Vision - January/February 2008 - (Page 32) “Clearly, it’s (2007 is) going to be a record year,” says David Cole, lead analyst for DFC Intelligence. “We’re forecasting about 25 to 30 percent growth in the market.” who is top dog? With industry sales skyrocketing, there’s little doubt that the overall pie will keep growing in the New Year. Instead, the big question is which console maker will scoop up the largest slice of the expanding market. Only a year or so ago, the answer was pretty obvious to even the most casual industry observer. Sony, which then commanded 70 percent of the console market, had amply demonstrated its prowess by shipping more than 100 million units of both its PS1 and PS2 models. So, as all of the big three console makers prepped their next-generation models for market, Sony seemed a lock to duplicate its success with its widely anticipated PS3 system. But things haven’t quite worked out as the Japanese electronics giant planned since the PS3’s launch in November 2006. Although Sony has dominated the console market for years, it initially stumbled with the PS3 for several reasons. Analysts say the factors included the deluxe machine’s relatively high price, delayed debut, early inventory problems and a lack of appealing games. “They (Sony) may have overestimated customers’ willingness to buy anything PlayStation,” says Brian O’Rourke, a principal analyst for In-Stat. “They were looking at creating something more than just a game console. It certainly dug them into a significant hole.” Sony however came roaring back from its early missteps. The PS3’s brand name, technological prowess, emerging game line-up and price cuts drove a major surge in pre-holiday sales. Sales of Sony’s Play Station 3 gaming console soared after the company cut prices and introduced its 40GB model early in November. Sony Computer Entertainment America (SCEA) said that on a year-on-year basis, PS3 hardware sales were up 245 percent compared to Black Friday sales in 2006. And since November 2, when the new 40GB SKU and lower priced 80 GB model both were available, Sony said PS3 hardware sales were up 298 percent. Although Sony did not provide software sales data, top titles such as Guitar Hero III, Rock Band, Assassin’s Creed and PS3 exclusives such as Ratchet & Clank Future and Uncharted: Drake’s Fortune continue to help to drive demand for the PS3. Competitive market Like Sony, Microsoft has struggled with its Xbox 360. Although the Xbox 360 first hit the stores in November 2005, a full year ahead of the PS3 and Wii, Microsoft has not been able to use its early-bird advantage to blow away the competition. Instead, Microsoft first reduced its sales target for the Xbox 360 early last year and then failed to meet its own lowered goal during the summer. Cole says that Microsoft shipped 1.6 million Xbox systems in the first six months of 2007 after shipping 10 million consoles in 2006. “They didn’t do too well. They have a ton of inventory.” Industry analysts blame this on the relatively high price of the Xbox 360, its focus on the narrower hard-core gaming audience and, perhaps most of all, the unexpected popularity of the Nintendo Wii. They also cite quality concerns about the Xbox 360, which has suffered from some technical glitches. In early July, Microsoft said it would take up to a $1.15 billion pre-tax charge to extend the warranties on its game consoles so that defective units could be fixed for free. As a result, while Microsoft entered this past holiday season still holding a sizable sales lead over Nintendo and Sony for the latest generation of consoles, its edge over its two rivals was dwindling. In particular, Nintendo was coming on strong. “They’re (Microsoft) still in first place,” Cole says. “But Nintendo is now breathing down their necks.” In August, Microsoft cut the price of its main Xbox 360 console and with the launch of fresh content like Call of Duty 4, Madden ’08 and its exclusive Halo 3 outer-space shooting game in September, Microsoft also aimed to swamp its competitors offering more and better games. Heavily promoting what it called the “greatest holiday line-up in video game history,” the company sought to take advantage of its one-year head start and the fact that many PS3 and Wii titles are still in the works. “Now’s the time for Microsoft to take advantage of Sony’s struggles,” Cole says. “They’ve got to milk that window of opportunity pretty quickly… The Xbox 360 needs to go into 2008 with a big lead.” But the unexpectedly delayed debut of Grand Theft Auto IV may have thrown Microsoft for a loop. Unlike earlier versions of the popular urban adventure game, which had been designed primarily for Sony’s consoles, Grand Theft Auto IV is slated for release on both the PS3 and Xbox 360 platforms at the same time. will the dark Horse Lead? While Sony and Microsoft have both scrambled to regain their footing, Nintendo has been busy. Since introducing the Wii in November 2006, Nintendo has seen the console’s sales take off, prompting the company to raise its shipment forecasts. Nintendo, which sold 13.2 million Wii systems worldwide between the console’s debut and the end of September, now expects to sell another 10.2 million units by the close of its fiscal 2008 year on March 31. www.ce.org 32 January/February 2008 http://www.ce.org
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