PS5 and Xbox were left stuck in time by the COVID pandemic

PlayStation 5 and Xbox Series X launched five years ago, in November 2020, which means they both debuted in the teeth of the COVID-19 pandemic that massively disrupted economies and societies around the globe. This fact is self-evident but also strange to recall, and somehow sounds wrong — a distorted perception of time being just one of the effects of that pandemic.
COVID-19 and its effects must, surely, have left an indelible mark on this generation of consoles. But how? PlayStation 5 is selling in broadly similar numbers to PlayStation 4. The Xbox Series consoles are trailing Xbox One, but there’s a whole bunch of reasons for that. It’s hard to tell if the consoles were held back by the logistical challenges of the lockdowns, or supercharged by the gaming boom the pandemic inspired. Or neither. Or both, but the effects canceled each other out.
“This is a huge topic that covers every facet of the gaming market from supply to demand, and macro to micro,” says Mat Piscatella, a gaming industry analyst at Circana, former Activision and Warner Bros. exec, and the guy who posts those fascinating threads about game sales and engagement. “It’s impossible to capture the impact of 2020-21 on, well, everything.”
What really happened with the stock shortages?
The pervading memory of the launch of the PS5 and Xbox Series X is how bloody difficult it was to get one. Orders were difficult to secure and prone to cancellation, stock disappeared in seconds, and scalpers profiteered shamelessly, listing new systems on eBay for four-figure sums. The whole thing was deeply frustrating and left a bad taste in the mouth. And the situation persisted for years, especially for PS5. Sony didn’t declare the PS5 stock shortage over until early 2023.
The manufacturing and logistics challenges of the pandemic undoubtedly played a part in this. “It’s indisputable that component shortages, shipping/logistical shortages, and retail closures harmed the launch of Gen 9 consoles,” says Matthew Ball, a venture capitalist and consultant and CEO of Epyllion, whose writing on games and the metaverse has been influential in Silicon Valley. “This led to reduced adoption and extra scalping that helped neither the console-makers, nor game-makers and took up scarce consumer spend. This constraint was severe, too.”
But, says Piscatella, this wasn’t the whole story. Business finds a way, and retail systems bounced back remarkably quickly. “It was incredibly challenging,” he says. “However, manufacturers and retailers quickly adapted to the demands of the new marketplace at the time. Online options were quickly improved and expanded.”
Piscatella’s theory is that supply wasn’t overly constrained; it was a sudden increase in demand, unplanned for by the console manufacturers, that caused the shortages. This is a theme we’ll return to — that the boom in interest in gaming during the lockdowns of 2020 and 2021 caused as many problems for the industry as it created opportunities.
“Gaming demand surged with the onset of the pandemic, as more players began playing for more hours and had more dollars available to spend,” Piscatella explains. But Sony and Microsoft had planned their console manufacturing according to projections made pre-pandemic — and manufacturing pipelines are as slow to turn as oil tankers at the best of times, never mind during a global crisis. “Given the long lead times of planning out a console launch, and given that only so many consoles can be made given manufacturing constraints, demand for the new consoles significantly outpaced supply.” As Piscatella points out, it wasn’t only the new consoles that experienced this phenomenon — it was equally hard to find a Nintendo Switch at the time.
This is why it’s hard to perceive any effect from the pandemic in the early sales figures of the new-generation consoles. They sold what had been planned for, what was available, and neither Sony nor Microsoft could do much about it. “Over each new console’s first 12 months in market, sales for both PlayStation 5 and Xbox Series were very close to the launches of the previous generation devices, as that was what manufacturing allowed for,” Piscatella says. “But demand was so much higher than had been the case in 2013-14.”
The problem with the pandemic boom
“PlayStation 5 and Xbox Series launching in 2020 happened near the all-time peak of gaming demand,” Piscatella says, and he has the figures to prove it. According to Circana’s Games Market Dynamics, the U.S. video game market — a total of spending on video game hardware, content, and accessories — was worth $45.1 billion in 2019. In 2020, it was $58.2 billion — an incredible 29% jump. (That’s a lot of copies of Animal Crossing: New Horizons.) In 2021, the U.S market reached $61.7 billion, an all-time record.
Sounds great, right? Could there be a better time to launch a new video game console? But the signs are that PlayStation 5 and Xbox Series haven’t really been beneficiaries of all these new hours and dollars that people were spending on games. Sales were constrained by manufacturing supply at first, but once those problems were solved, they remained flat compared to the previous generation (or, in the case of Xbox, slumped). And there are other troubling indicators for the health of this generation of consoles.
“It’s difficult to speculate whether the COVID boom in engagement and software sales helped consoles more than the supply constraint harmed them,” Ball says. “What we do know is that Gen 8 [PS4 and Xbox One] owners have been slower than usual to upgrade, and after 100 or so months, Gen 9 [PS5 and Xbox Series] is about 12 million units or 10% behind Gen 8.”
Why didn’t the new consoles sell better after the boom? Ball points the finger at an underwhelming offering from the new consoles themselves — “fewer perceived (literally and figuratively) gameplay benefits versus prior generations,” as he puts it — and top games like Fortnite and Minecraft still being playable “with no functional difference” on previous generations. It’s a persuasive argument.
Piscatella goes one step further, and argues that the boom was such a radical shift for the entire video game industry that it caused problems for virtually every company in the business. This is because, after 2021, the video game market didn’t return to the state of more-or-less permanent growth it had known for decades. It reached a ceiling, and stayed there. After that 2021 peak, the size of the U.S. market has settled between $57.7 and $59.5 billion, according to Circana’s Games Market Dynamics, and looks likely to stay put. It’s still a lot bigger than it was pre-pandemic, but it’s static.
“All of a sudden, the market matured basically overnight, where ceilings were quickly reached in player count, hours, and dollars,” Piscatella explains. “Companies had to reckon with fighting for share rather than growth in the U.S., and in other previously well-developed gaming markets. This has been an exceptionally difficult transition. It’s tough going from expecting an expanding market every single year to one where you have to find new ways to get to growth.”
Prior to the pandemic, every successful game company could keep doing what it was doing and expect the numbers to go up. That’s no longer true. Now, they’re all fighting to increase their slice of the (suddenly bigger, but finite) pie. This, Piscatella points out, is why all the console manufacturers are now looking beyond their own platforms. It’s most obvious in Xbox’s case, as Microsoft transitions into being a big third-party publisher. But it’s true of PlayStation too — Sony regularly publishes on PC now, and occasionally on Xbox and Switch — while Nintendo is looking outside of gaming, to movies and theme parks, to find growth.
These transitions would have happened anyway, with or without COVID; the video games market would, eventually, have matured. But it would have done so “slowly over a course of years rather than all at once in a few short months,” as Piscatella says. The rapid expansion and equally sudden end to growth were business shocks with painful long-term consequences, seen in the waves of costcutting, layoffs, and cancellations of the past two years. “We’re still seeing the aftershocks of the decisions made during that market earthquake,” Piscatella says. Not all the decisions were good ones; not all the effects could be foreseen, or mitigated.
That’s the world that PS5 and Xbox Series X, pandemic babies both, grew up in. The COVID-19 pandemic increased their potential, but simultaneously prevented them from reaching it. And it shook up the industry they were born to in ways that will still be felt long after they’re gone.