A few days ago Sony announced it has now sold a total of 6 million PlayStation 4 consoles. Microsoft’s next-gen equivalent, the Xbox One, has likely racked up sales of around 4 million so far. Both flagship consoles were released around the same time in late November last year, in time for the 2013 holiday season. And both companies have been shouting loudly about who’s beating whom for cumulative console and games sales globally and in key markets like the U.S.

On the cumulative console sales score at least, Sony’s PS4 appears to be edging out the Xbone, for now.

The thing is neither of these new generation console flagships is selling very well when compared with previous generations of flagship consoles. The console market appears to be shrinking significantly — and that’s evidently having a knock-on impact on games studios and game development. The big games studios don’t exclusively develop for a single platform, after all, so the health of the entire market is key to keeping games studios in business.

Crunching the numbers on sales of the new generation of consoles is a little tricky, as console makers aren’t as keen as they used to be about releasing data. That reticence itself is rather telling. But it’s possible to paint a fuller picture by looking at North American console sales data leaked by market researcher NPD’s subscribers — data that’s finding its way onto games industry forums.

Here’s NPD’s official data on console market sales in North America for January 2007 – i.e. after the last generation of flagship consoles launched back in the 2006 holiday season:

Wii: 436,000

360: 294,000

PS3: 244,000

PS2: 299,000

NDS: 239,000

PSP: 211,000

GBA: 179,000

GC: 34,000

Add those numbers up and the total sales figure is just shy of 2 million.

Now here’s an equivalent list of sales for consoles this January (not an official list, since as noted above much of this data is not being officially released, but rather these figures are drawn from leaked NPD subscriber data – with further caveats being that NPD doesn’t like subscribers leaking its data so releases slightly different figures to try to identify leakers, hence the lack of concrete numbers for certain consoles):

PS4: 271,000

XB1: 141,000

3DS: ~97,000

PS3: ~53,500

Wii U: ~49,000

360: ~48,500

Vita: ~17,000

Add the January 2014 figures up and the tally is closer to 700,000. So that’s 2 million vs. ~700K — a very big market contraction, even if some of those sales figures are underestimates.

The Wii U has certainly flopped – but, taken as a whole, the console market is generally not shipping the numbers it once was. The Xbox One’s sales look especially bad compared to the previous gen Xbox 360. But even the PS2 was selling more units than the PS4 at the equivalent point in its sales cycle.

It’s been noted elsewhere that total industry sales (hardware and software) in January 2014 were down 1 percent year-over-year – and that in a year when two new flagship consoles have just been released vs the low bar set by consoles sales last year with no such flagship hardware releases to accelerate games sales. So again, not exactly a sign of a healthy market overall.

The PS4/XB1 is the first generation to have technology that is worse than what is already out there.

And before you say “yes but the PS4 didn’t even launch in its home market till late February,” early sales indications from Japan aren’t great either. In its second week the PS4 sold just 65,685 units, according to Japanese market researcher Media Create. That’s less than week-two sales of the PS Vita (72,479) and far less than the second week performance of the (now considered a flop) Wii U (130,653).

For a shiny new system just landed in its home market PS4 sales aren’t exactly knocking it out the park in Japan either.

One thing is certain: the cost of developing flagship console games titles continues to rise. And with fewer consoles being sold than previous generations that’s a circle that’s looking increasingly tough to square.

Even big name games studios are throwing in the towel – last year’s well-reviewed Bioshock Infinite title sold some 4 million units but that evidently wasn’t enough to keep Irrational Games in business. And that’s just one example. (See also this sobering list of games studios that have been shuttered since 2006, compiled by a member of the NeoGAF forum.)

Whatever the exact truth of the new generation of consoles sales – and it is still certainly early days for the PS4 and Xbone – it looks pretty clear that the console market overall has a big problem: aka the C-word, market contraction.

It’s not just new flagships failing to sell as well as new consoles used to; previous generations of consoles are evidently not sustaining long-tail sales as once they did either. Sales of the PS3/360/Wii are declining at an alarming rate compared to the transition from the prior outgoing platforms (PS2/GC). Those consoles stuck around selling in larger numbers for longer than their current-gen equivalents so there’s a wider market collapse going on.

Why the shrinking console market? There are likely multiple factors in play here. Not least increased gaming competition from mobile devices. And, well, increased competition for free time in general. Since 2007 mobile apps have taken off, social networking has gone mainstream, mobile gaming has spawned huge casual gamer franchises like Angry Birds and Candy Crush and the rest, and mobile messaging has gone massively over-the-top to make IMing your buddies free and easy (and yet another pull on free time).

Another problem console makers are facing is rival devices’ faster refresh cycles. Mobile devices typically get upgraded with shiny new hardware every year. While, from the other side, top-of-the-range PC hardware is now outperforming console hardware – so really hardcore gamers looking for the best in class gaming experience (at least from a a graphical fidelity/frame-rate point of view) are actually better off with a high end gaming PC than the current console flagships.

Whilst the casuals are moving to mobile/web, the high end enthusiasts are moving to PC where games are better looking. The traditional consoles are caught in a pincer movement.

As one veteran games developer, who has worked in the industry for more than a decade and who pointed me in the direction of the leaked NPD data, put it: “The PS4/XB1 is the first generation to have technology that is worse than what is already out there. There are 2+ year old GPUs that outperform these boxes, and even budget GPUs releasing now in the $150 range outclass these machines. If you buy the highest end GPU on the market now, you have almost 3x the performance of these machines, and we are at the start of the generation. This is unprecedented.

“This means whilst the casuals are moving to mobile/web, the high end enthusiasts are moving to PC where games are better looking. The traditional consoles are caught in a pincer movement.”

Yet another troubling reality for consoles — which is really a symptom of an ailing ecosystem — is dwindling choice of games titles. The days of a wide range of console experiences – from niche small games, through a diverse array of mid-sized titles, up to the flagship triple A blockbuster titles – are gone.

The industry has condensed games development to focus on blockbuster titles – likely because of the rising costs of development requiring a commensurately sizeable pay-off at the end — and even those blockbusters are diminishing in quantity, as there are fewer big games companies left to make these increasingly expensive titles. It’s now a couple of big titles per company per year – titles that are also mostly sequels or proven formula games, rather than something new.

The result: less choice for console gamers – ergo, less incentive to buy a console in the first place. If there’s only a handful of exclusive titles to push you to buy a console, only hardcore fanboys are going to shell out the $400/$500 required to own new generation hardware. That doesn’t sound like a sustainable market.

If you look at cumulative console sales for the last generation of home gaming boxes, it’s clear how far the current gen has to go just to remain flat. The Wii sold 100 million+, while the 360 and PS3 sold ~80 million apiece — making a total of ~260 million home consoles.

At this relatively early stage the new generation stacks up as follows: Wii U at 6 million, XB1 at ~4 million and PS4 at 6 million: a total of ~16 million. So only around 244 million to go — just to perform as well as the last generation. But with game budgets increasing a flat console market isn’t a good thing. This new generation needs to be outselling the last, not looking like it’s going to have a really tough time shipping the same.

One more troubling recent development: Sony Santa Monica – the PS4 maker’s flagship North American studio — recently announced staff cuts of (purportedly) almost a quarter of the studio’s workforce. It also reportedly canned a major PS4 title it had in development.

And that’s Sony wielding the axe.

The company also just parted ways with its two-decade veteran U.S. PlayStation chief Jack Tretton — literally just last week.

To spell it out using the developer’s words again: “If the platform holder is already canceling projects (and worse, laying off development staff), then people should be looking over their shoulders.”

The big question hanging over the dedicated gaming machine is this: Is the current-generation market contraction something that can be overcome — or does it signify a more fundamental console category crisis?