     |
 |
 |
 | | | | |
 |
|||
 |
||||||
          |
 |
 |
||||
|
Analyze This: Wrapping Up the Year in Gaming
The continued strength of the PS2, as it continues to out-sell the [Xbox 360], does raise the question as to whether a new generation has really begun. It supports Sony's view that systems should last for 10 years if they are going to generate sufficient payback on investment. Nintendo's Wii was stronger than we had expected. But while we expect it to put in a good performance early on, doubts over its longevity remain. For now, Microsoft and Nintendo can rest easy, but this time next year could be a whole new ballgame. 2006 will be seen as a transition year as the industry pauses for breath before the PS3 really begins to do battle in 2007. And it's only in 2008 and beyond that we'll begin to see the real impact on the publishing industry in terms of maximizing the development potential of the new platforms.
This year we watched Xbox 360 performing solidly in Europe and the U.S., although it has not become the next-gen console driver which PlayStation was in previous cycles. Despite the emergence of next-gen hardware, we expect the PS2 to continue generating significant software volumes until 2008, especially as the Xbox and GameCube are no longer addressing the player demographics of cheaper consoles. The PS2 turned around a potential software market decline in 2006. Looking forward [to] 2007, Microsoft looks like it is deepening its software library at exactly the right time to compete with two platforms which are just getting out the starting gate. Gears of War, Lost Planet, Blue Dragon and Mass Effect are all exclusive to Xbox 360 and based on new IP. Sony and Nintendo may have a historic pull with gamers, but neither will be able to compete with the depth or quality of the Xbox 360's software library before late 2007, at the earliest. Whether new titles can drive Xbox 360 growth in the Japanese market, however, remains to be seen.
Nine months ago we were forecasting industry software sales would be flat to down 5% in 2006. But now, largely due to the resiliency of the PS2 market and strong DS sales, we are projecting software sales will end the year up around 5%. This is a major change from the last transition period back in 2000 and 2001, when the software publishers largely abandoned the PS1 as soon as the new consoles launched. The resurgence of Nintendo is the big story of the year, in my view. The remaining question is whether the DS and Wii can become robust platforms for third-parties over the coming years, or whether Nintendo hardware ends up primarily serving Nintendo software. The focus in 2006 was on new hardware, but the spotlight in 2007 should be on the games. Not only will we see higher quality titles for the new platforms, there is also an exciting lineup of new games, e.g. GTA IV, Halo 3, Spore. Clearly there are higher expectations for next year in terms of the content that gamers are expecting from the developers and publishers. We are all crossing our fingers that they don't disappoint. Got a business-related question concerning the games industry that you would like to suggest for discussion in Analyze This? Are you a professional analyst who covers the market and would like to take part in this column? Feel free to send an email to howardhwen@gmail.com. |
|||||||||||||||
Features
Previous
David
Mercer, 
|
|
|