I'm going to go on a bit of a rant. I don't think any one company or group is to blame really.
There are just certain realities kicking in now. In terms of the number of people using consoles, it hasn't expanded much since the PS1 days. Generally the top selling console is around 120 million over 5-6 years and the other 2 are follow ups, with a lot of overlap (i.e. people having more than 1 console). But the costs have grown. I thought GTA 6 would cost 250 million to make (which is a far chunk of change). Then i found out that Spiderman 2 cost around that. If that's the case then GTA 6 could very well be close to 1billion in production cost. There is only 1 IP that can sustain those production costs. It's....er...well it's GTA.
So something had to give on the exclusive front. It's just too risky to make games costing 200 million bucks then leaving them on one console, even a relatively successful console like the PS5. It's been coming for a while but, this time, I think the train finally left the rails for MS and Sony. Despite this, insanely, they both still seem to be putting coal in the furnace. MS are boasting that their next console is going to be the biggest generation leap in tech. Sony are releasing the PS5 Pro...for what!? It's just more cost and bother on the development front.
The costs are also just killing innovation in the AAA space. The most technically interesting game is a 10 year old, laughably mismanaged project still in Alpha. Even last gen, on potato CPUs, we got something interesting like No mans sky. This gen, big CPU upgrade....SFA of technical interest on the simulation side. Instead we have games running PS3/360 levels of simulation (or appear to be from the users perspective) running poorly and people are scratching their heads as to why. If the big AAA blockbusters are not landing then that really hurts consoles.
I also think, in the pursuit of things like BC, we have lost some of the benefits of what a console can do. BC is not a 0 cost thing. There is a hardware cost. AMD have discussed some of the limitations they were under when working on RDNA. BC with GCN was a requirement. It needed to be able to work with GCN workloads so PS4/X1 games could run with less hassle on on the PS5/XSX. That's not free. The controller also needs to offer the same functionality as it's predecessor. So, with a new gen, consoles are no longer just a blank sheet of paper. I mean we, by and large, know what the next Xbox and the next PS are going to be. It'll be the same deal as the last few times. Same concept, more umph. It's getting boring. There are now rumours that the Switch 2 is going to be just a Switch 2.0.....which I hope proves false. A new console is an opportunity to try new things. The console holders have a very strong capacity to put requirements on new games to get certified and this can be used to push innovation. I'm not saying BC should be abandoned of course...but it shouldn't be top priority, not if it gets in the way of trying something new.
At the end of the day I think the consoles biggest problem is it's still "Many of the downsides of PC gaming, few of the upsides". lots of patches, Lots of buggy games at launch, Lots of OS updates (now recommended for parents to unpack and update the console before the big day) and now console games even have PC like settings. It's ridiculous. The xbox in particular is bad at this newness. You go from an Xbox one to an Xbox series. You unpack the new box (it's very nicely packaged to MSs credit), you plug it in, turn it on. Update the system inevitably, put in your account (remember that password?) then....it's the same UI. The same sounds. On the same controller. To all intents and purposes it's the same bloody system as the 10 year old one. It's like getting a new PC just to be greeted by the same version of Windows.....AGAIN!!
There is little new. There is little in the way of unknown possibilities in the console space. It just feels very tired.
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