Game consoles, a sector that will reach $ 45 billion this year

And the way companies in the industry make money has changed rapidly over the years.

With the release of the new consoles from Microsoft and Sony, there is a clear move by both companies towards software and subscriptions, similar to the way Apple has put more emphasis on services in recent years.

Businesses hope to benefit from the growing demand for games as consumers around the world spend more time at home during the pandemic.

According to Niko Partners analyst Daniel Ahmad, consoles are now a much more profitable business for companies like Microsoft, Sony and Nintendo than they were ten or two years ago. “We are moving to a point where hardware is profitable, software has always been profitable, and networking services play a much more important role in keeping people in console gaming ecosystems,” he told the podcast. “Beyond the Valley” on CNBC.

Digital distribution of the games has enabled companies to make higher profit margins than selling physical copies in stores, Ahmad said. While publishers traditionally made around $ 35 for a $ 60 game sold in the store, online downloads mean they can now win up to $ 45 per game; the percentage can increase up to 95% for owners of platforms like Sony.

The so-called gaming ecosystems will become even more important in the coming years. Microsoft, for example, is betting heavily on building a player base on a range of different devices, including its Xbox consoles, Windows computers, and smartphones.

The company commercially launched its xCloud gaming service in September as part of its Xbox Game Pass subscription platform.

Meanwhile, Japanese rival Sony is launching the PS5 as an all-in-one system that gives gamers access to its exclusive games, as well as its PlayStation Plus and PlayStation Now subscription services, which offer online games, some titles. free and cloud games. .

Analysts say the PS5’s predecessor, the PlayStation 4, has far surpassed Microsoft’s Xbox One console due to the number of exclusive games it sells. Sony Studios has produced several popular franchises, such as God of War and The Last of Us.

Likewise, Nintendo is taking advantage of its large catalog of intellectual property, with series like Animal Crossing and Super Mario selling millions of hits on the Switch console.

The company stands out because it is less interested in the battle of the latest generation consoles from Microsoft and Sony, choosing instead to go on a wave of continuous demand for Switch. However, it didn’t miss the switch to subscriptions and services, using the paid functionality of Nintendo Switch Online to generate additional sales from the software.

Other tech giants are stepping on the ground for gaming companies. Google, Amazon and Facebook have launched their own cloud gaming services, with the aim of gaining a share of the $ 160 billion gaming market.