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The Next Generation of Gaming Consoles

Chris Morris|Special to CNBC.com
Friday, 12 Jun 2009 | 5:12 PM ET

We're still a long way away from seeing the next generation of Xboxes, PlayStations and whatever Nintendo has up its sleeve, but Ubisoft is already preparing for the future.

"The next generation is going to be so powerful that playing a game is going to be the equivalent of playing a CGI movie today," predicts Yves Guillemot, chairman and CEO of the publisher.

With the increased graphical power will come greatly increased costs. Today, making a game for Microsoft's Xbox 360 or Sony's PlayStation 3 typically costs between $20 million and $30 million. (Games for the Wii typically cost much less to create, due to the system’s less than cutting-edge components.)

Yves Guillemot
Source: Ubisoft
Yves Guillemot

Next generation, estimates Guillemot, top tier games will likely average $60 million to make.

The ramifications for that are unknown. It could mean higher retail prices or lower return on investment. Ubisoft hopes to supplement the cost by reusing assets in the film community (as it is currently doing with its game adaptation of James Cameron's "Avatar".)

High development costs for game makers will just as certainly mean high production costs for console makers. That's part of the reason Microsoft, Sony and Nintendo are working hard to extend the life cycle of the current generation of game machines.

Microsoft is the most ambitious of the console makers, saying it plans to market the launch of its recently announced "Project Natal" motion-sensing controller as prominently as it marketed the launch of the Xbox 360. In essence, Natal’s launch will be a next generation launch of sorts.

Guillemot says he is excited about Natal, but he suspects consumers may be a bit more impatient than console makers believe.

"[Natal] is one step, but quickly they will take the other step — pushed by the environment," he says. "For us, the current machines are very powerful and we can do high quality work. I'd like to stay with this generation as long as possible, but my customers will want the best machine possible."

One thing that could move up the timetable for console makers is the move to make a gaming system that streams games directly to your TV or computer. OnLive is a company that’s attempting that and showed a working prototype earlier this year. Ubisoft and Electronic Arts have already pledged to support the service.

The idea behind OnLive is the company’s servers will run the game, and send a videostream through your home’s Internet connection. Your controller and button mashes are sent via the Internet to OnLive's servers. The experience, though, is seemless — as if you were playing a copy on a machine at home.

It's early technology, but one with promise — and, according to Guillemot, it could shake up the timetables of console makers

"If somebody comes out with online — if OnLive manages to make this work — we will have a next generation of systems sooner than currently planned," he says.

When Motion Control Makes Sense, and Doesn't

While it is laying the groundwork internally for the next generation, including hiring 1,300 new employees last year, Ubisoft says it plans to be in the thick of motion controlled games for all systems.

Guillemot says he expects as much as 80 percent of the company’s future family games (and the "Rayman" series) to utilize motion-sensor controls. That’s a significant investment in the technology.

For its core games, though, including "Splinter Cell" and "Assassin’s Creed," you're less likely to see motion controls broadly used.

"The current pad for gamers is giving them a lot," he says. "They play for hours, so they don't want to get up and down. They don’t want to be tired after five minutes. These games are about reactivity."

On the upside, he says Natal and Sony’s controllers will ultimately expand the action/core base by about 20 percent, which will help drive more sales.

While Ubisoft has grown into one of the industry’s largest game publishers over the past few years, there is a category it is notably absent from: Massively Multiplayer Online (MMO) games.

It's not for lack of trying. The company tried hard to acquire MMO-specialist Cryptic Studios last year, only to lose a bidding war to Atari. Guillemot says he is still interested in buying a MMO-maker, but won’t rush into anything.

Ubisoft tried its luck making MMOs internally several years ago, but did not fare well. As the company considered making another run at the genre, it knew it needed to find an expert.

"We know it can be a disaster or a very profitable business," says Guillemot. "It's a part of the business we want to be in … but we have to find the best place to invest."

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