Video game console sales cap out each generation at around 250 million, so how will the console manufacturers break through that barrier? By learning a crucial lesson from the videotape format war, one former PlayStation executive has suggested.

Speaking on the Pause for Thought and Naomi Kyle YouTube channel, Shawn Layden, former boss of Sony Interactive Entertainment America (SIEA), said the console video game market has hit a limit, and significant change is needed to expand beyond it.

“We talk about gaming as being this $250 billion industry, which it is, and have hundreds of millions of users, which it does,” he began. “But of course that includes if you're playing Wordle, you're a gamer. If you're playing Candy Crush, you're a gamer in that number. But the number of discrete consoles sold over any particular generation caps out about 250 million. If you line up all the PS1s, Sega Saturns, and N64s, and you go by generations, it's all about 250. The one time it popped to almost 300 was the generation that had the Wii, and people thought you could buy Wii Fit and lose weight. So, we got some non-traditional gaming audience to buy into the gaming industry at that time. But that was an anomaly and we've still kind of flattened out. So we need to crack that cap, that barrier.”

But how? Layden said the video game industry should study the past as it looks to the future, in particular Betamax’s loss to VHS in the videotape format war.

The videotape format war was a late 1970s/1980s battle between Sony's Betamax and JVC's VHS for dominance in home video recording, with VHS ultimately winning due to longer recording times, broader licensing (more manufacturers), and key partnerships with movie studios, making movies available for rental/purchase on VHS more readily, despite Betamax often having slightly better initial quality.

“Betamax lost to VHS for one reason only: that VHS licensed its format across many different manufacturers,” Layden explained. “Sony held the unique Betamax patent trademark and everything. There was a license we did with Toshiba towards the end of the lifecycle, but it never went wide like VHS.

Shawn Layden, Xbox boss Phil Spencer, and former Nintendo of America chief Reggie Fils-Aime at The Game Awards 2018. Photo by Alberto E. Rodriguez/Getty Images.

“People didn't understand that need of having the same machine as your neighbor. You can have an RCA TV and you can have a Sony TV and you know that's all fine. But once your neighbor has picked VHS and you want to watch that tape of that movie, but you have Betamax, all of a sudden… So the industry coalesced around VHS.

“Then later on, Sony and Phillips created the compact disc consortium. They created the patent and then they licensed it out to all the other manufacturers. Same thing happened with DVD. Same thing happened with Blu-ray. They said that we'll compete on the device. So if you get a Bang & Olufsen Blu-ray player, it's going to cost you more than the Sanyo version, even though they'll both support the platform, but they'll have different bells and whistles.”