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Dell XPS phase-out symbolic of declining PC gaming sector
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Wed May 14, 2008 5:01 am Reply and quote this post
Dell announced today that it intends to phase out its XPS desktop systems in order to prop up Alienware sales. Dell acquiredthe much-smaller boutique computer manufacturer in March, 2006, butinitially believed that the its own XPS products would complementAlienware's custom-built systems rather than compete with them forsales. This assessment appears to have been incorrect; Dell now reportsthat XPS sales have eaten into Alienware sales to a certain degree.
Dell currently offers two desktop product lines. The lower tier(Inspiron), is meant for cost-conscious buyers, with entry prices aslow as $379, while the upper tier (XPS), further bifurcates into XPSPerformance/All-in-One and XPS Gaming PCs. Out of this group, only theXPS Gaming tier is being eliminated, and Dell apparently intends tocontinue using the XPS brand on mainstream desktops and higher-endlaptops. As for the reason why Dell chose to eliminate its XPS gamingdivision, the numbers below paint a sobering picture.


Data source: NPD Group

PC gaming (and by extension, PC gaming hardware sales) may not bedead, but the PC gaming industry is clearly not what it used to be. In1998, the PC gaming industry generated 1.8 billion in sales andaccounted for 32.72 percent of total video game software sales. Thevideo game software market grew by 72 percent between 1998 and 2007,while PC gaming sales have consistently decreased every single year inboth relative and absolute terms. The picture isn't quite as bleak asthe graph makes it seem, given that NPD's numbers don't track digitaldistribution or subscription-based revenue, but neither category couldpossibly account for the tremendous decline in PC game sales.
Even if Steam, and other services like it, accounted for a massive50 percent of "hidden" PC game revenue, total PC game software saleswould only have reached $1.37 billion in 2007, down 24.9 percent from1998. There's absolutely no sign that download services actuallyaccount for anywhere near this kind of volume, and subscription MMOsales, while important towards total PC gaming revenue, only reflectthe conditions of one segment of the gaming market. Furthermore, asignificant chunk of the growth in subscription MMO sales over the pastfew years is going to be flowing into the pockets of one particulartitan. World of Warcraft may be a license to print money, but that's nohelp to the developers of, say, Call of Duty 4, to say nothing of anyother games.
Dell's decision to kill its XPS gaming platforms does nothing toundermine the validity of the assertion that PC gaming is, in fact, inquite a bit of trouble. At $910 million, PC gaming can hardly beconsidered dead, and we won't be trotting that particular dead horseout for a beating today, but the industry is rapidly transforming intoan increasingly niche market with fewer and fewer exclusive titles.
In somewhat happier news, at least for AMD fans, Alienware hasannounced a new, entry-level gaming PC built around AMD's Phenom. Thenew Aurora-class system is built on the AMD 790FX platform and offersyour choice of either Athlon (5200+ and 6400+) or Phenom X4 processors,up to and including the Phenom X4 9850 Black Edition. The new rig isavailable in blue, green, silver, or black, though the flesh-eatingbiomechanical accessory robot (pictured to the right) is only availablein black. With a starting price of $999, and an $1824 "midrange" optionwhen outfitted with the Phenom 9850 and a Radeon X2 3870, Alienware isobviously trying to court both AMD fans and potential buyers in searchof a lower-cost, custom-built machine.

Contributed by Editorial Team, Executive Management Team
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