Playing the Xbox and PlayStation from a living room couch isn't what it used to be.
This week, the video game industry will descend on Los Angeles to hold the Electronic Entertainment Expo, or E3, its loudest, biggest and most lavish annual conference. Much of it is a giant advertisement for video game consoles, with some of the most highly anticipated presentations coming from Microsoft, Sony and Nintendo, discussing games like sci-fi epic Halo 5 for the Xbox One, adventure game Uncharted 4 for the PlayStation 4 and space shooter Star Fox for the Wii U.
From the outside looking in, it may seem like video game consoles are the most popular products in the industry. That's beginning to change.
Sales generated by PC games are poised to overtake those for video game consoles, a monumental shift that is many years in the making, according to data from industry researcher PwC. By the end of 2016, PC game sales are expected to reach $29 billion around the world, compared with $28 billion in sales for the console market.
The gap will continue to widen over the next few years, thanks to the growing popularity of PC-based gaming in other countries, like China and India.
The video game industry is going through rapid change. Gone are the days when people played games only on specialized devices, like a video game console. Smartphones, tablets, set-top boxes and virtual reality systems have begun to change the way video games are played, as well as how we all pay for them.
"You could have said 10 years ago that there were three major platforms: Console, PC and Web," said Brian Blau, an analyst with research firm Gartner. "Now you have TV streamers, mobile devices -- you even have watches today. There's so many more types of devices to play games."
One of the biggest beneficiaries of that change has been the PC, which has become the only way to play some of the best-looking and most popular games in the industry and to enjoy some of the most cutting-edge features online gaming has to offer. And later this year, that will also be the only way to play high-quality virtual reality games, offering players the opportunity to strap on a headset and transport themselves to all manner of imaginary worlds.
The PC won't just be the technology on which players spend the most money playing games, but it will soon become one of the key battlegrounds of new technologies as well.
From PC to consoles, and back again
In the '80s and early '90s, the PC platform was credited with pioneering game genres, establishing the first communities around online multiplayer and pushing the technological boundaries of the medium with better-looking and more-realistic experiences.
Many of the most graphically intensive and influential games in the industry were available only on PCs then, such as the sci-fi shooting game Doom and the hit strategy game StarCraft. But the industry's focus started to change as Internet connections proliferated, computer components advanced and it all became cheaper. The solution: A specialized computer designed specifically for playing games on televisions.
Beginning nearly 40 years ago, products like the Commodore 64, the Atari 2600 and the Nintendo Entertainment System helped spark consumer interest in nascent video game technology. By the time blockbuster franchises like Microsoft's Halo and Activision's Call of Duty military shooting titles came along, the console was the central figure of the industry.
Companies loved consoles because they were simple products to sell, and consumers loved how comparatively magical the set-top box was. An Xbox or PlayStation upgrade came along only every half decade or so, far from the PC industry's constantly changing components and model numbers.
"With a console you turn it on, put your game in and you just play," Blau said. "Consoles were a one-stop shop for your games."
Following the introduction of Sony's PlayStation in 1994 and Nintendo's N64 in 1996, each of the industry's biggest franchises -- from adventure game Super Mario Bros. to soccer franchise FIFA -- found their homes on game consoles.
Most games on the market today are released on both consoles and PCs, including some of the most successful titles, like the action-adventure title Assassin's Creed: Unity and the fantasy game The Witcher 3. Yet the PC market is sometimes left in the backseat, with some games launching long after a console release, and some not at all. The crime drama game Grand Theft Auto 5 didn't make its way to the PC until 19 months after its console launch.
So what's causing a change? In a single word: Steam.
Three out of every four times a game is sold for a PC, it's sold through an app and website called Steam. Part social network and part online store, the service is offered by game maker Valve. It's like Apple's App Store for the iPhone, only it launched nearly a decade earlier.
Steam's popularity stems from its various features, such as the ability to synchronize game files across various PCs, as well as semiregular discount and sales bundles. The company also encourages game developers to offer its users access to games that are still in development, which makes the service an attractive avenue for game makers hoping to test out ideas or crowdfund new projects.
By comparison, consoles seem stodgy. Their games are still overwhelmingly sold as discs, stuffed inside shrink-wrapped plastic boxes.
There's another thing going the PC's way: A trend called e-sports -- competitive gaming between highly trained professional gamers -- has become an international phenomenon grabbing the attention of tens of millions of people. The top competitive games are available only on a PC: Riot's League of Legends and Valve's Dota 2.
Analysts say it will be increasingly harder for consoles to grab back attention, too. Consumers bought about 30 million of the Xbox One, the PlayStation 4 and the Wii U. Compare that with more than 308 million PCs sold worldwide last year alone, according to market researcher IDC.
"It's very hard for that [consoles] to compete globally," said Joost van Dreunen, CEO of game analytics firm SuperData Research.
Interestingly, subscriptions to online games, and other game add-ons such as extended storylines, new features or cosmetic changes, have become a staple among PC titles, and represent an outsize portion of their success. Though game makers sell fewer games on a PC when compared with a console, customers spend more through those in-game add-ons and subscriptions.
By the end of this year, the PC market will have notched $21.8 billion in such sales, according to PwC. The console market, by comparison, will rack up only a fraction as much, at $2.4 billion.
The hybrid future of consoles
Makers of console games already see the writing on the wall, and many have begun designing games more as services that players spend money on over time to address these changes.
Companies like Electronic Arts, makers of the popular FIFA and Madden sports games, and Activision, which is publishing the space-age shooting game Destiny, are leaning on services like specialized social networks and other add-ons to keep people playing their games. At EA, that's being done through a service called Ultimate Team, a form of fantasy sports that lets players spend real-world money to obtain and manage an online roster of sports players and compete in online tournaments.
At Activision, there are plans to add to Destiny for the next decade. The company has already released two add-ons, charging as much as $20 each time.
The strategy is working. Of EA's $4.3 billion in sales last year, a record $2.2 billion came from Internet sales of both full games and add-ons. Activision said a record 76 percent, or $538 million, of its total revenue came from sales over the Internet of full-game downloads and in-game add-ons.
Unfortunately for console makers, EA and Activision's efforts are still the exception. The console market still makes the bulk of its money from selling games on disc at $60 a pop. As a result, large and successful game franchises will likely continue relying on an annual release schedule, instead of following the PC industry model of regular updates to a single game.
The next wave of growth will likely come from virtual reality, a nascent technology that in the past three years has become one of the most closely watched aspects of the video game industry. Though Sony is set to release a virtual reality headset for its PlayStation 4 next year, much of the early applications for the technology will be centered on games played for the PC, due in part to VR's demanding performance needs.
When Oculus VR CEO Brendan Iribe unveiled his company's Rift headset last week, which will debut early next year, he described it in sweeping terms. "VR allows us to experience anything anywhere, it is that powerful," he said.
Oculus is also partnering with Microsoft, using its Xbox One game controller as a way to control games. The two companies will also bring Xbox One games to the Rift headset by streaming them to a PC. The catch: Console owners won't get to experience those games in true VR. Rather, players will have to settle for a virtual home theater, with the Xbox game playing on the wall.
For players who want the true virtual reality experience Oculus has to offer, which Iribe says will let us "finally be able to teleport to new worlds," the PC will be the only option.
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