Overview
Starting in 2025, the video game console market is poised for major growth. As expected, worldwide video game console software revenue, encompassing packaged goods, digital goods, subscriptions, and downloadable content (DLC), experienced a decline of 6% in 2024. However, this downturn is temporary, as a solid rebound is anticipated in 2025, followed by record-setting revenue in 2026. Over the next two years, video game console software revenue is projected to grow by an impressive 20% from 2024 levels.
2024 Recap
It had been anticipated that 2024 would see a market decline in the console segment. DFC Intelligence’s console software forecasts for 2024 actually were slightly bearish in retrospect, with actual sales reaching $37.7 billion, outperforming the original $36.5 billion DFC estimate.
PlayStation 5 (PS5)
The PlayStation 5 narrowly underperformed DFC’s forecasts. While the console met expectations in North America, sales in Europe fell short by 10%, and there was a significant miss in Japan. Despite these challenges, a strong holiday season helped offset major concerns about lower than expected sales going into the fourth quarter. Solid holiday sales are a strong sign heading into 2025.
Nintendo Switch
The Nintendo Switch closely aligned with DFC’s overall forecast for 2024, with varied regional performance. Sales in North America lagged 10% behind projections, while sales in Europe met expectations. Japan, however, stood out as the key growth driver, with sales exceeding DFC forecasts by 20%. In future reports, DFC will discuss how the Switch performance in Japan is a major indicator for overall directions in the console market.
Xbox Series X/S
The Xbox Series X/S continues to struggle, failing to meet even DFC’s modest expectations. Sales in North America and Europe fell short by 20%, while market penetration in Japan remains negligible. Additionally, the Xbox’s foothold in Europe is increasingly tenuous, raising concerns about the platform’s long-term competitiveness. With North America still representing Xbox’s core market, it’s clear there are significant challenges ahead for Microsoft in the console race.
New DFC Forecasts
Looking ahead, DFC Intelligence’s newest forecasts introduce projections for the highly anticipated Nintendo Switch 2, alongside preliminary scenario-based forecasts for potential new systems from Sony and Microsoft. While many unknowns remain, the latest forecasts emphasize the Total Addressable Market (TAM) for the overall console market in the coming years. However, the devil will be in the details as we learn more about upcoming systems.
Switch 2 Poised for Success
DFC is bullish on the Nintendo Switch 2, which builds on the remarkable success of its predecessor. The original Switch redefined what a console can achieve in terms of consumer reach and longevity, largely due to its portable design and appeal to households purchasing multiple units. The Switch 2 is expected to carry on this legacy, but initial shortages could hinder its ability to fully meet demand at launch.
Questions for Sony and Microsoft
As gaming on the go continues to grow in popularity, Sony and Microsoft are under increasing pressure to expand beyond consoles tethered to a television. While subscription services, cloud gaming, and PC games have been part of their strategies, these may not be enough to counter Nintendo’s dominance in the portable gaming space. The challenge for Sony and Microsoft lies in competing with Nintendo’s portable appeal while preserving the power and performance that define traditional high-end consoles. Historically, both companies have struggled with portable-focused strategies, raising questions about their ability to adapt. With the PlayStation 6 and a potential new Microsoft console in the pipeline, critical details such as price, launch dates, and form factors remain unknown.
DFC is currently running multiple scenarios based on varying assumptions about these factors. Regardless of specific outcomes, DFC maintains its position that only two console systems are likely to dominate the market at any given time. During the current generation, Nintendo and Sony have clearly held the lead, with Microsoft lagging far behind. The key question moving forward is whether Sony’s PlayStation 6 can maintain its position as the second most dominant console, or if Microsoft has a game-changing strategy in store.
The Road Ahead
With a return to growth on the horizon, the coming years represent a critical moment for the video game console market. The Switch 2 is expected to do extremely well, continuing Nintendo’s success. For Sony and Microsoft, the stakes are higher than ever. Whether the PlayStation 6 can maintain its lead over Microsoft, or if Xbox manages to reverse its fortunes, remains to be seen. Much may depend on which company has the better portable strategy.
DFC Intelligence will continue to refine its forecasts, tracking market developments and providing granular insights into emerging trends. Despite lingering uncertainties, the outlook for 2025 and 2026 is highly optimistic, signaling a new era of growth and innovation in the video game console industry. As the industry evolves, DFC remains committed to providing the insights and analysis needed to navigate this complex and dynamic landscape.
