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Analyst: Current Console Cycle To Extend Through 2013
by Matt Matthews
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June 29, 2009
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In a new report from Wedbush Morgan Securities, industry analyst Michael Pachter explains that the current console hardware cycle should extend through at least 2013 with an increasing focus on digital downloads and other supplemental revenue streams.
The report, entitled "Money for Nothing, How Ancillary Revenues Can Extend The Console Cycle", predicts that the Nintendo Wii will be the dominant console by the end of the present hardware cycle, based primarily on its lower price and novel input method, the Wii remote. While the Xbox 360 is currently presumed to be in second place globally, the report suggests that by 2015 the PlayStation 3 could have displaced Microsoft's console on the strength of Blu-Ray's dominance in the high-definition media market.
In 2009, the report explains that the Nintendo Wii will account for 49 percent of the American and European console videogame market revenues (excluding older systems such at the PlayStation 2) while the Xbox 360 will capture 29 percent. The PlayStation 3 will lag behind at 22 percent.
However by 2011, the last year for which the report provides specific figures, the PlayStation 3 is expected to increase its share to an even 26 percent -- same as the Xbox 360 that year -- with the Wii share dropping marginally to 48%. It is worth noting that the growth in revenue will more than offset the expected losses in marketshare and that all three systems are expected to demonstrate increased revenues even as the marketshare distribution shifts.
In Japan the market will be dominated by Nintendo, who will command a share of more than 65% in its home market by 2011, according to the report.
On the subject of hardware itself, Mr. Pachter ties together several trends in the market today. On the subject of high-definition graphics, a Wii Plus (HD) console is expected by the end of 2010 at a price of just under $200. Such a system would have the potential to pull even more marketshare from the competition -- Microsoft and Sony -- as the Wii continues extraordinary growth through at least the next two years.
Moreover, the report suggests that through the next ten years local storage on videogame systems will grow to 1 terabyte, and that in the near term the expansion of digitally distributed software (i.e. through an internet connection) will be approximately exponential. Despite this growth, the current expectation is that consumers will never fully abandon physical media and that in 2019 digitally distributed software will still account for only 50 percent of all software sales.
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The only way the Wii will dominate to that extent is if a HD version comes out.
@ Matt, what where the forecasts 2 years ago for the Wii. I love how something catches on and now analysts get some numbers together and say in 5 years this is what will happen. Anytime a prediction is made it should be documented and then we can go back and see a person's history and see how full of it they are. Natal was not even mentioned and is going to has a possible HUGE impact on gaming and the way audiances are drawn to games as much as the Wii and Iphone have influenced gaming. Huge ommision there and when projecting 5 years out should have been at least accounted for.
I find this predictions amusing, but they don't tell us much about the future, they only tell us something about the analysts interpretation of the current market situation and this can be interesting as well. Pachter still believes in the BluRay revolution, right now it just doesn't seem to happen. And even IF BluRay would become the next standard, why should the PS3 benefit from that? If BR becomes as succesful as the DVD, prices for players would drop to 25€ (35 US$) in no time. Then it wouldn't be a big advantage to have an BR player in your console.
(its a mayan calander thing, well, and a snide remark)
All that being said, I can't predict just how much longer this console cycle'll last, and I kinda doubt the claims on DDGs having a low percentage rep. for sold games in the future too. Like I always say...it's just an analyst; just one other person's opinion. Take it for what you will.
I think Pachter speaks the truth here for the HD giants. Both spent billions getting their Trojan Horses in our homes and it wasn't so that they could only sell us games. By 2013 they will all be getting serious revenue from movies, music, online licensing, advertisement revenue, and games.
I'm not so sure he understands the Wii though. I don't think Nintendo is serious about fighting with Sony and Microsoft over marketshare. They'll stick to being unique. There's no need for them to make an HD console and doing so would just open a bridge for the HD giants to cross into their territory - not the other way around.