." 

All of these analysts agree that longer console generations are inevitable – it's too costly for both platform holders and consumers to upgrade on the historic five-to-seven-year basis, making decade-long console cycles more likely. And while they all expect a huge spike in growth around GTAVI – notably a console-first title – such moments will be few and far between. 

But regardless of how bleak the situation seems, none believe the next console generation will be the last. 

Van Dreuen cites Nintendo's success with Switch 2 as proof that consoles can deliver something neither PC nor smartphone can replicate, while Harding-Rolls hopes to see more technological innovation from platform holders trying to offset rising costs and drive consumer interest.  

"We saw how Nintendo turned around the GameCube and Wii U cycles with Wii and Switch innovations," he says. "Could we come to expect more innovation to stand out in a difficult market?"

This article was originally published on July 24, 2026 - read the full issue